A comment from Councillor Phil Twiss, Cabinet Member for Finance DCC has prompted Owl to add more clarification on the plight of Woking Borough Council highlighted in this morning’s post: “Another one bites the dust” 

Phil pointed out that Woking is a LibDem council. Indeed this is now a LibDem run council, Owl pointed this out quite clearly in the post, but the problem it is grappling with is one that it inherited from an earlier Conservative administration. 

“We inherited enormous Conservative debts. We knew that decades of dependency on new future debt was hard-wired into supposedly long-term projects. These two factors – debt and a dependence on debt – already presented a financial survival project.

“Yet we are now uncovering a third and potentially more worrying financial inheritance: the mis-statement of debt. Uncovering more of that reality is essential, even if it makes unpleasant reading.” LibDem leader, Woking Borough

New discovery adds to Woking Council’s debt woe

George Rae www.wokingnewsandmail.co.uk

THE Liberal Democrats in charge at the Civic Offices claim to have uncovered another devastating threat to Woking Borough Council’s (WBC) already parlous financial position – the mis-statement of debt.

They say that new officially-audited accounts for Thames
Wey Limited, which is fully owned by the council and responsible for multiple energy and housing developments in the town, uncover a string of overstatements of income and assets.

The documents reveal that the company has negative net assets of £19.4 million, as of the end of 2021, rather than the claimed positive assets.

A “restatement” of previously published accounts shows concern by newly-appointed auditors Menzies that old accounts were not giving a true and fair view.

For example, say the Lib Dems, the new documents demonstrate that, in 2020, ThamesWey Group accounts overstated turnover.

Financial statements incorrectly included £30.3 million inter-company revenue, effectively an internal transfer, in the group turnover, meaning the real turnover for the year has had to be reduced from a previously-claimed £61 million to £31 million – an overstatement of almost double the actual revenue.

In 2021, there were group losses of a further £17 million. A single loss of £13.2 million had been classified as “work in progress” when it should have been written off.

Cllr Ann-Marie Barker, leader of the council, said: “We inherited enormous Conservative debts. We knew that decades of dependency on new future debt was hard-wired into supposedly long-term projects. These two factors – debt and a dependence on debt – already presented a financial survival project.

“Yet we are now uncovering a third and potentially more worrying financial inheritance: the mis-statement of debt. Uncovering more of that reality is essential, even if it makes unpleasant reading.”

It follows grim warnings that WBC could be facing bankruptcy unless a balanced budget can be agreed by February.

Although the scale of council debt has long been known and debated – it is forecast to reach £2.4billion by 2024-25 and has attracted the concern of central government – the recent appraisal by the Liberal Democrat administration was the bleakest assessment yet.

With the council, in their words, “close to running out of money”, the Lib Dems proposed launching Operation Recovery “to rescue Woking”.

While local authorities cannot officially go bankrupt, they are effectively in that position as they declare a Section 114 notice, under which all non-essential and statutory spending is stopped.

A sobering assessment of the financial situation was delivered by the council’s finance director Leigh Clarke. In a document considering the council’s medium term financial strategy and presented to the council Executive, the section headed Executive Summary noted the need for “additional assurance on the financial position for each of the years 2023-24 to 2025-26 to provide assurance the expenditure can be contained within resources.

“If this is not possible, the council will need to commence discussions with the government on financial support and the finance director will determine whether a Section 114 report is appropriate.”

Inflation is measured by increases in the retail and consumer price indices.

Recipients of public services, e.g. the NHS, do not pay a retail or consumer price for this service. The same applies for most other public services.

If nurses are given a pay rise to cover inflation, consumers are not charged any more, so there is no direct effect on inflation. 

Government tax receipts tend to rise with inflation. Those given pay rises in line with inflation, pay more tax; VAT also rises with inflation. 

So the Treasury line that paying more than currently offered would be “inflationary” is arguable.

The real crunch occurs when inflation drives prices up but economic stagnation pushes purchasing power down, producing what is called “Stagflation”. Squeezing public sector pay reduces economic activity.

The political reason to squeeze public sector pay, which can only ever be a short term tactic, is to create budget headroom. Useful at this point in the electoral cycle to fund pre-election tax giveaways.   [Owl’s thought for the day]

Richard Partington www.theguardian.com 

Jeremy Hunt is facing calls to offer a bigger pay rise to public sector workers to break months of strike deadlock, after official figures showed stronger than expected government finances.

The government ran a surprise £5.4bn surplus in January, fuelled by bumper self-assessment income tax receipts, handing the chancellor scope to increase spending or offer tax cuts at next month’s budget.

