Harry Fone: £255 million a year is spent on councillor allowances. That is where the economy drive should begin.

30 Dec

Harry Fone is the Grassroots Campaign Manager for the TaxPayers’ Alliance.

The TaxPayers’ Alliance is well-known for scrutinising the pay of council bosses but our latest research has focused attention on allowances for elected representatives. In 2018-19 alone, the cost of councillors was at least £255 million. As witnessed across numerous local authorities, members vote through an increase in their allowances whilst often claiming they don’t have enough money for statutory services.

There was little surprise when an opposition councillor at West Sussex County Council (WSCC) met with fierce resistance after suggesting that cabinet members have their special responsibility allowances (SRAs) cut by 25 per cent. SRAs are typically paid to chairs of committees, cabinet members, and opposition leaders in addition to a basic allowance.

At the heart of the dispute were plans to cut the SRAs of the opposition leaders whilst cabinet members and committee chairs saw no decrease. It’s always welcome when councils make savings but some will question why the cuts fell almost solely on the opposition.

This spurred one opposition leader to propose an amendment calling for a cut in all SRAs. Even if this was an act of retribution, savings of around £90,000 a year would no doubt be well received by ratepayers. Councillors should be compensated for their efforts but the role should not be treated as a full-time job with a decent salary. Civic duty should be put above all else.

Given WSCC’s recent poor performance – notably “systemic and prolonged” failures in children’s services and the £265,000 golden goodbye to controversial former chief executive Nathan Elvery – you would think councillors would want to do everything possible to make amends with constituents.

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Across the border in East Sussex, Brighton and Hove City Council is forecasting a budget shortfall of around £15 million next year. With residents facing a rate rise of five per cent, it has to be asked if better decision-making might have mitigated such a large increase.

The ongoing saga that is the i360 observation tower is failing to deliver on its promises. Funded by £36.2 million of council loans (via the Public Works Loan Board) to a private management company, the 530 feet “doughnut on a stick” has never really got off the ground. Even before the pandemic, it was plagued with low passenger numbers and frequent breakdowns.

Adding insult to injury, loan repayments have regularly been deferred due to financial difficulties. To date, only £5.9 million has been repaid, with £33 million now outstanding.

One of the key players behind the project, former leader of Brighton council, Jason Kitcat, claimed back in 2014:

 “The project will provide a new source of income to help shore up vital frontline services.”

It seems there’s a long way to go before the council will see the estimated “£1 million a year” profit from its investment.

While residents are still shouldering the burden of this white elephant, Kitcat, a self-described “recovering politician” has fared rather better financially. After being asked to stand down as council leader by his own party, he became the Executive Director of Corporate Development at Essex County Council. A role that remunerated him to the tune of £190,000 in 2018-19 and gifted him a payout of nearly £164,000 when he left shortly after.

Let’s hope for a change in the i360’s fortunes so that local ratepayers see a ‘recovery’ in the council’s balance sheet.

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Following a recent government review, fears are mounting that Nottingham City Council (NCC) could fall foul of bankruptcy. As residents of Croydon and Northamptonshire know all too well, a Section 114 notice is far from desirable.

The similarities between Croydon and Nottingham are disconcerting. Both authorities engaged in ambitious commercial investments with well paid council employees lacking the necessary financial expertise, as borrowing exceeded £1 billion – Nottingham has the third highest debt to net budget of all the core cities.

Over recent years, NCC has seen its reserves dwindle mostly due to the collapse of its ill-judged energy company. Formed in 2015, Robin Hood Energy (RHE) tried and failed to compete in the highly competitive and regulated energy sector. Financed with £43 million of public money, RHE failed to make a profit in every single year of operation. Total losses are estimated at £38 million.

The government’s report is particularly scathing of RHE’s directors who are described as “unable to critically appraise the trading position and a forecast profit [£202,000] outturned as a significant loss [£1.6 million]”. Another damning report by auditors Grant Thornton went further saying there was “institutional blindness within the Council.”

Despite warnings from NCC’s Section 151 officer about RHE’s worsening finances, the authority failed to take action. The report doesn’t specifically blame then chief executive, Ian Curryer, for failing to act but does state, “The Council does not appear to have a mechanism for setting targets and goals for its Chief Executive and holding the postholder to account for it.” Local residents may be irked to learn that between 2012 and 2020 Mr Curryer received total taxpayer-funded remuneration of over £1.3 million.

As Robert Jenrick, the Local Government Secretary, put it:

“Taxpayers and residents have been let down by years of disgraceful mismanagement and inept ventures”.

A series of recommendations have been put in place to turn the ship around but councils all across the country must learn from Nottingham’s mistakes.

