COUNCILLORS MARGARET PHIPPS AND VANESSA RICKETTS –
BCP COUNCIL’S HUGE FUNDING GAP – AS WE SEE IT:
First, we want to say – We are both appalled at the utter financial mess BCP Council is in. Many of you may have heard or read about the situation. If not, we provide some information here - as we see it as your Ward Councillors.
We consider that for our previously solvent, well-run town of Christchurch to be forced into such a shocking financial and reputational position by the current leadership, after such a short time, is absolutely shameful. 84% of Christchurch residents told us they did not want to be merged into BCP council. We agreed with them, and they were right. BCP Council is now verging on bankruptcy.
In February this year BCP Council voted by a majority to approve the Conservative administration’s budget for 2022/23. The facts are - as your Ward Cllrs neither of us, nor any Christchurch Independent Cllrs. voted for this budget. It was carried through by the Conservative majority led by Cllrs. Drew Mellor and Philip Broadhead.
That budget was only going to balance by use of a Special Purchase Vehicle (SPV), whereby the Council planned to sell off, to itself, (forming an SPV Council owned company) the beach huts, which it owns anyway. A Government scheme existed until the end of March 2022 for flexible use of capital receipts (FUCR), which meant that capital received from selling assets could be used as revenue to be spent on certain things. One of these was “transformation” (putting the 3 Councils’ services into 1) which is mostly what the Council wants the money for. The sale would have generated around £54m. We were told that the Government was sure to extend the scheme past March 2022 but at that time in February had not actually decided yet.
Many opposition Councillors, including Christchurch Independents, pointed out that should the FUCR scheme not materialise there would be a big hole in the budget, and there appeared to be no “Plan B”. We were all told at Full Council in February, by the Leader Drew Mellor, that a draft report existed from consultants KPMG supporting the proposal, but we couldn’t see that report because it was not finalised.
Therefore, in February Councillors were asked to vote through a budget, having seen no evidence to support a dubious plan for the Council to sell its beach huts to itself, via a Government scheme which might be removed in March 2022, with no backstop Plan B. We did not vote for that budget but the majority administration voted it through.
What happened next
The Government looked at the proposed scheme for the Council selling beach huts to itself to obtain £54m. Councillor Mellor had told everyone that the plan was in line with Government FUCR rules. Levelling Up Minister Greg Clark wrote to the Council saying that he could not countenance use of the scheme for “dodgy deals” and he changed the regulations to close up the loophole so that the Council could not form a company (SPV) to sell the beach huts to itself.
This has left a gaping hole in the Council’s 2022/23 budget. BCP Council now faces a funding gap not only for the current financial year but for the following two years as well.
The Chief Financial Officer has produced a report pack on 2022/23 budget monitoring quarter 1, setting out the situation and scenarios, which you can download here:
It is not easy reading. The Financial Officer says that any of the scenarios presented will leave a material funding gap in the revenue budget for 2023/24. He also says “as a Council we have little financial resilience as the reserves are low and there is little room to manoeuvre”.
A Loan from the Government?
The administration has now asked the Government for a loan called Exceptional Financial Support (EFS), of £76m over 3 years, which will come from the Public Works Loan Board. Government Minister Paul Scully wrote to the Council leader on 2nd September stating - “In respect to your Council’s request for EFS, after careful consideration, I am minded to offer the Council in-principle support of up to £20m in the form of a capitalisation direction for the financial year 2022/23”.
However, he goes on to say that the “in-principle” offer is subject to certain conditions:
• “That the Council produces a full plan for addressing its budget gap in 2023/24 and beyond, and shares this with my department by the end of September 2022. This plan should seek to utilise all the resources available to the Council to close the budget gap, be fully within the spirit and intent of all local government guidance, and aim to eliminate any amount of exceptional financial support required going forwards;
• That the Council undergoes an external assurance review of its finances and governance arrangements. This review will advise on the amount of support required, help to ensure that the Council is on a sustainable footing going forwards, and ensure that policies and procedures are in place for robust decision making and accountability. This review will take place in Autumn 2022 and my officials will be in contact with your officers about this in due course.”
The Council also applied for support for 2023/24 and 2024/25, and that is yet to be determined, but not for several months.
