Reckless councils are the exception, not the rule

By Cllr Chris Criscione | 11 August 2020

Government should come down hard on financially reckless local authorities who lack good governance, says Cllr Chris Criscione – ‘but without ruining it for others who just want to build a better council for their residents’

Recent coverage on local authority finance, shrouded in controversy over prudence and proportionality as councils look to cover their costs through continued investment in commercial property, has shed light on a complex and gloomy state of affairs that for most, preceded the public health emergency, but has certainly 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 fact that this behaviour is a necessity in the absence of Government funding and any reasonable alternative.

The local authority has to meet the challenge before it and it has to accept that top-down Government funding and intervention is not sustainable and not right for those who continue to argue for devolution across the country. You can’t have your cake and eat it.

For many authorities, the choice is between cutting public services, raising council tax to eye-watering levels – with adverse impacts on the taxpayer – or seeking alternative funding through commercial investments. The latter is the most credible first step that has been taken up as the total amount of investments by local authorities exceeds £6.6bn, on the basis that cuts and tax rises should be a last resort. But many ask: 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, while they need to provide that certainty around funding as they move into a self-sustaining future, they also understand the need to act with prudence and proportionality in all their endeavours. But some have thrown the rulebook out of the window in moves that are likely to ruin it for the many.

The Government’s review into local authority borrowing (the Public Works Loan Board 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, but 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 the entire point of the whole exercise.

For Spelthorne BC, its billion pound investment portfolio delivered near to 1% ROI in the last year – a stark figure when you consider that the authority is looking to meet the shortfall caused by decreases in Government funding and other key revenue streams that in coming years will total well in excess of this figure.

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 trailblaze or to do something just because one is able to do so.

It is 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 their 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 is not a process that delivers untold levels of satisfaction, but it is an opportunity, nevertheless. It has proved that Government sees the good intentions of the bulk of authorities and treats the reckless ones as the exception to the rule.

Cllr Chris Criscione is leader of the Conservative Group at Uttlesford DC and member of the council’s investment board

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