Category Archives: Local Government Finance

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13 Feb 2019

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Accountability, Audit (EDDC), EDDC, Local Government Finance

” ‘Major shake-up of public audit needed’ “

“A “radical overhaul” of public service audit is needed to give the public confidence over how its money is spent, according to recommendations from a think-tank.

Increasing financial pressures and people’s dissatisfaction with public services means now is the time for a shake-up of audit for central and local government, the authors of a report for the Smith Institute said.

Tax is likely to increase in the future as a result of demographic pressure on areas such as health and social care, and these can only be justified if the public is “confident” its money is being well spent, authors John Tizard and David Walker told the report launch yesterday.

“Fiscal pressure is likely to rise in the short run, depending on the nature of Brexit. It will certainly grow in the long run, as public spending accommodates demographic change: an older population will demand more health and social care and other services,” Spending fairly, spending well said.

It called for the creation of two new government bodies and more responsibilities given to the National Audit Office to improve public audit.

The NAO would take over audit responsibilities for the NHS and local government, the report suggested.

Authors audit commentator Tizard and David Walker, former head of communications at the Audit Commission, urged for the creation of a Public Interest Appraisal Unit, which would evaluate value for money before spending decisions are made. The NAO assesses government spending decisions after they have been made.

They also said the government should set up an Office of the three Es – equity, efficiency and effectiveness. This body would be responsible for looking at which groups benefit and which groups lose out on certain spending decisions. …”

https://www.publicfinance.co.uk/news/2019/02/major-shake-public-audit-needed

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11 Feb 2019

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Accountability, Economy, Local Government Finance, Post-Brexit Adjustments

Public services: cut, slash, burn, destroy after Brexit

Brexit just a useful excuse.

“… In his annual budget in November, Hammond loosened the government’s purse-strings, giving support to the economy as it slowed ahead of Brexit. However, rising healthcare spending leaves little spare for other public services, the IFS said.

“This suggests yet more years of austerity for many public services — albeit at a much slower pace than the last nine years,” IFS research economist Ben Zaranko said.

Public services outside of health, defence and overseas aid saw budgets fall by an average of 3 percent a year in real terms after 2010, and now look set for declines of 0.4 percent a year in inflation-adjusted terms going forward, the IFS predicts.

“The (finance minister) has said that the Spending Review will take place in 2019, and that is the right moment for government to make long term funding decisions,” a spokesman from the finance ministry said in a statement.

“Outside the (health service), total day to day departmental spending is now set to grow in line with inflation, and public investment will reach levels not sustained in 40 years in this parliament.”

Due largely to the global financial crisis, Britain’s budget deficit peaked at nearly 10 percent of gross domestic product in 2009/10 — one of the highest in the world at the time — but is roughly on track to drop to 1.2 percent this year. …”

https://uk.reuters.com/article/uk-britain-budget/uk-public-services-face-post-brexit-squeeze-forecasters-warn-idUKKCN1Q002T

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11 Feb 2019

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Austerity cuts, Economy, Local Government Finance

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The great HS2 rail heist – Dispatches, Channel 4 8pm tonight

Imagine the public services the cost of this railway line could provide! Originally costed at £32.7 billion, latest estimates put it at £56 billion and rising fast.

“The government will soon start to spend billions of pounds on the HS2 high-speed train line, creating faster connections around England. However, some are questioning if this is the right part of the rail network to receive so much investment.”

Channel 4 synopsis of programme

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10 Feb 2019

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Accountability, DCC, Economy, EDDC, Growth Strategy, Local Enterprise Partnership, Local Government Finance, Scrutiny

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“Heart of the South West, our Local Enterprise Partnership, gets its first school report and it’s not good”

Local David Daniel, a former senior government strategist, who has done much work on the East Devon economy, Heart of the South West Local Enterprise Partnership (HotSWLEP) statistics and forecasts and county growth figures (and presented these to EDDC and Devon County Council) has provided this analysis of the current “achievements” of HotSWLEP.

It must be recalled that HotSWLEP is sucking up vast amounts of money that in the past would have gone direct to local authorities and its board members (apart from a few councillors) have vested interests in housing development, the nuclear industry, commercial banking and Hinkley C recruitment.

Here is the report:

“As a result of the 2017 Mary Ney review of Local Enterprise Partnership (LEP) Governance, a newly formed Joint Scrutiny Committee is to scrutinise Heart of the South West’s (HotSW) annual performance review. This will take place on

Thursday, 14 February, in County Hall at 2.15.

There will, however, be no opportunity for public engagement or speaking and this Scrutiny Committee is not politically balanced but appointed by the very councils that agreed HotSW’s strategy in the first place.

Credit where credit’s due, this is progress! Remember, HotSW was appointed by the Government to act as our “devolution body in waiting” in 2011. It didn’t publish minutes of any meetings in the public domain until 2015. Yet it had already agreed a growth deal with the Government on our behalf the year before, 2014.

It has since published wildly ambitious strategy papers culminating with its Productivity Strategy in late 2017 aimed at doubling our local economy first in 18 years, later revised to 20 years, through transformational growth in the “Golden Opportunity” economic sectors of: Aerospace; Marine; Nuclear; Data Analytics and Healthcare. Economic growth comes from increasing the labour force and/or increasing productivity.

Demographically, the population is set to grow 0.8% p.a. but it is an ageing one and the growth of those of employable age will only be a fifth of this at 0.16% p.a. HotSW intends to “limit growth” in employment to 0.8% per annum and concentrate on raising productivity way above the national average. But even this “limited” growth in employment is five times the trend and will need substantial inward migration.

When this strategy was written, productivity in the HotSW area ranked 7th worst in England. An Office of National Statistics (ONS) report last week said: “The lowest labour productivity in 2016 was in Cornwall and Isles of Scilly. Other largely rural LEPs with relatively low labour productivity included Heart of the South West, Greater Lincolnshire, and The Marches”. The ONS now places HotSW lower at 4th worst, 18% below UK average.

