- Conservative Group Leader issues pre-budget warning on City Finances
- Report in Public Interest on Croydon Council’s bankruptcy has lessons for Brighton & Hove
- Lessons to learn include: risks of investing in private companies & housing subsidiaries; significant overspends; and a lack of scrutiny by councillors
Conservative Group Leader Steve Bell has issued a pre-budget warning to Councillors that Brighton & Hove City Council risks becoming the next Croydon if a recent pattern of financial decisions by the Greens and Labour continues.
Labour-led Croydon Council recently declared effective bankruptcy and issued a section 114 legal notice, with a Report in the Public Interest issued by its auditors shining a spotlight on where the Council had gone wrong.
Cllr Bell, who sits on the Policy and Resources Committee, said that there were lessons for Brighton & Hove Councillors to learn from the report ahead of its own budget next month.
Lesson #1: Investing in companies puts taxpayers at risk
“The Report in the Public Interest draws particular attention to how the Council’s approach to borrowing and investments, including investing in companies, exposed the Council and future generations of taxpayers to significant financial risk” Cllr Bell said.
“We have seen too many examples of this approach locally with continued use of the i360 model, where the Council takes on all the risks normally incurred by businesses by borrowing money from the Public Works Board, with all the associated risks carried by taxpayers.
“A case in point is a recent sale and leaseback deal agreed at Policy and Resources Committee in October. As a result of this decision taxpayers now have a stake and bear the burden of risk for a predominantly American owned pharmaceutical company. Decisions like these, made by the Greens and Labour, are not in the taxpayer’s interest.
Lesson #2: Housing subsidiaries carry significant risk
“The report also shows that Croydon took on risks by loaning money to a housing subsidiary of which none has been repaid.
“Brighton & Hove City Council recently made a decision to link itself with a private development company that couldn’t make its own housing development proposals viable.
“I’ve never been in favour of the Council doing these deals with private companies – I believe free enterprise is there for a reason. They fund themselves, look after themselves and rise and fall by themselves - it is not for taxpayers to take on or underwrite this risk. Taxpayers in Brighton & Hove will now bear additional risk for this Housing Development company going forward.
Lesson #3: Significant overspends are unsustainable
“The Croydon budget monitoring reports significant overspends by the Council in 2019/20.
“Over the last 12 months local media in Brighton & Hove have reported on several examples of overspends in Brighton & Hove City council as a result of policy decisions or lack of attention to service delivery.
- £10 million on the ideological council decision to ‘insource’ the city’s housing repair service, currently subject to ongoing industrial action.
- £1 million on Labour’s meddling with the City’s Home to School Transport policy on similar ideological grounds - which resulted in the collapse of a service for disabled children to get to school.
- £3 million overspend at City Clean in the two years to the end of March, with Auditors saying that they had not been able to count all the costs of the problems with the council service.
- £800,000 for the 6 months measures resulting from Labour and the Greens’ controversial decision to close Madeira Drive and implement the A259 Cycle Lane were in place, money which would usually go towards concessionary bus passes for the disabled and over-65s as well as subsidising bus routes.
- £3.3 million administrative error impacting local schools – the council has said that it pass 43% of the costs of this error onto schools and local taxpayers will pick up the rest of the bill.
- £1200 a day for 6 months on a temporary housing director employed by Labour
“These examples reach a total of £16 million in self-inflicted harm by council mismanagement and policy failures, outstripping the council’s declared budget shortfall for next year.
Lesson #4: Councillors must provide proper rigour and scrutiny
“The Croydon report’ says that the Council failed to show rigour with insufficient scrutiny from Members on the financial risks in the budget.
“It also said the Council’s financial governance was focused on lobbying government for additional funding, not containing spending within the funding provided which was its statutory duty.
“This certainly rings true in Brighton & Hove where since 2019 the Official Opposition has also been part of a Coalition with the Administration and therefore unable to provide the level of scrutiny expected by residents. At the same time, both Labour and the Greens have taken a blame game approach to finance, blaming the government for any financial position it finds itself in rather than taking on proper responsibility and ownership or managing the City’s budget.
“The City is reaching the point where it cannot afford any further self-inflicted harm if it is to balance its books. The City cannot afford any more ideas based on ideology such as insourcing housing repairs, meddling with home to school transport or stopping cars parking which break the budget. Recent proposals like paying volunteers is an example of an idea that should be dropped.
“Green and Labour Councillors in Brighton & Hove must learn lessons from the Croydon Report – and quickly” Cllr Bell said.