The Financial Future?
With or without further loans, the Council may have to use both earmarked and unearmarked reserves, and likely try to use the FUCR scheme legitimately (rather than via a dodgy SPV deal), by having a fire sale of some non-strategic assets to bring in funds.
The report from the Financial Officer also assumes for 2023/24 “the full Council Tax increase and continued increases in fees and charges for all services.”
At the same time, the Council has agreed a massive Capital Investment Programme (CIP) that also calls on reserves and extra borrowing. The Budget Report is really too short in timescale to show the benefits of this programme on future revenues, so the longer-term position of the council is unclear.
Put this against a background of the rising Dedicated Schools Grant deficit, high inflation, economic stress and uncertainty, and the risks to the council look high.
We don’t know the answer to this mess and certainly did not vote for any of it. Perhaps an alternative approach would be to concentrate council resources on reducing its costs first. Once the budget can be balanced without calling on reserves, that might be the time to increase the Capital Investment Programme. This would reduce risk, but also push away the forecast benefits of all that capital investment. It also requires Council decisions to be reversed.
This Council cannot continue to live beyond its means. It seems to us that BCP is currently not breaking even, so it is using reserves to cover the shortfall in revenues. This cannot continue.
A solution could be to cut operating costs via the very expensive Transformation Programme. However, the supposed benefits of this programme have already been assumed in the Budget. Without the Transformation savings being delivered as forecast, BCP cannot balance its budget. Not a good situation to be in.
In our opinion, the administration needs to rein in its spending, stop concocting “dodgy deals”, and concentrate on making sure that core services are delivered to its residents. You don’t pay your Council Tax for the administration to squander it on consultants and speculative deals.
Both Margaret and Vanessa as your Christchurch Independent Commons Ward Councillors, will continue to work on behalf of all residents, as we try to chart a course through this financial fiasco, which we did not vote for.
FUTURE PLACES – AS WE SEE IT
On 26th May 2021 the BCP Council Cabinet agreed to form a private development company, BCP Future Places Ltd. (FP) with an approval for a 3 year Service Level Agreement with them. The stated “Ambition” relates to the Council’s “Big Plan to deliver regeneration at a pace and scale not seen before across the BCP area”.
The company is wholly owned by the Council and will provide regeneration, development, and project management services to the Council. The FP team would be made up of a mixture of directly employed key staff and seconded Council staff. The company is financed from BCP Council funds.
There was an initial grant to FP from BCP Council of £3.4m for setting up. The Cabinet then agreed a further £8m working capital loan facility which can be drawn upon as regeneration/development schemes come forward. There is a list of 14 council owned sites across BCP which FP will pursue as their initial portfolio. One of which is the Christchurch Civic Offices site.
Following Freedom of Information requests, it was revealed that the three main Executives in Future Places are earning £150,000; £145,000 and £100,000pa. Two of the Directors of the Company were the Leader and Deputy Leader (unpaid). However, the Deputy Leader has now stepped down and been replaced by an Independent Chairman, who we understand is Lord Kerslake. According to a report in the public domain he will receive between £18 to £30,000pa. His hours of work are not known but he will certainly be part time. The Leader will apparently step down as well once 2 more Independent Non-Executive Directors are appointed, who will of course be paid employees.
Future Places was formed as a Teckal Company which reduces the need to go to competitive tendering (they will get their business from BCP), but that also limits the ability of the company to trade with third parties (and hence to pay back any debt). Being a Teckal Company means that FP must do over 80% of its business with the Council. Without outside contracts, the question must be asked, how FP can repay this debt to the Council? It’s staffing costs are extremely high before they even start to do any operational business.
Also, BCP has a large hole in its budget and is having to borrow from the Government just to try to stay afloat - and then also fund Future Places. It is difficult to understand why 3 staff are being paid so much and how that can be justified in the current economic climate. It would be interesting to know if what FP is being lent millions of £s to do, could just as easily and more cheaply have been achieved by employing competent staff directly to BCP. We question whether Future Places is value for money.
To Contact Us:
Cllr. Margaret Phipps – firstname.lastname@example.org - Tel: 01202 478266
Cllr. Vanessa Ricketts – email@example.com – Tel: 07760 391467