We now have the opportunity to lift the lid and peer into how successful HotSW has been in meeting the targets it agreed, by reading the HotSW annual performance review for 2017, commissioned from Ash Futures.

Investment

HotSW has secured a total of some £245M to date from central government funds, though, when assessed on a per head basis, HoSW has actually received one of the lower allocations across the LEP network. These funds are supposed to be matched by funding from other sources.

LEPs have to be business-chaired and business-led and it was intended that LEPs would unlock private investment. However, the bulk of this matched funding is forecast to come from public bodies including 17% from local authorities. Only 23% will come from the private sector. In regard to this the report says: “Our consultations have also highlighted that the strategic plan is not perceived as having had any significant influence over private sector investment plans.”

Only seven of the 56 funded projects are yet complete in spending terms and so the bulk of the benefits are yet to come. Though this needs to be read in the context of a continuous stream of past funding previously distributed through Regional Development Agencies.

Of these projects, 30 are designed to create conditions for growth e.g. transport and digital infrastructure; 17 are designed to capitalise on distinctive assets in expected high growth sectors such as low-carbon and nuclear energy, marine, big data and photonics; and seven on maximising productivity and growth such as opening up employment space.

Several stakeholders feel that rural areas have been ‘overlooked’ by LEP investments and much of this due to this original identification of urban-based transformational opportunities. However, this should not come as a surprise given the composition of the original HotSW board which was dominated by individuals from a construction/development; defence/nuclear or big education background.

Here are some examples of the sort of projects submitted in the bid proposals:

£13 million to provide Hinkley C infrastructure and £55 million of pump priming to provide Hinkley housing;

a Nuclear Training College;

and one of the deals agreed includes £13.7 million loan funding to three developers to accelerate home building at: Frome, Brixham, Exeter and Highbridge. (You may ask why developers need such funding).

Much is made of the “Golden Opportunity” offered by Hinkley C. This is not the first nuclear power station to be built on the site. Hinkley A was constructed between 1957 and 1965 and Hinkley B between 1967 and 1976. So there should be plenty of historical evidence of the short and long-term economic benefits of such developments. Where are they or are they too insignificant to be found? It is no longer obvious that this is a growth industry.

Economic Measures and Growth

Lack of progress in making any significant changes to our economy are best illustrated by two direct quotes from the review:

“…….the review of economic data leads to the overall conclusion that the HoSW economy, at best, continues to track the ‘baseline’ growth scenario. That is, there is no firm evidence that it is achieving either ‘strong’ or ‘transformational’ growth as aspired to in the Strategic Economic Plan.” [Baseline – continuing to fall behind UK average; Strong – keeping pace with UK average; Transformational – faster than UK average]

“The plan outcome measures and objectives in the current economic environment do not currently look achievable, certainly in the short-term. Some of this is outside of the LEP partnership’s control (with more muted conditions nationally). However, the fact that many of the Strategic Plan outcome measures are expressed in relative terms does means that even if significant absolute improvements have been made to the HoSW economy, they may still never meet their outcome measures given that other areas will grow more quickly, notably London and South East. It is our view that some of the outcome targets, particularly those associated with the ‘transformational’ target, now look very aspirational in their nature.”

The only areas on track appear to be in the delivery of broadband coverage and in housing development density (development rates against existing stock).

Conclusion

For an unelected body that made a pitch to Government eight years ago that it could transform the local economy, including, initially, delivering health and transport, this below average performance from unlocking investment to falling productivity surely can only be seen as a failure?

The review catalogues the “critical issues” (excuses) for shortfalls: the economic context has changed; the expected ‘freedom and flexibilities’ have subsequently been rolled-back by Government; parameters [strings] have been tied around what could be funded; HoSW is a relatively new ‘construct’ and does not naturally represent a functional economic, or political, area as found elsewhere in the UK.

But that’s life. Any worthwhile strategic plan needs have been developed to be robust against a set of likely future scenarios. The “critical issues” listed above shouldn’t have come as surprise and the sensitivity of the plan to these sorts of “issues”, some use the term risks, should have been examined and reported. Another essential component, given the extreme uncertainty of how to improve productivity, should have been the development of a set of metrics and a feedback mechanism. So it is heartening to see that the reviewers make this recommendation:

“Currently, there is no ‘feedback loop’ back to the Strategic Investment Panel to develop its understanding of ‘what has worked well, and what not’ with investments made. Whilst we recognise that many projects are still at an early stage of development, we feel this is a missed opportunity. A better understanding of how investments have developed would lead to better long-term decision-making.”

On the basis of this review, is HotSW delivering value for money (our money)?

SOURCES:

Joint Scrutiny Agenda and Ash Futures Review reports pack:
https://democracy.devon.gov.uk/documents/g3570/Public%20reports%20pack%2014th-Feb-2019%2014.15%20Heart%20of%20the%20South%20West%20HotSW%20Local%20Enterprise%20Partnersh.pdf?T=10

Office for National Statistics latest productivity data:
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/regionalandsubregionalproductivityintheuk/february2018#results-for-local-enterprise-partnerships-and-city-regions

HotSW Productivity Strategy:

Click to access HeartoftheSouthWestProductivityStrategy.pdf

HotSW Strategic Economic Plan

Click to access Non-tech-summary-FINAL.pdf

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10 Feb 2019

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Accountability, Local Government Finance

“Basildon Council to sell land it bought for £1m for £1”

“A council is to sell a plot of land it bought for £1m two years ago to the developer of a four-star hotel – for £1.

Basildon Borough Council’s oversight and strategy committee approved the scheme for land next to Basildon Golf Club, which will also see it pay an estimated £500,000 for an access road.

The council said the project was “an exciting step forward for the area”.

But critics have described it as a “bad deal”.

The authority bought the land in March 2017 for more than £1m, according to council papers seen by the BBC, in a bid to ensure a “high quality” hotel was built on the site.

