Saturday, 4 September 2010

Barnet Council Leadership : We can't bury our heads in the sand any longer

Barnet Council has huge debts of over £200 Million (long term borrowing and liabilities). This has risen from about £38 million when the Tories took charge. Due to a serious of massive blunders, the reserves have been depleted and huge unexpected charges in the form of spending overruns, legal cases and lost investments have left the council in a position where every Council tax payer in Barnet owes £1,000. Sadly the current leader of Barnet Council doesn't even begin to comprehend that this is a problem. The executives at Barnet Council have two answers (which anyone with an ounce of financial acument will recognise as completely insane). The first is to borrow even more money to cover the debt (think of the adverts "Why not roll all your debts into a brand new one and then go on holiday"). The second is to have a firesale of council assets, namely properties, which will then be leased back. Whilst this will plug the immediate hole in the finances, it will build in huge structural costs into the council budget for ever. Just suppose the Council sell £100 million of assets to cover the debt.  A commercial landlord will then charge the council a rent on these. All of a sudden there is an annual bill of £10-15 million for rent, which wasn't on the account sheet before. At some point there will be rent reviews and the bill will get even bigger.

As ever, when you really want to see what sort of shape an organisation is in, start with their latest accounts. I've spent the last few days going through these, which is why I've started asking these questions. The situation looks grim to me.

What other "black holes" are there in the council accounts? I've also been digging in the council papers, chatting with my friends in the trades unions. One of them sent me this link :-

This details shortfalls in the Local Government Pension scheme, to which Barnet subscribes. I'm not an expert on such matters, but as I understand it the problem is this. Barnet has a legal obligation to it's workforce, there is a shortfall (and these are huge sums) and someone is going to have to pay for it (guess who).

Just to give you a flavour of this, have a look at the council accounts for 2008/2009 (the last full year) - - go to page 102. What is the biggest red figure - at £228,024,000 - the pension fund reserve. How on earth can you have a negative reserve? Even more worrying is the fact that this rose by over £26 million in one year.

Even worse is the fact that the total liabilities of the council are £560,635,000 on the face of it, the accounts show that the position is rosy, £1,962,959,000, but the vast majority of this is the council housing stock - £1,220,000. When you then take the other property assets - £489,893,000 you soon see that most of this is sown up. Assuming that these liabilities have to be financed, lets say at 3% above base rate, this is costing us approx £20 million a year, even at a low base rate of 0.5%. If interest rates were to go up to 6.5% (not a particularly high rate historically), the Barnet taxpayer would be paying £60 million a year.

Of course, all of these interest rates are notional. Barnet has it's cash on a whole range of interest rates, some fixed and some variable. The point is that the more debt we have, the more assets we sell, the less control the town hall has over what the council tax levels will actually be. Under the combined leadership of Mike Freer and Lynne Hillan, we are approaching a cliff and the current leadership have put their foot on the accelerator, not the brakes. I have no idea whether the leadership challenger, Mark Shooter has any answers to this,but he has told the press that he isn't a fan of the future shape scheme, which at least acknowledges that he realises that selling the family silver is bonkers.

It seems to me that there is a political consensus in Barnet. This is one of completely burying our heads in the sand. I believe there is a stark choice which cannot be put off any longer. Lynne Hillan is part of the problem, she has caused the problem. She is the one who froze the council tax, by raiding the reserves, purely to win an election. She was the one who then tried to vote herself a huge payrise with our cash. She is a totally discredited failure. She has no answers. If she isn't sacked now, then come the next election, there won't be a Barnet Council left. I have one question for all of our Tory Councillors. Have you actually read the Council accounts? If you have, how could you possibly vote for Lynne Hillan - the only answer to this is that you are too thick to understand a balance sheet or too greedy to care.


Jaybird said...

I wonder how they sleep at night.

I wonder how Mike Freer managed to get a position on the Local Government select committee.

I wonder if I should move out of the borough.

Mrs Angry said...

This is truly horrifying. Is there no way of legally challenging the state of the borough's finances? I suppose now that the Audit Commission has conveniently been abolished, we're stuffed as there will be no national external review. It seems incredible that such risks can be taken with local tax payers money with no accountability to any objective scrutineer.

Rog T said...


I suspect they sleep very well because, quite frankly they don't give a damn.

Mrs Angry,

If Hillan stays, I intend to serve all manner of FOI requests on them. The unions are interested in this and may well seek legal remedy if I find what I expect to find.
If Hillan goes, we'll just have to see what the new leadership has to say and does. If they adopt a Hillanesque approach, then they will also receive a tidal wave of FOI's & court challenges. If they do the decent thing & start telling the truth about all of this, I guess we'll just have to play it by ear and work out what to do when they announce their strategy. I'm not taking bets though. If I had a pension in Barnet Council, I'd be very worried whoever gets in

Mrs Angry said...

Good man Rog: I'd advise you to get those FOI requests in asap if necessary as I'm pretty sure the new government will attempt to dismantle this act - as suggested by dear Mr Blair, the best PM the Tories never had, the other night in his cringe making interview.

Jaybird said...

Am I right in thinking that Nick Walkley is the highest paid Chief Executive of a Council in London?

I understand the range is £164K to £242K.

Moaneybat said...

We don't see the Executive Officers who research, forward plan, recommend, implement and then administer their own flawed advice, ever taking a hit. Any wonder Barnet has this level of debt created by a bunch of overpaid inept Local Government chancers employed on behalf of the taxpayer.

Put Barnet and Hammersmith's Local Government ideas together with Cameron's Canada vision, you will get Big Bollocks Society. No wonder Freer got there.