31 October 2022
BCP Council has been scrambling to fix a "material funding gap" of £36m. This follows a Government intervention to block the local Conservative administration's "dodgy deal" to sell off 3,605 beach huts to plug the budget hole.
The Government stated its concern about the "financial sustainability" of the Council, and put in special extra oversight measures. BCP Council has now asked the Government for a bailout of £76 million over three years, including £20m now. The Council's own auditors issued what the Bournemouth Echo described as a "scathing report", branding current financial sustainability arrangements as "not good enough".
The Echo reports it "looks almost certain" BCP residents will face a Council Tax increase in 2023/24, and that 10% hikes in all fees and charges for Council services are being planned. As well as sell-offs, BCP Council is looking at cutting services to legal minimum levels. They hint librarians, gardeners and youth workers could be replaced with volunteers. Some street lights could be turned off.
Conservative-run BCP Council had wanted to effectively mortgage off its beach huts in a complex scheme, by receiving an upfront payment in return for then foregoing 20 years of beach hut income. Local beach hut owners, who had complained they were not informed of the plans, had collected over 1,000 petition signatures against the move.
Refusing Government permission this summer, the then Secretary of State for Levelling Up, Greg Clark MP, said: "Every council has a duty to use the tax they receive from hard-working people in a responsible way. It’s not right that some councils have attempted to abuse a loophole to do dodgy deals which only benefit the bottom lines of consultancies and accounting firms. That’s why we are cracking down on accounting practices that put taxpayer cash at risk."
Mr Clark was referring to BCP Council's engagement of controversial auditors KPMG to advise them on the aborted beach hut sell-off. It is understood that this report cost the local taxpayer £120,000. Yet the Conservative leadership now admit they dragged their feet for months on making the report available to all councillors.
Government regulations for councils have generally prevented them from using one-time asset sales to fund day-to-day spending. Even Sir Christopher Chope, Conservative MP for Christchurch, who had raised questions in Parliament about the plans, had said: "This seems an extraordinary way of behaving... at odds with the principles of local government to protect the interests of Council Tax payers."
Despite protestations from opposition councillors and other community figures, the Conservative administration had insisted that no contingency plan was needed, that the beach huts sell-off would be just fine. This has left the Council desperately scrambling to fix the black hole after the sell-off was indeed torpedoed.
BCP Council's permanent Chief Financial Officer (CFO), Adam Richens, said in August that no new financial commitments should be made until the local authority can deliver a balanced budget for next year. The budgetary situation is compounded by the surge in energy costs, with BCP assuming theirs will double.
The Council's latest report proclaims that they have a plan largely in place to balance the 2023/24 budget. However, the measures being lined up to 'achieve' ongoing financial solvency are severe:
With Conservative Government austerity biting ever deeper into council funding, the highly controversial move to take local government further away from local people by merging the former separate councils for Bournemouth, Poole and Christchurch in 2019 was taken explicitly on its potential to deliver efficiency savings. Ongoing financial viability of BCP Council has always been dependent on achieving these "Transformation" savings. However, these have been much slower to achieve than expected. BCP Council now needs the cash to fund ongoing Transformation work intended to shrink future years' costs. The Green-backed former Unity Alliance administration, in power from May 2019 till October 2020, had planned to fund a large chunk of this work from Council reserves - now no longer available because the current Conservative administration has already spent them.
Minister of state Paul Scully MP has written to Council Leader Drew Mellor, saying that while minded to offer BCP Council £20m, "I want to reiterate that I continue to have significant concerns about the present financial strategic direction of the Council and urge you to consider what action is needed to ensure the Council remains in a sustainable position."
No decisions have been made over the further funding requested for 2023/24 and 2024/25. The Government is also to force BCP Council to submit this autumn to an external assurance review of its finance and governance.
The Council's solvency relies on an uncertain assumption that temporary Government dispensation to sell off physical assets to plug current funding deficits will be extended. BCP's CFO has stated that the Council will be in an "untenable position" if these rules change, with a Local Government Association peer review in July being clear that bankruptcy (a "Section 114 notice") might then have to declared.