‘Back to the drawing board’

After a bidding process, Bran Investments was selected as the council’s preferred developer.

The company carried out a study which found that while there was demand for a hotel, the anticipated room rate was below the original expectation. This led it to revise its proposal and offer a notional purchase price of £1, according to the council report.

The council, which can sell land for less than its market value if the project boosts the borough’s economy, said the hotel would create 50 jobs once open and 100 people could be employed during the construction process.

Conservative council leader Andrew Baggott said: “This is an important and exciting step forward for the area and the borough.”

Basildon Council independent councillor Kerry Smith said:

“This is a bad deal – it doesn’t weigh up.

“I think they need to go back to the drawing board and open the bids again and let’s see who we get.

“This sixth bidder has been offered the £1 deal. The other five, who they have totally rejected, haven’t been offered this deal which is costing taxpayers money.”

https://www.bbc.co.uk/news/uk-england-essex-47172198

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9 Feb 2019

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Accountability, Democracy, Local Government Finance

Labour to offer councils direct access to Westminster

“Labour has announced proposals for a new representative body for councils to give them a regular voice at Westminster and a direct say on policy.

Andrew Gwynne, the shadow communities and local government secretary, will set out the plans for a local government commission, made up of leaders from all types of local authority.

Under Labour, the representatives would meet every month with the communities secretary and other cabinet ministers and “inform decision-making”, Gwynne will say in a speech to the Local Government Association (LGA) conference in Warwick.

Labour said the current communities secretary, James Brokenshire, had met directly with just one council in April to June last year, the last three months for which records were available.

There have been significant cuts to central grants for councils since 2010, and the LGA says its members are facing a funding gap of £3.2bn in the next financial year.

In his speech, Gwynne will argue that councils are hugely neglected by the centre of government, all the more so given that a Labour calculation found that 44% of the commitments in it 2017 manifesto would have fallen directly or indirectly to local authorities in England to implement.

He will say: “For nine years, ministers have sat in meetings in Whitehall and cut funding to councils hundreds of miles away, never having to see the library that is closed, the potholes that go unfixed and the elderly people that go without care as a result.

“To fix our broken political system which has left people disconnected and disillusioned with Westminster politics, we need to put local people and communities at the heart of decision-making.”

The new commission would “ensure that councillors can influence every decision that affects local councils”, he will say. “We need their guidance, your support and your advice, in ensuring that from Whitehall to our town halls we are being as effective as possible in helping our hardworking communities. Gone will be the days when we have a secretary of state for local government that doesn’t want to know local government.”

https://www.theguardian.com/society/2019/feb/09/labour-unveils-plan-to-give-voice-to-neglected-councils

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8 Feb 2019

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Accountability, EDDC, Local Government Finance

Oh noooooo…..”£20m investment fund to be set up so East Devon can buy property and raise cash to balance budget”

Owl says: THAT COST-NEUTRAL MOVE TO HONITON SEEMS TO HAVE COST AN AWFUL LOT!

Owl can see it now …. and it isn’t nice …

“East Devon District Council is set to join the growing number of councils who are investing in property to help balance its budget.

The cabinet have recommended to full council that up to £20m be allocated to an investment fund, either from existing resources or funding from the Public Works Loan Board.

The money would then be drawn down and invested as and when required and would be expected to give the council a net return of £450,000 a year.

East Devon District Council is set to join the growing number of councils who are investing in property to help balance its budget.

The cabinet have recommended to full council that up to £20m be allocated to an investment fund, either from existing resources or funding from the Public Works Loan Board.

The money would then be drawn down and invested as and when required and would be expected to give the council a net return of £450,000 a year.

Any decision on investment of more than £5m would have to be made by the council, but delegated authority to the Deputy Chief Executive in consultation with Leader, Portfolio Holder for Asset Management, Portfolio Holder for Finance and Portfolio Holder for Economy would be given for anything less than that.

Tim Child, Senior Manager – Property & Estates, told the cabinet on Wednesday night that the Commercial Investment Framework was a strategy to help deliver income that would be gleaned from land and property and that the overview committee had supported the principle of it.

He added: “This is a method tried and tested by other authorities. Some have done this and others are trialling it. The model we are set to go with reflects the low risk appetite for East Devon and some of the investments will be within East Devon.”

Chief Executive Mark Williams added: “As the new council prepares for the 2020/21 budget and the £2m funding gap and a 13 per cent reduction in our budget, we will have to do something and a lot of engagement with the public around it. As part of that engagement, I dare say public will say what are you doing to protect the services, and one of those things is to engage in low risk activity to try and generate some income by investing in property.”

Cllr Philip Skinner, portfolio holder for the economy, said that he was very supportive of the idea and was the kind of work the council needed to do. He said: “I look at Torbay, and they are known as a basket case, but they have put together a fantastic financial team and have made some phenomenal investments up and down the country.

“They are doing a really good job, and want to make investments in our patch, so we need to make sure we get there first, as there is a speed that you need to move at in the commercial world as good deals don’t last long as other people recognise that there are good deals.

“We need to make these investments to ensure we can find a way to cover the funding gap we will be facing. We need to wake up and smell the coffee on this. I am very supportive of this and this is the kind of work we need to be doing.”

Among the investments Torbay Council has made includes purchasing a bakery in Bodmin from Proper Cornish Ltd for £3m, with a council spokesperson saying that investment in properties from Cornwall to Kent will raise an estimated £2.8m and that they need to generate more income to fund local services due to budget cuts.

Cllr Mike Allen added: “This strategy is very important. The amounts are small compared to other authorities who are borrowing up to £100m, but this is a prudent way of filling the black hole gap we have in the revenue income.”

Leader of the council, Cllr Ian Thomas, added that the council was taking a very professional approach to an area that they historically haven’t covered very well.

Concerns though about the strategy were raised by Cllr Roger Giles, who said that he would have thought that people generally would want the council to borrow money to provide services for residents and to borrow to provide additional housing for the less well-off residents.