The surplus was £5bn higher than the government’s fiscal watchdog, the Office for Budget Responsibility, had expected, although it was £7.1bn smaller than in January 2022, according to figures from the Office for National Statistics. Analysts polled by Reuters were taken by surprise, having predicted that the government would have to borrow £7.8bn in January.

In the final snapshot of the government finances before Hunt’s budget, public borrowing for the year so far was about £30bn lower than forecast by the OBR in November.

“[This] could tempt the chancellor to offer a pay increase to public sector workers as part of his budget next month, hoping to prevent another wave of strikes,” said Michal Stelmach, a senior economist at the accountancy firm KPMG UK.

Paul Nowak, the general secretary of the TUC, said the figures showed the government was “running out of excuses” to break the deadlock on strikes.

“Jeremy Hunt must come out of hiding and help break the deadlock on public sector pay. After 13 years of pay cuts and pay freezes nurses, teachers and millions of other public servants are at breaking point,” he said.

“If ministers don’t provide a fair pay settlement the staffing shortages crippling our schools, hospitals and other frontline services will just get worse.”

Government coffers were increased by £21.9bn of self-assessed income tax receipts, the highest January figure since monthly records began in April 1999. They were offset partly by substantial spending on energy support schemes for households and businesses to cushion the blow of spiralling energy prices, and large one-off payments relating to historic customs duties owed to the EU, the ONS said.

However, the Institute for Fiscal Studies said the cost of energy support was less than expected: “While expensive, the energy support schemes introduced in the last year are actually likely to cost less than forecast in November due to a combination of lower wholesale energy prices and a milder winter.”

Ruth Gregory, an economist at the consultancy Capital Economics, said the figures suggested Hunt “will have some wriggle room in the budget to fund near-term tax cuts and/or spending rises”.

However, Hunt suggested he was in no mood for loosening the purse strings after an increase in the national debt. “We are rightly spending billions now to support households and businesses with the impacts of rising prices – but with debt at the highest level since the 1960s, it is vital we stick to our plan to reduce debt over the medium-term,” he said.

“Getting debt down will require some tough choices, but it is crucial to reduce the amount spent on debt interest so we can protect our public services.”

Downing Street also played down the prospect of tax cuts, despite pressure from backbench Conservative MPs calling on Rishi Sunak to do more to support economic growth. The prime minister’s official spokesman said borrowing remained close to a record high, while “significant uncertainty and volatility” remained.

Interest payments on government debt have risen sharply in recent months because of the effect of higher inflation on index-linked gilts. Debt interest payable rose to £6.7bn, the highest January figure since monthly records began in April 1997. However, despite a rise compared with a year earlier, economists said borrowing costs had not risen by as much as feared in November.

The figures come as the government stands to benefit from a fall in global energy prices over recent months, which is expected to reduce the overall cost of support schemes put in place for households and businesses.

Cara Pacitti, a senior economist at the Resolution Foundation, said Hunt was approaching the budget with “significantly healthier borrowing levels” than forecast in the autumn.

“However, with borrowing still much higher than last year, and with interest rates likely to remain elevated for some time to come, Jeremy Hunt can’t afford to be relaxed about the state of the public finances,” she said.

“The extra fiscal headroom should allow him take on some key issues however – namely corporate reform, boosting workforce participation and preventing a spike in energy bills this spring.”

A member of the committee which keeps a check on how well Teignbridge councillors are doing their jobs has resigned. Jane Taylor, in her open letter announcing her departure, accused leaders of not taking seriously a damning report by the local government watchdog.

Philip Churm www.devonlive.com

In the open letter to Teignbridge District Council (TDC) monitoring officer Paul Woodhead, published on the ‘Kingskerswell – Have your say’ Facebook group, Jane Taylor, accused council leaders of not accepting the findings of the Local Government and Social Care Ombudsman. It followed an extraordinary council meeting on Tuesday, February 14, to debate the findings of a highly critical report by the local government watchdog.

The ombudsman said an investigation by TDC into the conduct of South Devon Alliance Group Leader, Cllr Richard Daws, was flawed and “found fault with a number of aspects of the council’s investigation.” The Ombudsman ordered the council to now apologise to Cllr Daws.

Cllr Taylor, who is a parish councillor in Kingskerswell, as well as a former Devon and Cornwall Police office, accused Teignbridge of not accepting the Ombudsman’s report. She also claimed the council were “out of control, show no remorse for their behaviour and who have no intention of being accountable for their actions.”

Cllr Taylor, who previously stood as a candidate for ‘Newton Says No’ in the Devon County Council elections in 2021 – the predecessor to the South Devon Alliance – added: “It has become very clear to me that the bullying of anyone who challenges the council is blatant and unacceptable. It would not be tolerated in any other workplace and I want no part in it.”

