This is a genuine question, not an accusation or an allegation, it's just that if you lose £27.5 Million, it is a fair question to ask. Was it a punt and if so why did they make it? Barnet runs a cabinet system of council. They take collective responsibility for their decisions. Just so we know who they all are, I've taken the trouble to list them.
Council Leader Mike Freer
The cabinet team :-
Councillor Matthew Offord
Councillor Lynne Hillan
Councillor Melvin Cohen
Councillor Brian Coleman
Councillor Andrew Harper
Councillor Anthony Finn
Councillor Fiona Bulmer
Councillor Helena Hart
Councillor Richard Cornelius
These characters have presided over a council policy which has lost a huge amount of money. Mike Freer, leader of the council, said: "The audit commission gave us a clean bill of health and we have always placed our surplus cash in reputable banks." A strange comment considering two of those reputable banks have gone bust. It makes you wonder what Mike Freer thinks reputable means. What does it say about his judgement?
If you dig a bit deeper there are some rather disturbing facts and figures, which ask more questions. The Edgware Times report says that the council has £328 Million pounds in deposits. In the period 2006 to 2007, the council borrowed £110m, raising its total debt to £215.5m. This means that the council has a net positive balance of £113 million pounds (if the Times figures are to be believed). Mike Freer stated that the council had earned £25 Million by investing these deposits. Only a mere £2.5 Million less than they've lost.
Now if the council has £113 Million pounds spare, what should it do with this? I believe that the Tories stated that they wanted reserves of up to £25 Million for contingencies. This means that there is a lump sum of £75 Million left. The council, rather than improving services, building new council homes or cutting taxes, has just decided to sit on this cash. I thought the point of the council was to provide services, not to play at being bankers.
Why on earth would a Tory council do this? This certainly doesn't fit in with Conservative thinking as I understand it. In two years time, there is a Council election. All of the councillors in the Cabinet list above get generous allowances. If you build your cash reserves up and raise taxes to stash in the bank, then in the run up to an election deliver a massive cut in taxes, that won't do your reelection prospects any harm, will it? Maybe you won't do that, maybe you'll improve services, to attack the Labour core vote. The point is that in two years time, when the election comes, you'll be sitting pretty, while ordinary Barnet families have been struggling. Whilst 6,000 families have been in Temporary accomodation awaiting council houses. Much better prospects for keeping control of the council, so well worth it for you.
From a party political point of view this is a great plan, if the bank you chose to invest in is sound and doesn't go bust. The only trouble is this strategy has gone wrong. The bank did go pop and the money has been lost. I've seen no explanation for the accumilation of this huge pot of cash. Until we do I can only speculate and ask questions. Mr Freer dismisses all criticism as ill informed. He arrogantly says that council finances are too complicated for us to understand. Well Mike, you have a blog on the Times, another blog courtesy of Barnet Council and a whole website full of info at www.barnet.gov.uk - why don't you do the people who pay your allowances the honour of giving us a detailed explanation as to why this has happened and what the plan for this cash was.
What has Mr Freer said so far - "No council could have reasonably foreseen the collapse of Iceland’s banks in what once were safe deposits.
Councils have been actively encouraged, and indeed praised, by Whitehall to undertake investments of this kind. The Government must take immediate action to identify the scale of the problem and provide certainty for councils and taxpayers."
The first part of Mr Freer's statement has been comprehensively discredited, not least by the Daily Telegraph in 2006 (see my last blog), the actions of Brighton & Hove Council and numerous warnings from ratings agencies, which should have alerted anyone with a modicum of financial acumen, let alone a career banker.
As to the second part of the statement. If Mr Freer can show me a Whitehall document that says "Invest money in banks with credit warnings" I'll go to work in a Man United top (I'm a City Fan) for a week. On top of that, Freer is a Tory, Whitehall is run by Labour, surely he should plough his own furrow. As ever the last part is typical Freer, blame everyone else and ask everyone else to take responsibility. Well there are some people who should take responsibility. The list of Councillors at the top of this blog. They are a cabinet, so they are all in it together.
Councillor Duncan MacDonald has tabled a motion calling for an emergency meeting to discuss this crisis. This has been granted - on the 4th November - by Tory Mayor John Marshall, for 1/2 an hour before the scheduled council meeting. Clearly they are not too bothered about the situation, to actually do an extra evenings work. I am sure that the one thing which won't be cut are their allowances. At the moment the impression Freer and his cabinet are giving is that they are a bunch of failed chancers blaming everyone but the people who made the decision.