Chris Criscione: Financially reckless councils are the exception, not the rule

2 Sep

Cllr Chris Criscione is the Leader of the Conservative Group on Uttlesford District Council and a member of the Council’s Investment Board.

Recent coverage on local authority finance, shrouded in controversy over prudence and proportionality, as Council’s look to cover their costs through continued investment in commercial property, has shed light on an increasingly complex and rather gloomy state of affairs. One that preceded the public health emergency, but certainly have been worsened by its arrival. Concerns around the attitude of some local authorities in pushing the boundaries of acceptability in terms of risk and exposure are yet to overcome the very fact that this behaviour is a necessity in the absence of government funding and any reasonable alternative.

The local authority, standing on the principles of an unerring social conscience and a commitment to delivering good public services for all within its boundaries, has to meet the challenge before it. It has to accept that top-down government funding and intervention is not sustainable and, bluntly, just not right for those who continue to argue for devolution across the country. You can’t have your cake and eat it. So, what then?

For many authorities, the choice is between cutting public services, raising council-tax to eye-watering levels with adverse impacts on the taxpayer – a process that would require direct consent through referenda – or seeking alternative funding through commercial investments. The latter is certainly the most credible first step that has been taken up as the total amount of investments by local authorities exceeds £6.6bn, and on the basis that cuts and tax-rises should be a last resort. But many are asking, has the system allowed for it to take place in a responsible fashion?

On the whole, most would agree that it has. Local authorities should understand that whilst they need to provide certainty around funding as they move into a self-sustaining future, they also need to act with prudence and proportionality in all their endeavours; or it could end up costing them beyond their wildest imagination. But – and in this instance it seems to be a huge “but” that has caught the eye of government and the independent regulators that concern themselves with public finance – some have thrown the rulebook out of the window in moves that are may ruin things for the many.

The government’s review into local authority borrowing (the PWLB consultation) seems to have been motivated by the recklessness of authorities who have borrowed well in excess of their annual budgets and spending power without any consideration of expected yield, year-on-year. It would be fair to say that the scale of investment on an authority-by-authority basis is concerning in some cases. However, the return on investment (ROI) presented by the secured investments is of the greatest significance because it seems to completely ignore the need to consider the principles of opportunity-cost, value for money, exposure, and, again to put it bluntly: the entire point of the whole exercise. For Spelthorne, their billion pound investment portfolio delivered near to 1% ROI in the last year; a stark figure when you consider that they are looking to meet the shortfall caused by decreases in government funding and other key revenue streams that total well in excess of this in coming years.

It is a shame that it seems as if the most reckless authorities who lack good governance, sound independent advice, and prudence in their interactions, have at first glance ruined the opportunity for others. In Uttlesford, the District where I sit as a councillor, and as a member of the Council’s Investment Board; borrowing arrangements, the perceived strength of investments vis-à-vis the loan period and market conditions, as well as a consideration of yield, dominate our conversations at every turn. There is much to consider, but at all times councillors put the need to meet the “gap” in funding at the forefront of our minds as we consider opportunities.

How can it be that authorities seemed to have abused lax-funding arrangements and the trust of their residents to secure investment portfolios in excess of £1bn without considering the whole motivation behind the operation? If we are to continue to build a self-sustaining future for local authorities, we must put the goal and objective front and centre, not the eagerness to trail-blaze or to do something just because one is able to do so. This is a means to an ever-ambiguous end, not a profit-making exercise to put authorities in history books (seemingly for the wrong reasons).

In my humble opinion, it’s not the Government’s rules and regulations that have caused this recklessness to take root, but the complete ignorance of the local authorities who have lost all comprehension of the goal and objective of the process. One can only hope that the Government comes down hard on them for their decisions, but without ruining it for the other authorities – totalling in the hundreds – who just want to build a better Council for their residents in the circumstances.

Many authorities will be looking to meet the challenge of balancing their budgets with a sense of optimism that they can write their own destiny through their own actions and without the help of central government. It’s not a process that delivers untold levels of satisfaction, or indeed one that presents a welcome challenge given the circumstances and timescales with which we are faced; but it is an opportunity nevertheless. That is provided that the government sees the good intentions of the bulk of authorities and treats the reckless ones as the exception to the rule.