But leader of Teignbridge District Council, Lib Dem councillor for Kenton & Starcross, Alan Connett described suggestions he did not take the ombudsman’s report seriously as “a load of old nonsense.”

He said: “For a start, I apologised as leader of the council to Cllr Daws on the 19th of January when the ombudsman’s report was published. I repeated that and we stated that apology in full at the council meeting and it was very clear, I think if you read the words we accept, in full and without reservation, the report and the recommendation of the ombudsman.”

Cllr Taylor also accused Cllr Connett of not accepting the finding of the report because he called for a letter to be written to the Secretary of State “challenging the authority of the ombudsman’s involvement.” But Cllr Connett said that was not true and he was determined to ensure the council carried out the recommendations.

“It suits some people to ignore the inconvenient and focus on their own particular spin,” he said. “That’s been a huge difficulty for the council over several years because the SDA don’t like to be confronted with the facts.

“I was concerned that council accepted the recommendations without reservation and we implement them. So, it’s my leadership that has enabled that meeting to happen.”

Cllr Taylor, in her letter, added: “I will be resigning with immediate effect, as I do not wish to be associated with a Council, where the majority of councillors either condone this behaviour or lack the courage to stand against it. A council who will readily breach both their own policy and the law to exact revenge, on those who dare to speak out against them.”

Last week we had Simon Jupp the Farmers’ Friend, aimed at Honiton? This week it looks to be Sidmouth’s turn….

‘I’ve spoken to the PM about the state pension and the triple lock’

(Simon is worried about protecting pensioners’ spending power – what about everyone else? – Owl)

Conservative Member of Parliament for East Devon Simon Jupp writes for the Journal.

www.exmouthjournal.co.uk

I know many people have welcomed the news that the state pension will rise in line with inflation this year. There is no value more British than our commitment to protect and honour those who built the country we live in.

I’ve talked to the Prime Minister and Chancellor on how to protect pensioners’ spending power. Restoring the Triple Lock is a big part of doing that. The Triple Lock raises State Pension payments by the highest of inflation, average earnings, or 2.5 percent. It offers vital economic security for many people in East Devon.

The government has acted to ensure that every household is also supported with energy bills, and it’s been confirmed recently that the government will provide another £300 Cost-of-Living Payment for pensioners next winter.

It can be a little tricky to work out what support is out there. Fortunately, most people don’t need to take any action since support is being paid automatically.

But it’s worth being sure. So, if you are receiving the state pension and reading this, I’d warmly encourage you to check two things.

First, please check if you’ve received this winter’s Winter Fuel Payment. It is usually paid automatically in November or December if you’re getting other benefits like the State Pension. Everyone who is eligible should have been paid by 23 January 2023. If you did not receive your payment, you should contact the Winter Fuel Payment Centre through gov.uk/winter-fuel-payment/how-to-claim or 0800 731 0160 by 31 March 2023.

Second, please check if you are eligible for Pension Credit. Pension Credit is extra money to bring your weekly income up to a minimum amount. Estimates suggest that up to one million people who may be entitled do not claim the benefit. You can use this online tool to check gov.uk/pension-credit-calculator or call 0800 731 0469. An award of Pension Credit can also act as a gateway to other pensioner benefits, including help with rent and council tax.

It’s only right that those who’ve paid into the tax system all their lives are looked after when they’ve retired.

Former Tory Surrey council on brink of insolvency with debts of nearly £2bn

[Conservative control 2011 to 2018, no overall control 2019 to 2021, LibDem control 2022. Elections for one third seats for three consecutive years followed by one year with no elections]

Richard Partington www.theguardian.com

A local council in Surrey has signalled it is close to effective bankruptcy after amassing debts worth almost £2bn to fund a property investment spree, raising fresh questions over the fragile health of local authorities after years of austerity.

Woking borough council said it was “in the territory” of being unable to meet its financial obligations, amid a surge in debt interest costs on its investments, which include a shopping centre, residential skyscrapers and 23-storey Hilton hotel.

The council, one of several in England with big debt problems, said it was at risk of issuing a section 114 notice, which effectively signals insolvency. Although councils cannot technically go bankrupt, a section 114 is able to force central government to intervene to ensure local services are sustainable.

The process is seen as an admission by an authority that it lacks the resources to meet current expenditure, that its reserves are depleted and that it has little confidence it can bring its finances under control in the near future.

Woking is currently subject to a government review of its finances. Control of the council passed to the Liberal Democrats last year, after a fraught local election which partly focused on the vast debt pile accumulated by the former Conservative administration.