He said that property investment brings with it the potential for significant risk if things go wrong and there were concerns about the public perception of making these investments, particularly if they are outside of East Devon.

Concerns though about the strategy were raised by Cllr Roger Giles, who said that he would have thought that people generally would want the council to borrow money to provide services for residents and to borrow to provide additional housing for the less well-off residents.

He said that property investment brings with it the potential for significant risk if things go wrong and there were concerns about the public perception of making these investments, particularly if they are outside of East Devon.

The cabinet agreed with the overview and scrutiny recommendation hat there should be a Council Tax increase of £5 a year made on an Band D council tax property, taking the meaning the average tax payer will be charged £141.78 a year for 2019/20.

They also agreed to recommend that a vacant post within the Economy Portfolio at a cost of £25,000 be reinstated. The deletion of this vacant post in the draft budget was agreed by the Strategic Management Team as a saving in line with Transformation Strategy “Fit for Purpose” imperative as they believed the saving could be made through efficiencies and would not impact the service, but the cabinet disagreed and said that it would help free up the economy and planning teams from their current pressures.”

https://www.devonlive.com/news/devon-news/20m-investment-fund-set-up-2525158

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6 Feb 2019

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Accountability, Austerity cuts, EDDC, Local Government Finance, Sustainability

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Just about everyone puts the boot into the government on local authority funding

“The UK government is “in denial” over the sustainability of local government finances, a group of MPs has warned.

Councils are overspending on social care, reducing key services, relying on reserves and resorting to generating income from alternative sources, the Public Accounts Committee has claimed – adding that the government’s insistence that the sector is in fact sustainable is “extremely troubling”.

A PAC report, published today, noted that local authorities in England have seen their core funding from central government slashed by nearly 50% since 2010/11.

It added that such cuts have coincided with increasing demand for services such as housing – the number of homeless people in the UK has risen by one-third in the past eight years – adding that increased demand for social care means councils have had to cut spending in other areas. Spending on services outside of social care has fallen by 32.6% between 2010/11 and 2016/17, it stated.

The report added that, despite these figures, the Ministry of Housing, Communities and Local Government insists the sector remains sustainable.

“The government is in denial about the perilous state of local finances. It insists the sector is sustainable yet is unwilling or unable to back up this claim,” said Meg Hillier, chair of the PAC.

“Flimsy assertions have no place in financial planning. The fact that government has bailed out councils with short-term fixes should be evidence enough that all is far from well.

“Government needs to get real, listen fully to concerns of local government and take a hard look at the real impact funding reductions have on local services. And then it needs to plan properly for the long-term,” she added.

The cross-party group of MPs added that it was “deeply dismayed” that MHCLG views the financial sustainability of local authorities solely in terms of a “small set of statutory services”, such as social care, rather than the full range of services local people need.

“It is extremely troubling that the government views the financial sustainability of councils solely in terms of statutory services, rather than the full range of services local people need and can reasonably expect councils to provide,” Hillier said.

Overall local authority spending on services fell by 19.2% in real terms between 2010/11 and 2016/17, which the PAC says has pushed the MHCLG into using short-term cash injections, such as the £1.4bn allocated in the 2018 Budget.

Permanent secretary at MHCLG, Melanie Dawes, told the PAC in November: “We believe the sector as a whole is sustainable if the amount of resources available to it can deliver the statutory services that it is required to deliver.”

The report recommended that MHCLG should work with local authorities to collect evidence on the impact on service users of providing funding through one-off funding boosts as opposed to long-term funding arrangements.

In the 2019/20 local government finance settlement communities secretary James Brokenshire said that core spending power would increase from £45.1bn in 2018-19 to £46.4bn in 2019-20 – a cash increase of 2.8%.

“This year’s settlement paves the way for a fairer, more self-sufficient and resilient future for local government. That is why local authorities will have more control over the money they raise and a real terms increase in their core spending power,” he said.

The Local Government Association recently warned that discretionary services are under threat due to cuts to central government funding.

Further reaction to the report:

Rob Whiteman, CIPFA chief executvie, said: “It is widely accepted that the current funding model for local authorities is no longer viable, and without bold policy solutions vital public services will continue to be eroded in order to balance the budget.

“We should all share the concern that if current trends are allowed to continue, it will be some of the most vulnerable in society who will be missing out on services and experiencing worsening outcomes as a result.”

Richard Watts, chair of the Local Government Association’s resources board, said: “We agree with the Committee that the financial sustainability of local government cannot be defined by the ability of councils to just provide statutory duties.

“Pressures continue to grow in children’s services, adult social care, and efforts to tackle homelessness, and this is leaving increasingly less money for councils to fund other discretionary services, such as the maintenance of parks, certain bus services, cultural activities and council tax support for those in financial difficulty.”

Andrew Gwynne, shadow communities and local government secretary, said: “Nine of the ten most deprived councils in the country have seen cuts of almost three times the national average.

“And when you cut vital support services in such areas, social problems grow – and demand for those services only becomes greater.”

https://www.publicfinance.co.uk/news/2019/02/local-government-finances-unsustainable-mps-warn

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5 Feb 2019

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Audit (EDDC), Local Government Finance

Local authorities – cut, cut, bleed dry

Huffington Post has done a long article on the effect of austerity on six councils all over the country – Labour and Conservative.

It ends with this summary:

“The Facts And Figures

Cuts to local authority budgets began in 2010 under the coalition Conservative and Liberal Democrat government, as part of the wider reform agenda to reduce the deficit following the financial crisis of 2008.

But almost a decade on the Local Government Association (LGA) says more and more councils are struggling to balance their books, facing overspends and having to make in-year budget cuts.

Some of the basic facts and figures highlighted by the LGA are;

– Between 2010 and 2020 councils will have lost almost 60p out of every £1 the government provides for services.

– Main government grant funding for local services will be cut by a further £1.3billion (or 36%) in 2019/20.

