We hear much from Labour about “Tory cuts” to local government. Now, it is true that local government budgets have been cut since 2010. A necessity following a ballooned fiscal deficit and increased debt left by the last Labour Government. That annual deficit ran to £103 billion in the fiscal year 2009/2010. Faced with such an unsustainable budget deficit, the government rightly chose to cut government spending. Indeed, the then Labour Chancellor Alistair Darling agreed with this need to reduce annual spending, saying before the 2010 General Election that his Labour government, if re-elected, would “…cut deeper than Margaret Thatcher did”. The alternative was to raise taxes on ordinary working people.
As a Conservative, I believe working people know how to spend their money better than any government.
Fast forward to 2023, we face similar fiscal challenges. A once in a generation public health emergency necessitated the de facto switching off of the UK economy, and hugely expensive spending on schemes like furlough, to stave off unprecedented levels of unemployment and keep the economy afloat. Without the fiscal restraint shown by the Conservative-led Government in the early 2010’s, this intervention to protect people’s livelihoods throughout the pandemic simply wouldn’t have been possible. The Government took decisive action to fix the leaky roof before a huge storm blew in.
Here in Dagenham and Rainham, we have a very different scenario at the local level.
The London Borough of Barking and Dagenham (LBBD) faces both immediate and longer-term budget challenges – of huge proportions. It is one of the most heavily indebted councils in Britain, mostly due to property acquisitions[1].
In fiscal year 2023/24, LBBD has a forecast overspend of £15 million. This budget gap is estimated to reach around £30 million by fiscal year 2027/28. Reserves have sharply decreased from what were once considered healthy levels to just £17.5 million. At this rate of depletion, reserves will be exhausted within 1-3 years, leaving insufficient funds to cover projected overspend. LBBD would in effect be a bankrupt council.
The root cause of this budgetary pressure appears to be excessive levels of borrowing to fund the council’s increasingly risky investment strategy. Debt is projected to double to £2 billion in the next 3 years and to reach nearly £3 billion in 7 years’ time[2].
Reading LBBD’s Treasury Management Strategy Statement 2023/24, council officers have highlighted several major development schemes have been approved despite them not being financially viable, incurring huge risks to the council taxpayer[3].
LBBD also appears to be relying on optimistic assumptions for income sources such as council tax, business rates and investment dividends. Any underperformance (which is not an impossibility set against continued wider UK and global economic headwinds), could create a crisis – some risks resting on these optimistic forecasts appear to already be crystallising.
It’s also hugely concerning that the council has not had a proper audit conducted of its accounts since fiscal year 2018/19[4].
The council needs to urgently change its course.
In the cabinet meeting of 20th September 2022, chaired by the Leader of the Council, Cllr Darren Rodwell, the council agreed to borrow further millions for property acquisitions[5].
These decisions, made amidst the council's financial difficulties, raise serious questions about fiscal responsibility and accountability. Without serious course correction, LBBD may eventually default on these self-imposed debts, accumulated through extraordinary financial mismanagement.
Barking and Dagenham is an area with significant deprivation and challenges – it should urgently reconsider its approach to debt and adopt a more prudential path to managing its budget and spending. Council taxpayers should not have to pick up the burden of its elected Councillor’s financial folly.
Sources:
[1] Source: Treasury Management and Investment and Acquisition Strategy 2023/24 Mid-Year Review - paragraph 4.12
[2] Source: LBBD Treasury Management Strategy Statement 2023/24, Appendix TMSS 2023-24 - App.2 Borrowing.
[3] Source: LBBD Treasury Management Strategy Statement 2023/24, Appendix TMSS 2023-24 - App.2 Borrowing.
[4] Source: Audit and Standards Committee Meeting – Weds 4th Oct 2023 - Webcast – particularly 34 mins 05 secs and 45 mins 19 secs (Cllr Rocky Gill expression of concern on amount of debt and deficit and leadership of the council in relation to its finances).
[5] Source: LLB Cabinet Meeting – Thurs 20th Sep 2022 – Agenda and Minutes. Item 34: Proposed Purchase of Maritime House Office Building, Linton Road, Barking and Item 35: Proposed Purchase of the Edwards Waste Site, Gallions Close, Barking. 20th Sep 2022 Cabinet Meeting Agenda and Minutes
