Everything Must Go

Local Government Debt and the Public Asset Fire Sale — The Case of Leeds

I have just co-authored a report Everything Must Go: Local Government Debt and the Public Asset Fire Sale — The Case of Leeds co-authored with Sophie Flinders from Common Wealth, and my colleague Stuart Hodkinson from the University of Leeds. It was part funded by the University of Leeds and Climate Action Leeds.

The report offers a detailed examination of the financial crisis facing local government through the case study of Leeds City Council (LCC). It situates Leeds within a broader national pattern of austerity-driven restructuring, and we argue that local authorities have been compelled into an “extractive” financial model characterised by rising debt, escalating borrowing costs, and the systematic sale of public assets. Our central claim is that this model is unsustainable and is leading to the irreversible erosion of public wealth, and missed opportunities to use public assets to solve city challenges.

At the core of the report’s analysis is the long-term decline in central government funding. Between the financial years 2009/10 and 2024/25, Leeds City Council experienced a 19% real-terms reduction in grants, falling from £1.45 billion to £1.17 billion. This contraction in revenue has significantly constrained the council’s ability to fund services, forcing it to rely more heavily on borrowing, asset disposals, and financial engineering. We situate this within the wider context of UK austerity policies, describing a shift from redistributive funding towards a system where local authorities must increasingly generate their own income.

One consequence of this funding squeeze has been a dramatic increase in local authority debt. By 2024/25, Leeds’ total debt had reached £3.2 billion. Servicing this debt has placed a substantial burden on the council’s finances: in that same year, £148 million was spent on interest and repayments, equivalent to approximately 20% of net revenue expenditure. This ratio is notably high compared to other local authorities, placing Leeds among the most financially exposed councils in England. Our report emphasises how debt servicing diverts resources away from frontline services, intensifying the pressures of austerity.

A major driver of this debt burden is the legacy of Private Finance Initiative (PFI) contracts. The report identifies Leeds as the most exposed council in England to PFI liabilities, holding more contracts than any other local authority. While PFI schemes were originally justified as mechanisms for financing public infrastructure, they have resulted in long-term repayment obligations that extend well beyond the life of the assets themselves. Although central government provides partial subsidies for these schemes, we found that these do not fully cover costs. Between 2011/12 and 2023/24, Leeds had to allocate an additional £65 million per year on average to meet its PFI commitments. These repayments are projected to continue rising until at least 2028/29, further locking the council into a cycle of financial strain.

In response to these pressures, Leeds has significantly expanded its programme of public asset sales. Since 2010, the council has raised approximately £739 million (in real terms) through the disposal of land and buildings. Notably, half of these sales have occurred in the past six years, what we call a “fire sale” of public assets. These disposals have included a wide range of properties, from community facilities such as nurseries, libraries, and car parks to major development sites. Alarmingly, nearly half of the proceeds have been used to repay debt or support new borrowing arrangements, while the remainder has been allocated to capital spending programmes.

Crucially, we raise concerns about how these capital receipts are being used. We note that funds from asset sales have been deployed not only for investment purposes but also to support revenue expenditure in indirect ways, including redundancy payments associated with service cuts. For example, £13.6 million generated through asset disposals has been used to fund severance packages aimed at reducing staffing costs.

The social and economic implications of these asset sales are our central concern. We document how publicly owned land has often been transferred to private developers, leading to new forms of commercial or residential development that do not necessarily align with community needs. One prominent example is the sale of land in East Leeds for £29 million, now redeveloped as an Amazon warehouse. Other sites have been converted into student accommodation, hotels, and build-to-rent housing, reflecting a broader trend towards commodified property led urban development. Such transformations represent a loss of public control over strategic assets and a reconfiguration of urban space in favour of private capital.

The concept of “extractive growth” is central to what we found. Rather than generating sustainable economic development, the current model relies on extracting value from public assets and future revenues to address immediate fiscal pressures. This creates a cycle in which the sale of assets provides temporary relief but undermines the long-term financial position of the council by reducing income-generating capacity and limiting future policy options. In this sense, asset sales are not a solution but as a symptom of deeper structural problems in the funding of local government.

We call for a fundamental reform of local government finance. Without significant changes to the funding system—including increased central government support, restructuring of local authority debt, and a reassessment of PFI obligations—councils will remain trapped in a cycle of austerity and asset depletion. There needs to be alternative approaches to public ownership and investment, like the Public-Civic Partnership model, retaining and developing public assets in ways that support social and environmental goals. If we continue on this ‘fire sale’ trajectory it risks hollowing out the public sector and eroding the foundations of local democratic accountability. Public assets are key to effectively responding to the many challenges a city faces. They need to be recognised as such, protected and expanded.