– It is estimated councils would need an additional £8billion more than they are expected to have in 2024/2025 to deliver the same services as today.

Against this financial backdrop, the LGA says there is an ongoing surge in demand for council services.

Town halls are being asked to take on larger caseloads providing statutory services in adult and children’s services, and housing homeless families.

All of this leaves less money for day-to-day services such as running libraries or filling potholes.

The size of local government staffing has also shrunk significantly over the last 20 years by 629,000 (or 23% of the directly employed council workforce), while central government staffing has increased by 31%.

The LGA has called on the chancellor to tackle this “funding crisis” and says it is working hard to try and bring money back into local government.

Cllr Richard Watts, chair of the LGA’s resources board, said: “Losing a further £1.3billion of central government funding at this time is going to tip many councils over the edge.

“Many local authorities will reach the point where they only have the funds to provide statutory responsibilities and it will be our local communities and economies who will suffer the consequences.

“In his Spring Statement last March, the Chancellor said he would invest in public services if public finances improve as recent forecasts have suggested. It is therefore vital that the government addresses the growing funding gaps facing councils in 2019/20 in the Autumn Budget.”

https://www.huffingtonpost.co.uk/entry/council-leaders-spending-budgets_uk_5c503229e4b0f43e410acaa1?guccounter=1

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1 Feb 2019

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Accountability, Austerity cuts, Developers/ Development, EDDC, Exmouth Creative Group, Grenadier, Local Government Finance, Regeneration

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Councils investing in commercial property and regeneration feel the chill

Owl wonders how EDDC is getting on with Grenadier in Exmouth …..

“Uncertainty over the impact of Brexit on the UK property market has hit two major council investment projects.

Essex County Council this week formally removed £6m from the budget for its £50m property investment fund after pausing further purchases due to worries over Brexit.

Meanwhile, Brighton & Hove City Council has been forced to delay the signing of a development agreement on a regeneration scheme in which it is planning to invest £8m.

The problems emerged in a week that communities secretary James Brokenshire announced allocations for councils under a new £56m fund to help them prepare for Brexit.

In a report to councillors, Margaret Lee, executive director for corporate and customer services, recommended the £6m reduction in Essex’s property investment fund, saying: “Due to the uncertainties caused by Brexit and the potential impact on the property market, the scheme has been paused with no further purchases planned.”

The pause in investment was originally agreed by Essex councillors in November, after advice from its adviser Hymans Robertson not to expand its commercial property programme “due to the current market conditions including the unknown impact of Brexit”.

However, the council has now decided to remove £6m from the investment programme budget as part of a package of measures that will help the authority reach a forecast underspend of £29.6m in its 2018/19 capital spending programme.

Before the programme was halted, £44m of the fund had been spent on property, which the council says is already yielding £1m for council services.

Essex is set to review whether to restart commercial property investment through the fund during the summer.

Meanwhile, in Brighton, councillors have been forced to delay a deadline they set for housebuilder Crest Nicholson to sign the development agreement on the King Alfred leisure centre and housing regeneration scheme.

Originally, councillors had proposed to walk away from discussions with the developer unless it signed the deal by 31 January.

However, it extended the deadline until 30 March – the day after the UK’s date for leaving the European Union (EU), following a last minute plea from Crest.

In a letter to the council, it cited “challenging economic uncertainties surrounding Brexit and the impact this could yet have on the construction industry workforce and wider confidence and stability of the property market”.

It added that “as soon as we have greater certainty over the nature and form of the Brexit arrangement which we all hope and expect will be achieved shortly, and assuming this does give reasonable certainty over the future trading relations with Europe, then we will enter into the development agreement and commit the team and resources required to promote the scheme, develop the design and seek planning in accordance with the conditions and programme”.

In 2016, the council committed £8m to the project, which comprises a sports centre, swimming pool, underground parking and 565 homes in blocks of up to 18 storeys high.”

http://www.room151.co.uk/funding/brexit-fears-hit-council-property-investments-as-contingency-funds-confirmed/

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1 Feb 2019

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Accountability, Audit (EDDC), Austerity cuts, Council tax, Local Government Finance

Bankrupt Tory council gets special treatment and audit bill balloons

Owl wonders how it would have been treated if it had not been a Tory council …

Its audit bill has ballooned:

“In its final audit report released this week, auditor KPMG said delays have been caused by the slow and patchy provision of information by the council and departures of key staff at the authority.

The extra work caused by the delays would more than quadruple its original fee of £71,250, it said.

The report said: “We stated during the audit committee on 26 November 2018 that this had now risen, at that date, to approximately £300,000 in total (i.e. including original scale fee).”

http://www.room151.co.uk/funding/delays-cause-northampton-audit-bill-to-balloon/

and

It is being allowed to raise an extra 2% on council tax without the (legal) need to hold a referendum:

“The council had already proposed raising council tax by 2.99%, the maximum amount it could do before holding a local vote.

The final settlement stated: “For 2019-20, the relevant basic amount of council tax of Northamptonshire County Council is excessive if the authority’s relevant basic amount of council tax for 2019-20 is 5% or more than 5% greater than its relevant basic amount of council tax for 2018-19”. …

When classified as “excessive”, a local authority must hold a referendum on its proposed tax hike.

In November, in a bending of the rules by the government, Northamptonshire was given permission to use £70m of capital receipts to help balance its budget.

The final statement otherwise largely confirmed what was contained in the earlier provisional settlement in December, with core spending power rising by 2.8% in cash terms from £45.1bn in 2018-19 to £46.4bn in 2019-20.

In real terms this is almost a freeze.”

http://www.room151.co.uk/funding/northamptonshire-thrown-a-lifeline-again/

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31 Jan 2019

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Accountability, Audit (EDDC), Local Government Finance

Auditors: what are they FOR?

EDDC’s auditors say they aren’t there to detect fraud:

“The former auditor of the collapsed cake chain Patisserie Valerie has argued that it is not the role of accountants to uncover fraud.

