Thursday, January 22, 2009

Crunch Budget Decisions for City Council

It is crunch time for the City Council' s budget setting process, as the Lib Dem's Leader and Executive Councillors meet next week to agree the budget measures that will be put to the Full Council meeting in February.

There have been unprecedented pressures this year, including:
- the £620k at risk in the Folk Festival tickets fiasco that for budgeting purposes at least must be assumed lost
- £9m invested in Iceland, with no guarantee of repayment of the capital or interest
- a shortfall in funding from Government for the concessionary bus fares of approx £1.3m a year
- The credit crunch more generally, and its effect on all Council budgets.
- Loss of interest on the Council's reserves due to falling interest rates.

The top two are due to the poor financial management from the Lib Dems, but even without these there are clearly severe financial pressures. The interesting question now is how should this year's budget be handled.

Remarkably, the Lib Dems approach to date has been to stick their head in the sand and pretend there isn't a problem. For the first time in over a decade, the reports presented to the scrutiny committees in January did not identify sufficient savings to present a balanced budget - over £1m of savings still need to be found in the period to April 2010. Looking at the list of proposed savings to date (which curiously don't seem to be on the Council's website when you look at the meeting agendas), the only real savings are from service reviews completed some months ago, with the first draft budget leaving hundreds of thousands of cuts still to be found. But later amendments reflecting the Folk Festival fiasco and the City Council being told it must assume it won't be getting any interest on the Iceland money, and we are left with collosal amounts of savings to be found in a very short period of time.

We already know that the Lib Dems are planning to increase Council Tax by 4.5% every year, about the most they can get away with to avoid capping, despite the budget now assuming wage inflation much below this, and despite the hardship many people are feeling from the credit crunch. They were also expected to hit their minimum general reserves level of £1.5m in a couple of years anyway, although there is a case that in the current tough times (and one-off financial catastrophes) it is reasonable to go below their target minimum in the short term.

But the bottom line is that there are deep cuts that will need to be made (and not just one-year only fixes), and the ruling group seemed to have assumed that the Folk Festival fiasco and the Iceland deposits, which have been known about for ages weren't an issue. Lack of planning for this means cuts will now be made in a hurry, so will likely either be insufficient or highly damaging or both.

But even if they make then numbers work, there are some highly questionable assumptions involving ignoring the effects of the credit crunch on income - for example, they assume folk festival ticket prices can rise again, but still sell out (assuming they prove capable of collecting the money this year of course...), they pencil in much higher car parks revenue on the back of significant increases in charges, and don't seem to have considered the collapse in the value of recyclable materials, such as paper for recycling which is now apparantly worthless. All these issues could see lower income for the Council than they are currently expecting.

The Council doesn't seem to have even begun to consider the effects of the recession on its capital spending - a lot of which is delivered through s106 taxes on developers - this income stream looks to have all but disappeared as developers down tools, and when the property market returns to more reasonable levels, it is unclear if the Council will ever be able to levy these charges again at the same level.

In summary, in the good times, the Lib Dems failed to find the efficiency savings that have already been identified for this year (without admitting any cuts in service), causing Council Tax to be racked up unnecessarily, but in troubled times, their weak leadership and failure to tackle the problems early enough could prove disastrous.

Its at times like this when it is very frustrating to be the lone Conservative, rather than a group big enough to run the Council. Budgets should have been rebuilt from the bottom up, cutting out the waste, looking for more innovation in delivery of services and use of the Council's assets, and focusing on key basic services, sound financial management and keeping Council tax low - there are plenty of Conservative run Councils out there who manage to do just that.

3 comments:

Anna Smith said...

Customer Access Strategy

Look at the expenditure on that - bascially £8 million on a call centre that doesn't work......

Chris Howell said...

The Council has certainly invested large capital sums on the service centre, and believe this will be justified with cost savings within a variety of departments that will eventually use the customer contact centre. Would be interested if you want to email me privately about what the current problems are that you have come across, so I can look into them.

Chris Howell said...

The Council has certainly invested large capital sums on the service centre, and believe this will be justified with cost savings within a variety of departments that will eventually use the customer contact centre. Would be interested if you want to email me privately about what the current problems are that you have come across, so I can look into them.