The development comes as Michael Gove’s levelling up department turns the screw on local authorities with high levels of debt. The government has ordered inspectors to review the finances, investments and governance, or has directly intervened, at several authorities, including Slough in Berkshire, Thurrock in Essex and Warrington in Cheshire.

Woking said it would increase council tax by 3% in 2023-24, but added: “It is not evident at this stage, however, how the council will establish a balanced budget for 2024/25.”

According to budget papers, the council borrowed about £1.8bn for investment purposes but is only bringing in £38.5m, a figure expected to rise to £43.3m next year.

“That’s clearly unsustainable and is five times the amount of council tax,” said Will Forster, the council’s deputy leader. “The major issue is the council’s borrowing commitments, which is something as a new administration we have inherited.”

He said Woking was committed to increasing its debt levels to £2.4bn by 2026, with much of the increase linked to its town-centre Victoria Square redevelopment, which includes a new shopping centre and a trio of tall residential and commercial towers.

“That is huge for a small borough council like Woking. We’re in a tough position.”

Several English councils have used debt-fuelled investment programmes over the past decade, arguing that budget cuts directed from Westminster forced them to take matters into their own hands. However, questions have been raised over the suitability and scale of some projects.

Local authorities have also run into trouble after a sharp decline in town- and city-centre footfall since the onset of the Covid pandemic, leading many retailers to pull out of key high street locations, hitting the value of their investments.

Conservative-run Thurrock council was the last authority to declare effective bankruptcy, after issuing a section 114 notice in December as it grappled with a £500m deficit caused by a series of disastrous investments. That followed other recent failures at Northamptonshire county council, Croydon and Slough.

Plymouth could be merged into a Devon “super council” but is opposing any moves to be ruled by a directly elected mayor. Under government devolution proposals, Plymouth City Council could become part of a combined authority with Devon and Torbay.

William Telford www.plymouthherald.co.uk

But while council chiefs would be happy with this outcome, which could come with increased government investment, they are not so keen on having an elected mayor for the area. A delegation from the three Devon councils recently travelled to Westminster to make its case.

Plymouth City Council’s Tory leader Richard Bingley joined Devon County Council’s John Hart, also a Conservative, and Torbay’s Lib Dem leader Steve Darling in a mission to meet Dehenna Davison, parliamentary under secretary of state in the Department for Levelling Up, Housing and Communities.

The Devon politicians pressed the case for a devolution deal that would see the Government award more powers to a new combined authority for the county. The trio said they had a “positive” meeting with the under-secretary.

Cllr Bingley said: “We had a very positive meeting with the minister and expressed our shared desire to have a combined authority with powers moved out of Government and into the hands of local politicians. While there is no desire to have a directly elected mayor here, we believe there is huge potential for a deal that would give us greater control in delivering our shared priorities.”

In 2022, the three authorities united to pilot one of the Government’s nine new county deals which were announced in the Levelling Up white paper. The nine areas invited to begin negotiations were Cornwall; Derbyshire and Derby; Devon, Plymouth and Torbay; Durham; Hull and East Yorkshire; Leicestershire; Norfolk; Nottinghamshire and Nottingham; and Suffolk.

The three options open to these areas include:

• Remaining as they are now but with the separate authorities working more closely to deliver services.
• Forming a single institution or county council, which could have additional powers for such things as transport, bus franchising, the adult education budget and compulsory purchase.
• Having a directly elected mayor, which comes with greater control over transport funding and the powers to identify a key transport networks and to establish mayoral development corporations.

In August 2022, Derby, Derbyshire, Nottingham and Nottinghamshire councils together signed a devolution deal which will include the creation of a directly-elected mayor for the East Midlands. In February 2023 a consultation began in Cornwall on whether the duchy should accept a new deal providing new powers and funding and have a new directly elected mayor. The issue divided people across the county after Cornwall Council distributed a 34-page Cornwall Devolution Deal documentary and consultation materials.

In 2022, Devon County Council issued a statement saying a combined authority without an elected mayor would “enable councils to work together strategically whilst respecting the sovereignty of their respective authorities.” It is understood the three authorities would welcome the opportunity to become a centralised focus for government investment.

It is also hoped that in return for making such a substantial change to the way the authorities are run, the Government may look to provide more infrastructure and skills investment.

The Government is keen to devolve powers over adult skills, infrastructure projects, and transport systems such as bus routes. Past devolution settlements in metropolitan areas have included these elements, plus powers over other forms of integrated transport, business support, planning and land use.

They have also come with a 30-year investment fund of between £15m and £38m annually and in some cases more extensive powers over health, housing and policing.

Ultimately the Government is keen that every part of England that wants one will have a devolution deal with “powers at or approaching the highest level of devolution and a simplified, long-term funding settlement” by 2030.