Grant Thornton is under investigation for its audits of the chain that collapsed into administration earlier this month following the discovery of a £40m black hole in its accounts. Patisserie Valerie’s former finance director has been arrested on suspicion of fraud.

David Dunckley, chief executive of Grant Thornton, which was replaced by RSM as the chain’s auditor in mid-January, told MPs on the business, energy and industrial strategy committee that there was an “expectation gap” that “needs to be fixed”.

“We’re not looking for fraud, we’re not looking at the future, we’re not giving a statement that the accounts are correct,” he said, adding that his firm audits 7,000 companies. “We are saying [the accounts are] reasonable, we are looking in the past and we are not set up to look for fraud.”

In a heated exchange with Rachel Reeves, the Labour MP and committee chair, Dunckley reiterated: “If people are colluding and there is a sophisticated fraud that may not be caught by normal audit procedures.”

He said in an ideal world it would be spotted. Reeves replied: “But in a shop that sells tea and cakes, you’d sort of think that might be spotted. It’s not a multinational complex organisation. …”

https://www.theguardian.com/business/2019/jan/30/ex-patisserie-valerie-auditor-says-not-his-role-to-uncover

and it seems, even when they DO detect major fraud, they don’t seem to feel obliged to do anything about it:

“Deloitte has been fined 2.2m ringgitt (£415,000) by Malaysian regulators for failures in its audit of a firm linked to the scandal-ridden state fund, 1MDB.

The Securities Commission Malaysia said Deloitte was reprimanded because it failed to report the irregularities detected in the Sukuk Murabahah Programme, an Islamic bond issued by Bandar Malaysia Sdn Bhd (BMSB).

Deloitte was the statutory auditor for BMSB and its holding company 1Malaysia Development Berhad Real Estate (a subsidiary of state fund 1MDB) for the financial years ending March 2015 and 2016 when the bonds were issued.

The securities regulator said Deloitte’s failure to immediately report irregularities may have a material effect on the ability of BMSB to fulfil its obligations in repaying sukuk holders any amount under the programme.

Imposing a fine of 2.2m ringgit , the regulator said it “finds the breaches committed by Deloitte serious in nature as it has failed to discharge its statutory obligations”.

https://www.theguardian.com/business/2019/jan/30/deloitte-fined-by-malaysia-over-breach-linked-to-1mdb

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30 Jan 2019

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Accountability, Austerity cuts, Local Government Finance

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“Amid Brexit vote chaos, the government quietly finalises council cuts”

“In what’s becoming a bleak pattern, the government chose today – Theresa May’s second attempt to pass her Brexit deal – to finalise its next round of cuts to councils.

Ministers outlined the provisional local government finance settlement for 2019-20 last December. But they chose today to announce its final plans for short-term local government funding – in a written statement, the subtlest form of government announcement, by the Communities and Local Government Secretary James Brokenshire.

After eight years of austerity, cash-strapped councils have been waiting for the government to use its final settlement this month to provide the resources they desperately need for funding public services in 2019-20. But the new settlement – sneaked out while Westminster is distracted by Brexit – doesn’t deliver what councils need.

As first announced in the Budget, the government is releasing extra chunks of funding for social care and potholes, as well as more money for high streets. The government calculates that its settlement adds up to a rise in core spending power for councils from £45.1bn in 2018-19 to £46.4bn in 2019-20: a 2.8 per cent cash increase. (It has also reiterated the £56.5m across 2018-19 and 2019-20 to help councils prepare for Brexit, which we can’t really count as extra funding as it’s to fill a Brexit-shaped hole.)

Firstly, this money isn’t enough – councils still face a funding gap of more than £3bn this year, according to the Local Government Association. The pressure to set legal budgets, with an average 49 per cent drop in real terms spending power since 2010 and rising social care demands, means councils need substantially more than a 2.8 per cent raise. Labour’s shadow local government secretary Andrew Gwynne has called the plan a “shoddy deal”, and warns it “means more cuts to our councils”.

Secondly, the funding announced is simply a short-term one-off. There’s no new system for funding social care – with the long promised green paper on adult social care repeatedly pushed back. Decisions on other structural concerns – business rates retention and a fair funding formula for local government – have been put off, with consultations being published instead.

Councils are desperate for a long-term, sustainable funding settlement. As the head of the National Audit Office, Amyas Morse, said last March: “Current funding for local authorities is characterised by one-off and short-term fixes, many of which come with centrally driven conditions.”

“It does not solve medium term financial pressures so tough decisions will still need to be taken and our members will have little choice but to raise council tax to meet demand-led pressures in services,” warned Paul Carter, chair of the County Councils Network.

Plans for 2020 and beyond are yet to be determined, according to the Institute for Fiscal Studies, which concludes that “current plans imply further cuts for unprotected services after 2019-20”.

This means councils will continue to operate in a financial void, unable to fund public services properly, while waiting for something to change in the promised Spending Review later this year.”

https://www.newstatesman.com/politics/economy/2019/01/amid-brexit-vote-chaos-government-quietly-finalises-council-cuts

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29 Jan 2019

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Accountability, Local Government Finance, Post-Brexit Adjustments

Local authority funding to cover Brexit

All unitary councils will receive £210,000 and combined authorities will receive £182,000. County councils will receive £175,000 each and all district councils will receive £35,000.

That won’t be enough …..

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28 Jan 2019

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Accountability, Freedom of Information Act, Local Government Finance, Privatisation, Scrutiny

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Information Commissioner wants Freedom of Information Act extended to outsourced companies

“The Information Commissioner has called for the Freedom of Information Act 2000 (FOIA) and the Environmental Information Regulations 2004 (EIR) to be updated to include organisations providing a public function.

In a report to Parliament, ‘Outsourcing Oversight? The case for reforming access to information law’, Elizabeth Denham said: “In the modern age, public services are delivered in many ways by many organisations. Yet not all of these organisations are subject to access to information laws.

