The monthly finance report to the County Council’s Cabinet last week spoke of £25m being used from capital receipts to contribute to this year’s revenue spending.
This is important because under normal circumstances it would be illegal for a Council to borrow money for normal day-to-day spending (revenue). They are normally only allowed to borrow for building things, or in investing or repairing assets (capital).
The Council has always had a large capital programme (any area the size of Northamptonshire will have). This is not funded out of the day to day revenue budgets which are used for providing services or funded from Council Tax payers and Government grants (although these have been slashed), but either from capital borrowing or from selling off other assets (capital receipts).
However the Government have introduced some new rules that allow Council’s to sell their assets to fund their revenue budget so the cash can be used for this year’s service provision. This is clearly in response to the fact that some Councils (NCC for example) are pretty much bankrupt and not able to deliver a lot of the services that we as residents would like them to do.
I would argue that this is unsustainable and short-sighted and equates to selling off the family silver just to get through the next year.
Apart form it being short-sighted, it also can lead to extra borrowing because the money raised from the assets they sell (the office block John Dryden House in Northampton for example) was originally going to go towards the funding of new capital investment (the new County Council HQ on Angel Street, Northampton for example).
If the money is now instead being used to help balance the revenue budget, which is heading for a huge overspend and a black-hole, then money needed for the capital programme will now have to be borrowed. This is legal but very dangerous financially, partly because the payments on any loans have to be paid out of future annual revenue budgets and will therefore be a burden on local tax payers for years to come.
It really is desperate measure to try to get us out of the fix the Council are currently in without any consideration of the future pressures it will bring. Another example of a lack of sensible long-term financial planning.
Because of this I addressed the Cabinet and directly asked the finance portfolio holder (the Councillor in charge of finance) “How much extra borrowing has been required as a direct result of having to use these capital receipts to make up the revenue spend? And what is the cost of this extra spending required to pay off these loans from next year’s revenue budget?”.
The response I get was he wouldn’t be looking at those figures until the financial year has ended and the outturns (final accounts) had been prepared.
I will leave it to you to decide if you think the current Conservative administration have a handle on the County council’s finances or not, but for me, it is clear the answer to that question is no!
Photo by Deidre Woollard