Harry Fone: How to avoid Croydon’s fate

3 Dec

Harry Fone is grassroots campaign manager for the TaxPayers’ Alliance.

Like Northamptonshire before it, Croydon Council has declared itself bankrupt. But what went wrong? Many blame austerity and coronavirus, but this is too simplistic. Through local activists, the Croydon Constitutionalists, I’ve learned of the hapless housing project, ill-judged investments, and wanton waste that sealed the council’s fate.

Is austerity to blame?

Croydon Council’s leader, Hamida Ali, has stated “austerity” is a major reason behind the bankruptcy. On the face of it, she may have a point. As the Council’s 2019-20 statement of accounts makes crystal clear, “since 2010, when austerity began, Croydon has seen its funding from Central Government reduce by 75 per cent”.

But compare it to other London boroughs and a fuller picture emerges. Between 1997 and 2010, before the cuts, Croydon Council raised rates 13 out of 14 years, leaving it with the seventh most expensive council tax charges in London. Residents were consistently asked to dig deeper into their pockets long before the coalition government. Looking at a 20 year period from 1997 to 2017, Council Tax rose in Croydon by 69.3 per cent in real terms, the third highest rise in London and compared to a city-wide average of 42 per cent. Most London councils have lower Council Tax bills and avoided bankruptcy. What’s special about Croydon?

Brick by Brick

One factor that cannot be ignored dates back to 2015. Croydon Council set up Brick by Brick (BBB), a company tasked with building 500 homes a year. Financed by £214 million worth of council loans, BBB made a loss of £774,952 in March 2019, despite obtaining some sites for just £1. It’s yet to make a single repayment on money it borrowed, having completed ony 283 homes in that time (less than half of which are deemed affordable). The latest set of accounts are still pending, but with profits forecast at a measly £250,000, Croydon residents will be waiting a long time for the homes they were promised or the loans to be repaid in full.

PwC summed it up, explaining, “the delays in bringing new homes to the market has put the Council at serious financial risk and resulted in only a handful of new homes being available. As a consequence, savings have not been made.” With almost nothing to show after five years and millions of pounds potentially down the drain, Brick for Brick has undoubtedly had a big role to play in Croydon Council’s downfall.

Risky business

Commercial property investments also failed to deliver. Take just two examples: the Croydon Park Hotel and the Colonnades retail park. Using the Public Works Loan Board (PWLB), the council purchased these for a cool £80 million. The hotel is now in administration and, given the current circumstances, the future of the Colonnades doesn’t look rosy either. But again it’s not simply about covid. As my colleague, Jeremy Hutton, explained in his analysis of local authority commercial property investments, high street retail investments were already struggling before the pandemic.

Frankly, access to loans from the PWLB was all too easy. One former council leader described the process as “absolutely bonkers” having requested hundreds of millions of pounds only to receive it “three days later.” No wonder then the Treasury has just this month imposed tighter restrictions on lending. Sadly it came too late for Croydon. The most recent accounts show the council has over £900 million of outstanding PWLB loans. Their investment fund is forecast to deliver a net return of only £82,000 in 2020-21. Once interest payments are factored in, the council could end up making a loss of around half a million pounds.

A tale of two chief executives

Colm Lacey is chief executive and founding director of underperforming Brick by Brick. He was remunerated to the tune of nearly £150,000 in 2018-19, with fellow directors also enjoying six-figure pay packets.

What did a recent strategic review by PwC make of them? It was scathing. “There is currently no financially qualified member of the Board to provide challenge to BBB’s reported performance or forecasts,” they said, citing the “unavailability of robust financial information from BBB.”

A glance at Mr Lacey’s LinkedIn profile may explain why. It shows a long career in the public sector, with no hint of financial qualifications aside from a degree in Economics and Political Science. If PwC’s assessment is correct, then two questions spring to mind. One, why was he chosen for this role? Secondly, why didn’t he appoint at least one financially literate member to the board? Those responsible for his appointment must have their feet held to the fire.

Until September this year, Jo Negrini was chief executive of Croydon Council. Paid £218,358 in 2019-20, she was one of 15 staff receiving over £100,000. Despite overseeing a rise in debt to £1.5 billion that led to the council’s downfall, she left with a severance package reportedly worth £440,000.

As Council Tax increased, both Negrini and Lacey repeatedly failed local residents, but enjoyed gold plated pay at their expense. Council leaders shouldn’t assume that paying top dollar for chief executives will benefit taxpayers. All too often it ends up costing residents dear.

What can councils learn from Croydon?

For starters, councils should only enter into the investment world if they know what they’re doing. They must remember that public money is at serious risk. It’s very welcome that the Treasury is imposing restrictions on PWLB loans; councils should seek to diversify portfolios and demonstrate financial expertise before any investments are undertaken.