The Bournemouth Daily Echo reported on 15th October: "The financial turmoil at BCP Council has been spelt out in a scathing report from the local authority’s own auditors. Firm Grant Thornton has warned the council’s ability to set a balanced revenue budget for next year and beyond appears 'increasingly fragile'. They say the current arrangements for financial sustainability “are not good enough”, while concern was raised over the spiraling cost of the local authority’s transformation programme."
A follow-up Echo report on 28th October said a Grant Thornton director "told councillors he would expect to see “significant improvements” in arrangements going forward. He warned that if this was not realised, the auditor could be forced to issue a statutory recommendation, which he described as a “nuclear option” only used in worst case scenarios."
He went on: "We are essentially concluding that we don’t think you have appropriate arrangements in place for financial sustainability and we also don’t think you have appropriate arrangements in place for economy, efficiency and effectiveness, and that is a concern.
“I don’t think I would say I am confident. I think far from that. I think there is an awful long way to go and you [BCP Council] have got some significant challenges ahead of you in the area of financial sustainability.”
The two annual budgets voted through by the ruling Conservative Group of BCP councillors - before the beach huts ruling leading to the current crisis - have intentionally over just two years:
In the budget debate for the current year, the Conservative leadership openly acknowledged and celebrated their "spend, spend, spend" approach. Here are a few of the things the Council has spent, or is committed to spending, local taxpayers' money on as part of this spending spree:
In February BCP's Green Councillors Simon Bull and Chris Rigby declined to support the Council's budget for this financial year, despite new 'green' funding, because of their concerns over rapidly soaring debt.
Green Councillor Simon Bull now comments: "I've observed the general way BCP's Conservative administration has been spending money and trying to negotiate with the Government for more money, without listening to anyone. I'm concerned that if BCP Council carries on in this way, we'll go bankrupt within the next few years.
"The seriousness of the issue is borne out by the figures on how BCP Council's debt has surged under this administration, from quite low levels under the three separate former councils. And look what happened to the councils elsewhere which have gone bust."
Following Slough Council becoming the third council in recent years to declare bankruptcy in July 2021, a report from the Government states it is likely to impose Council Tax rises of between 12% and 20% a year on Slough residents for each of the next three years, when rises are normally capped at 5%. Slough Council has also been told to sell hundreds of millions of pounds of local public assets, including all its council housing, with everything it owns except roads and parks being on the table for possible sale.
Croydon Council was forced to adopt a "bare legal minimum" approach to service provision after going bust in November 2020 - meaning closures of libraries, children’s centres, leisure centres and waste and recycling facilities, scrapping specialist nursery transport for children with special educational needs, and cutting the anti-social behaviour team.
Slough and Croydon had followed Conservative-run Northamptonshire County Council into bankruptcy. Northamptonshire had, in the years running up to its 2018 bankruptcy, relied upon a combination of selling off assets and running down its financial reserves, while dubiously freezing Council Tax - all reminiscent of the current situation at Conservative-run BCP Council.
Green Councillor Chris Rigby stated at the time that the current Council budget was "risky", "full of issues", and "a completely different approach to the tried-and-tested ways". He also emphasised the lack of inter-generational justice in some of BCP's new debts being repayable over 50 years.
Councillor Rigby now says: "This Council budget crisis hasn't come about in a vacuum. Like other councils, BCP's funding has been slashed over 12 years of brutal Conservative Government austerity cuts. High-risk attempts by BCP's Conservative Cabinet to cushion and sugercoat the devastasting effects of Government cuts have now backfired.
"With the BCP Council election in May 2023, it's not likely the Conservative Cabinet will be truly rigorous or long-termist in their scramble to keep the Council just about afloat for the next financial year.
"The Conservatives might not be in charge after that election, but the new BCP administration elected in May 2023 will have no option over the coming years but to take difficult actions to deal with the Conservatives' financial mess."
Ben Pantling, Green Party speaker for Poole, commented: "By the end of this financial year, most of the Council's financial reserves will have been rapidly spent, and now we're facing a sell-off of community assets too. People in Poole and across the conurbation are rightly asking: where has all our money gone?
"This situation is not just the BCP councillors' responsibility. It's the responsibility of central government underfunding councils. BCP is not the only council in this situation - Croydon, Slough and Northants have gone bust in recent years, and there'll be others teetering on the edge."