“Maintaining accountable and transparent services is a challenge because the current regime does not always extend beyond public authorities and, when it does, it is complicated. The laws are no longer fit for purpose.”

She added: “Urgent action is required because progress has been too slow. It is now time to act. This report sets out solutions that can extend the law to make it fit for the modern age.”

Denham said the main aim her report was to make an evidence-based case to extend the reach of FOIA and the EIR “to enable greater transparency and accountability in modern public services, which in turn improves services”.
The Commissioner said in the report that she would welcome a Parliamentary Inquiry via a select committee into the issues raised. The ICO has submitted the report to the Public Accounts Committee (PAC) and PACAC for their consideration. …”

http://www.localgovernmentlawyer.co.uk/index.php

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27 Jan 2019

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Accountability, EDDC, Local Government Finance, Scrutiny, Transparency

Councils relied too much on informal cabinet briefings: contract legality now being probed

“A CATALOGUE of errors detailing how two district councils were run have been exposed in a ‘gobsmacking’ report.

Initial findings from an investigation into contracts signed by Vale of White Horse and South Oxfordshire district councils between 2010 to 2016 show councillors’ knowledge was stymied by a ‘lack of information’.

The two councils are conducting reviews into several contracts after fears were raised last year that contracts could have been handed out improperly.

All of them have a value of or more than £10,000. Between the two councils, there are 162 of those in total.

A report also highlights there was an ‘over reliance’ on briefing cabinet members informally, rather than decisions being made at public cabinet or council meetings.

‘A lack of detail’ was also found to be a problem in papers for those cabinet briefings and at cabinet meetings.

The review also found there was ‘poor procedural compliance by officers and members, most notably in documenting decision making’.

Debby Hallett, Lib Dem councillor on Vale council and former group leader, said the ‘gobsmacking’ papers seemed to indicate a ‘culture of sloppiness and shortcuts’ over key contracts.

But she added: “The thing that surprised me is [the councils] have promised to have this done by March, which is putting this in the public domain before the local elections [in May].”

That, she said, showed the councils’ willingness to conduct the reviews in a spirit of ‘transparency and integrity’.

Adrianna Partridge, the councils’ head of corporate service, notes in the report: “This review has identified a significant risk that the councils have incurred expenditure that has not been adequately approved in accordance with the councils’ constitutions, which could have both financial and reputational risk.”

In the report which will go to the councils’ joint audit and governance committee on Monday, she states: “Action has already been taken to address and strengthen the decision making process on individual projects, and it is acknowledge that a greater transparency is needed, including an increase in the number of formal papers taken to cabinet and full council which the senior management team is enforcing.”

The councils have set aside a budget of £30,000 for legal advice if they need to take any action over contracts in the future.

Confidential papers will be discussed next week.

They are understood to refer to specific details of the councils’ eight to 10 contracts which are being reviewed.

https://www.oxfordmail.co.uk/news/17377868.gobsmacking-errors-in-how-oxfordshire-councils-awarded-contracts/

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26 Jan 2019

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Accountability, Austerity cuts, Local Government Finance

“‘Casino councils’ are spending huge sums on property across the country in a high-stakes bid to balance their books”

“…Councils across England are under huge pressure to adopt a more expansive investment strategy, as their funding from central government is slashed. Many have responded by loading up with debt to play the property market, exposing some to a ticking timebomb of high borrowings and the nascent threat of a property-market collapse.

The omens are not good for retail landlords. Last week the real estate adviser Altus Group forecast that 23,000 shops would close in the UK this year – with a loss of 175,000 jobs – while the Royal Institution of Chartered Surveyors (Rics) told valuers to be “aware of the potential for significant changes in value” in retail properties. Last month fund manager Fidelity International warned that UK retail properties could lose up to 70% in value as a result of rent cuts. The correction would be driven in part by a 10-40% reduction in rents to make them affordable for bricks-and-mortar retailers, Fidelity said.

The Local Government Chronicle (LGC) said the amount spent by councils in England on investment properties ballooned from £76.4m in 2014-15 to £1.8bn in 2017-18. These include offices, hotels, supermarkets and gyms, sometimes miles outside a council’s own area: these out-of-area investments are worth £619m alone.

Lord Oakeshott, chairman of Olim Property, which manages commercial property portfolios for institutional clients, said: “The whole thing is a mess. Councils are being loaned vast amounts of money by government, which is being invested in property. It’s a hell of a gamble that these councils are taking and this is not what councils should be doing.”

If the economy does take a turn for the worse, councils may find their current roster of reliable tenants forced to take evasive action. Store and office closures are a common cure when companies begin to feel the squeeze. A deepening economic crisis and a soaring debt pile makes for a toxic financial cocktail that some “casino councils” may be forced to swallow. Authorities will be forced to find new tenants who might not be able to pay the same levels of rent – if they can find new tenants, that is.

… But with Brexit looming the property sector is particularly vulnerable. The Bank of England has warned that “disorderly” Brexit – where Britain crashes out of the EU without a deal – could make the price of offices, warehouses, shopping centres and hotels drop by as much as 48%– more than the 42% peak-to-trough decline following the 2008 crisis. Even with only a “disruptive” Brexit – where the UK retains access to some trade agreements between the EU and other countries – the Bank suggested property prices could still fall 27%. … “

https://www.theguardian.com/business/2019/jan/26/small-supermarket-wales-owned-surrey-casino-property?CMP=Share_iOSApp_Other

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26 Jan 2019

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Accountability, Austerity cuts, Local Government Finance

“We Need A Complete Rethink Of How We Fund Our Public Services”

Jonathan Carr-West
Chief executive of the Local Government Information Unit (LGiU):

“A few weeks ago, a radio producer called the LGiU office desperately seeking a guest for a head-to head debate on local government funding: “I’ve booked someone to argue that local councils need more money, but I can’t find anyone who disagrees”. That didn’t come as much of a surprise.