Perhaps most importantly of all, council bosses must focus on their statutory responsibilities and stop trying to reinvent the wheel. They must deliver the best services at the best possible value to residents, relentlessly eradicating waste and ramping up efficiency, in order to keep any rises in council tax to an absolute minimum. There are plenty of places they can make a start. By abiding by these simple principles, councils can avoid Croydon’s fate.

David Leaf: In Bexley, we will keep on delivering top rated services – while Labour resorts to scaremongering

30 Nov

Cllr David Leaf is the Cabinet Member for Resources on Bexley Council.

You can tell it’s nearly Christmas, as its always at this time of the year that Bexley’s Labour councillors and their supporters, claim everything is a disaster and that the Council is about to go into bankruptcy.

They’ve actually now been making this claim every year since 2013. Then, they stated that if we were re-elected, the council would either go bankrupt or Council Tax would rise by 40 per cent – none of which happened.

Seven years since they first made that claim, we continue to be rated as an efficient effective Council which delivers value for money for our residents, and our budget plans for 2021/22 are almost completed, four months before they need to be, and our budget will be in balance. Our services continue to be among the best-rated services in local government, and the fruits of investments, such as investing in new street cleaning machinery (which Labour voted against doing), see services improving or being modernised.

Our manifesto pledges from 2018 have all been delivered, and satisfaction from the residents we serve with council services remains high. Roads are being repaired, children’s social care services are helping those in need, vulnerable adults continue to receive care, we remain number one for recycling as we have been for the last 15 years. We’ve also secured funding to build two new schools for children with special needs.

And we’re also delivering new facilities for residents – a new BMX bike park in Barnehurst, a new park, playground, and wildlife area in Sidcup and a new library is being built in Thamesmead. We also lobbied for and now have two Covid testing centres, are working with colleagues on Dartford to reduce infection rates, and are working hard to create centres for vaccinations.

By contrast, in the last month alone, Labour-run Croydon has actually gone bankrupt with a £50 million plus budget gap, Labour-run Transport for London has gone bankrupt for the second time and had to be bailed out by the Conservative Government for the second time. We see Labour-run Lewisham with a £24 million budget gap, Ealing with a £28 million budget gap, Brent with a £29 million one, and Greenwich with a £60 million budget gap over next four years.

No wonder Bexley’s Labour councillors and their supporters want to distract from that shambolic record by real life Labour administrations by trotting out these usual fictions about Bexley, alongside criticising every budget proposal while never actually putting forward any ideas or solutions of their own – the same pattern as usual of course.

What’s shocking this year is that Labour councillors who should know better are frightening the life out of council staff by making all sorts of claims about how they will all lose their jobs; our staff work really hard and to see Labour councillors almost salivating at potential job losses is sickening. Staff I speak to have been really upset by these statements, when what is needed is a calm approach.

Yes, there will be changes to the way the Council is run, or how services are provided.

This is a difficult time for local government, the impact of Covid has been felt across the sector, and across all services. Here in Bexley, much of our income from fees and charges vanished overnight – eg parking income which helps fund highways maintenance and school road safety projects disappeared overnight. There are some Labour supporters who think generating income for services like school road safety projects through parking income is wrong, but of course, as said above, they oppose generating income to help save lives without actually coming up with how to fund it instead.

Like all councils, we have had huge costs appear out of the blue – for example, from scratch we set up a food delivery network, getting hot food to vulnerable residents during the lockdown, making sure those on their own and in need of help got the support they needed. Some 3,000 meals were being delivered, and we had a team of people collecting medicines and prescriptions for those unable to leave their homes. It has cost the council millions of pounds overnight, money that is gradually being recouped from Central Government.

The test of any Council is how they find a way through sudden and unexpected events like this.

One approach is to go into panic mode, hide away and hope everything will be fine (a la Croydon) or lead from the front, make decisions quickly and calmly, work hard all the time to ensure services continue to be delivered, even if in different ways for a while. That is what we were elected to do, and what we have always done.

Yes, there are some difficult choices to make, but as Bexley residents have shown over four elections by electing us with decisive mandates, they trust us to lead the Borough, make difficult decisions when they need to be made, and ensure that we are planning for the long term while making sure services continue to be delivered. The consequences of not doing that can be seen in Croydon, Brent, Lewisham, Greenwich, and at Transport for London.

Kieran Neild-Ali: We need tougher auditing of Council spending. But a new Quango is not the answer.

13 Nov

Kieran Neild-Ali is a Grassroots Assistant at the TaxPayers’ Alliance

The coronavirus is putting extraordinary pressure on organisations of all shapes and sizes, and the same goes for councils. The demands on them are undoubtedly tremendous. But when it comes to council spending this year, that won’t be the full story. As always, the truth lies buried in their annual accounts.

