At the last meeting of the Council’s Public Accounts Select Committee (PASC), I made the point that, when I was Cabinet Member for Resources during the 2010-14 administration, I was sent out to defend the reserves from demands that these be used to support the Council’s day to day spending, thereby reducing the need for cuts. In those days, the use of one-off reserves which, when spent, would be gone forever, to fund ongoing expenditure on things like social services, street sweeping and bin collection was seen as very bad practice and not the kind of thing that a local authority should be doing if it wished to maintain public confidence. I said this in order to emphasise how times had changed. A report that was put before us made it clear that the Council’s General Fund had had to be bailed out using reserves in every one of the last 6 years. Why is this significant? One of the main reasons is that it means that for the last 6 years the Council has spent £100,000s of tax payers' money on the process of setting budgets that disintegrated on first contact with reality. We have spent 6 years on a pointless exercise.
I suspect that most residents do not appreciate what is involved in a Council Budget setting exercise. All I would say is that it takes months, involves all 54 Councillors plus the Mayor and many highly paid Council Officers in hours and hours of meetings and, in some cases, expensive staff and public consultation exercises. Clearly, we needn’t have bothered. Why spend months and scarce resources in setting budgets for Children’s Social Care and Refuse Collection, for example, which were clearly unrealistic and had to be supplemented by a raid on the reserves? What’s more, why, if we have gone through this exercise in futility for 6 years in a row are we doing it a gain for a 7th year? The definition of insanity is doing the same thing over and over again but expecting different results, at least according to Einstein. On this basis we are all clearly insane. We would all be better off in terms of saved time and money if we just got a baboon to pick numbers randomly out of a hat and inserted those into the Budget spreadsheet. After 6 years of the Budget needing a bail-out from the reserves, I think that it is reasonable to say that there is evidence of systemic failure in the Budget setting process. Moreover, it is reasonable to assume that the same thing will happen to the 2020/21 Budget. The King is indeed in the all together, to quote Danny Kaye.
This state of affairs should come a no surprise though. Last week when I met up with Barry Quirk, former Chief Executive of Lewisham Council and current CE of RBK&C, for one of our regular catch-ups over a few beers, he showed me something that he had been working on. He had looked at every local authority in the country and ranked their spend relative to their income from Council Tax and Business rates combined. Lewisham was in the second worse position in the Country. Its net revenue spend was around a third higher (32%) than its income, behind Knowsley that spent more than half its income (54%). This compares with neighbouring Greenwich which spent 11% more. In starker contrast lay our other neighbours. Lambeth spends less than its income (79%), while Southwark runs an even larger ‘surplus’, spending only 63% of its combined Council Tax and Business Rate income. Much can be said about this disparity, particularly as the current government seem to be committed to local authorities funding themselves from the income they can generate locally. How are Councils supposed to fund what should be universal services like Adult and Children’s Social Care together with Refuse Collection, which account for nearly all their General Budget spending, from localised property taxes? How can Knowsley provide the same care for its elderly and vulnerable people as Westminster can, when its income from Council Tax and Business Rates is over 12 times its spending?
I would emphasise another point though. Cllr John Muldoon and I have been arguing since the beginning of this administration that Lewisham is going bust and the issuing of a Section 114 Notice, akin to the raising of the financial white flag to the government, is inevitable. Initially our warnings were dismissed. Latterly the messaging has changed. Now it seems to be accepted that we are going bust, but only to the extent that all local authorities are going bust due to unremitting Austerity that is cutting local authorities’ incomes to below what is required to fund basic statutory services. Politically, in Lewisham, the view seems to be, as I have said before, ‘extend and pretend’. Extend the time-frame for setting proper balanced budgets that can be delivered and publicly pretend that things will be fine. And do this in the belief that there are many authorities that will go over the Section 114 cliff edge before Lewisham. Are we being complacent? Who really knows? However, what Barry’s analysis shows is that Lewisham may be further up the peloton that is racing towards bankruptcy than The Very Serious People, to borrow a phrase from the economist Paul Krugman, in this administration realise.
NB I have added a copy of Barry's analysis here. I'm afraid that it is very small. I'll see if I can get a larger version. Lewisham is in red.