The Greens and Labour risk bankrupting Brighton and Hove and turning it into the next Croydon if they keep up their recent pattern of financial decisions.
Labour-led Croydon council recently declared effective bankruptcy by issuing what is known as a “section 114 legal notice”.
Its auditors issued a “report in the public interest” shining a spotlight on where the council had gone wrong.
The report contained important lessons for the coalition of Green and Labour councillors as Brighton and Hove City Council prepares to set 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.
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 Loan Board, with all the associated risks carried by taxpayers.
A case in point is a recent sale and leaseback deal agreed by the council’s 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 and 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 and 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 past 12 months, local media in Brighton and Hove have reported on several examples of overspends in Brighton and 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 overspent at Cityclean 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 when the six months of 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 on an administrative error affecting local schools – the council has said that it will pass 43 per cent of the costs of this error on to schools with local taxpayers picking up the rest of the bill.
- £1,200 a day for six months on a temporary housing director employed by Labour.
These examples reach a total of £16 million in self-inflicted harm from 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 said that the council failed to show rigour, with insufficient scrutiny from members of 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 and 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 that it finds itself in rather than taking proper responsibility and ownership or managing the city’s budget.
The council 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 mistakes based on ideology, such as insourcing housing repairs, meddling with home to school transport or stopping cars from parking, which break the budget.
Recent proposals like paying volunteers are examples of ideas that should be dropped.
Green and Labour councillors in Brighton and Hove must learn lessons from the Croydon report – and fast.
Councillor Steve Bell is leader of the Conservative group on Brighton and Hove City Council.
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