Local authority audits play an important role in holding reckless council spending to account. Audited accounts reveal how councils are spending your money; publicising how much councillors claimed in allowances and expenses, disclosing revenue and spending, and giving the public a picture of the overall health of the authority. External auditors recently uncovered a scandal in Croydon where the cash-strapped authority loaned a failed housing developer £200 million in just five years and received no repayments. Local authority audits are vital for transparency and accountability.

When the Ministry of Housing, Communities and Local Government commissioned Sir Tony Redmond to review the transparency and quality of councils’ external audits, we had high hopes for a report that would make both holding councils to account, and taxpayers’ lives, a whole lot easier. Instead, we got the complete opposite.

The flagship recommendation of the Redmond Review is the establishment of a new quango, the Office of Local Audit and Regulation (OLAR), to regulate external audits. Simply, a new regulator is not a measured response to the problems facing local authority audits.

Redmond argued that the local audit framework is so damaged that a new “system leader” is needed to regulate every aspect of the auditing process. The review recommends giving the OLAR ‘tools’ to oversee everything including producing annual reports summarising the state of local audit; managing local audit contracts; monitoring and reviewing local audit performance; and determining the code of local audit practice. Effectively regulating the entire local audit sector.

Despite prescribing the quango with such a large brief, Redmond insists the regulator will be “small and focused”. It simply doesn’t add up. With the review prescribing the OLAR such large oversight over the auditing process, it’s erroneous to suggest the quango will be small and cheap. Ministers should be genuinely concerned that the Redmond Review has basically resurrected the retired Audit Commission in all but name.

The Audit Commission was responsible for the external audit framework and ballooned in size from its inception in 1982. The commission appointed external auditors to local authorities, reported on the auditing process, and undertook performance assessments of English councils. By 2009, the Audit Commission cost the taxpayer £28 million and, like all other quangos, was not accountable to the taxpayers who funded it. It was a product of its time: a big lumbering bureaucratic watchdog heavily reliant on state funding.  What was designed to be a voice for taxpayers became a creature of the central state, and a burden to the nations’ finances. Thankfully, the Coalition Government rightly got rid of it.

The breakup of the Audit Commission allowed the creation of smaller autonomous organisations and saved taxpayers money – all this would be undone by the OLAR. The Public Sector Audit Appointments (PSAA) relies on revenue from audit fees charged to local government bodies, and the Financial Reporting Council is funded by the auditing profession, not the state.

History may be repeating itself with the proposed OLAR. By design, the new regulator will consume the majority of auditing responsibilities, micromanaging the process and sending us back to a super quango like the Audit Commission. It won’t be long until the OLAR begins to appoint auditors, consuming the remits of the organisations who’ve already expressed concerns about it. We cannot go back to a ‘nationalised’ external audit framework, resurrecting yet another expensive arm of the state.

Instead of establishing a quango, we must continue to devolve power from central watchdogs to taxpayers themselves – building on the legacy of the coalition’s abolition of the commission.

The Local Audit and Accountability Act 2014 gave residents a right to come to their town hall and inspect the accounts for themselves, giving rise to ‘armchair auditors’ who keep an eagle eye on how their representatives are spending their hard earned cash. This is especially true in Lambeth where armchair auditors uncovered egregious examples of wasteful spending by combing through the council’s accounts. Residents discovered over £8 million worth of invoices had been lost by Lambeth’s finance department, and that their town hall renovation was over budget by over £50 million.

But councils cottoned on to armchair auditors and began to redact documents, impeding the public from scrutinising them. This is a shameful abuse of power which goes against the open government action plan – which MHCLG themselves have failed to deliver on. Councils must change, and government departments must lead from the front.

Rather than top-down inspections and audits, or further bureaucratic overreach, more could be done to open up local authorities’ data and spending to the press and public – so that citizens can hold them to account. Before signing off a multimillion-pound quango, the Ministry of Housing Communities and Local Government should first respond to the 2016 Transparency Code consultation and strengthen local government transparency. The recommendations are easily achievable too, like publishing more financial information online to improve the auditing process. It’s beyond belief that a consultation which ended four years ago is now gathering dust and could be completely junked in favour of setting up yet another quango.

Ministers must think carefully about the very real possibility of giving the OLAR an inch and it taking a mile. Unchecked bureaucracies are a menace to the taxpayer. In times of economic hardship, let alone the extreme demands of coronavirus, the government needs to think outside the quango box and implement policies which don’t further burden ratepayers. Local government transparency is as important now as it ever has been.