I regularly speak with council leaders who nearly all tell me a decade of deep cuts have left them at breaking point. Regardless of party allegiance, senior decision-makers unanimously agree that councils are in an unsustainable position, and some are nearly bust.

Local government in England and Wales is funded through grants from central government (about 54%) made up mainly of redistributed business rates, and locally raised funding (about 46%) which includes council tax and other sources such as car parks, parking permits and the hire of sports facilities.

Local authorities have already seen their central funding reduced, on average, by 40%. In Haringey, for example, the council’s spend per head of population has dropped by nearly a quarter. HuffPost’s What It’s Like To Lose series shows how people have already suffered the impact of the cuts.

However, from next year the Government has committed to phasing out central grants for local government, representing a further cut of more than £1billion at a time when the number of elderly people needing care is growing. Last year, the Prime Minister said it was the end of austerity. Not for local councils, it seems

To offset that savage cut, some councils are borrowing billions of pounds to buy property, supermarkets and gyms. At the same time, residents are paying more and more money to their local authority through higher council tax, and through increased charging on everything from swimming pools to cremations. But they will be receiving less, because it is the money from central government that pays for, amongst other things, adult social care and vulnerable children’s services, which is shrivelling up.

The most worrying aspect of all, though, is that local councils are still totally in the dark about how they will be funded from 2020. With only a year to go before the central grant disappears, the plan to allow councils to retain their local business rate income, which was supposed to make up the shortfall, has is yet to be agreed, never mind rolled out,.

Meanwhile, the government’s ‘Fair Funding Review’, which will change the calculation of each council’s funding needs, is yet to be finalised. The review’s first iteration has been criticised for removing deprivation as a funding criteria and shifting spending away from urban areas.

The LGA has consistently said that resources announced in the Autumn Budget and local government financial settlement are nowhere near enough to meet a gap in overall funding of more than £3billion. Clarity on the future shape of the system is desperately needed but the issue has failed to move up the Whitehall priority list due to Brexit.

Local government is the most important bit of government. Councils deliver the things that really matter most to us: schools for our children, clean, safe neighbourhoods, new homes, care for the elderly. All these services are delivered from the town hall, not Whitehall.

But there’s a paucity of ideas when it comes to fixing council finances: the government wants local authorities to raise more and to be more entrepreneurial, yet it balks from them taking any commercial risk.

Other proposed solutions leave councils with less autonomy when they need more – for instance, some have suggested that social care be delivered nationally or that councils should funded solely through central government grants.

Broadly, councils want to avoid being subject to the whims of central government policy-making to allow them to plan their own finances. Councils are calling for more control over areas of DwP and health that affect their ability to help their residents.

That means a complete rethink of how we fund public services. Instead of letting councils’ spend wither away, we need to localise our spending on all public services creating single place-based budgets that democratically elected leaders can spend in the ways that make most sense locally and that drive down demand.”

https://www.huffingtonpost.co.uk/entry/local-services_uk_5c4b3431e4b0e1872d433381

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26 Jan 2019

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Austerity cuts, Local Government Finance, Section 106

“Councils made to give £225k BACK to developers – often because they didn’t spend it quickly enough”

Could it, has it happened here? Only a Freedom of Information request will tell …

“More than £225,000 of Section 106 money has been handed back by councils – mainly because they did not spend it in time.

The money, paid to councils by developers, is meant to go on road improvements, public transport and community facilities at new housing estates.

S106 contributions are often included as a way to overcome objections and as a condition of planning approval.

But on a number of occasions in the last five years the money was returned because Suffolk councils had not spent it within a five-year limit, Freedom of Information requests from this newspaper show.

While the sums are a fraction of total S106 contributions made, councillors said they showed deep failings within local government.

Andrew Stringer, leader of the Liberal Democrat, Green and Independent group at Suffolk County Council (SCC), said it was “perverse” that developer contributions were going unspent during a time of austerity.

Much of the returned funding was down to SCC’s failure to carry out highways projects. …”

https://www.eadt.co.uk/news/section-106-ipswich-saxmundham-haverhill-housing-developers-1-5866556

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26 Jan 2019

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Accountability, Environment (local), Local Government Finance, Transparency

Community group sues council over secret contract

“A community group is taking Gloucestershire County Council to court over the award of a £600m incinerator contract. Community R4C, a non-profit mutual society which has had support from celebrities including Jeremy Irons, Jonathon Porritt, Hugh Fearnley Whittingstall and Kevin McCloud, claims the contract was unlawfully awarded, resulting in a massive rise in costs to taxpayers and a breach of procurement law. They filed a lawsuit with the High Court on Friday.

Campaigners have been opposing the waste incinerator at Javelin Park for years, saying the project wasted taxpayers money, was bad for health and the environment and that there were cheaper and better alternatives. Requests to see the contract, the largest the county has ever entered into, were consistently refused until a tribunal forced its disclosure in 2017, by which time a revised contract had been signed. This was only released on 20th December 2018.

“It was a very difficult decision to take this course of action when so much taxpayer money has already been spent on legal battles”, says Patricia Watson, a waste consultant and volunteer director of the group. “The underhand behaviour of the council and contractor has led to a far higher price than anywhere else in the country for the lowest possible environmental benefit.”

Board member Sue Oppenheimer says: “The contract has increased by a staggering £150m making it 30% more expensive. By law, it should have been retendered. Instead Gloucestershire County Council has spent around half a million pounds keeping this information secret. With the support of the community, we had been working on a much cheaper waste processing plant and would have bid for the contract. Our plant would have increased recycling, reduced pollution and would have been a better deal for the environment and the taxpayer.”

Tom Jarman, another board member says: “There is a strict 30 days limit to bringing this sort of claim and it seems to us that the council timed the disclosure of the relevant information strategically, just before Christmas, so to make it almost impossible for anyone to bring legal action in time. Keeping a 30% increase in cost secret from the public and its own audit committee is not the way we expect a public authority to conduct itself.”

https://www.unitynews.co/people-of-gloucestershire-have-to-sue-their-own-council/