Tories are sleep walking Kingston into bankruptcy


I believe local Conservatives are making policy decisions that will lead Kingston Council to go bankrupt, like Northamptonshire. It is a bold statement to make, and not one I make lightly. Below is my thinking, the facts and the statements made by others that lead me to that conclusion.

Acting like a business

Three years ago Northamptonshire CC announced it was to start acting more like a business1 – a PLC holding company of outsourced services, digitising services, cutting staff, overuse of consultants – a Tory ideology.

Words used to describe this new approach, such as “transformational”, “free from central government”, “outsourcing”, “reduced staffing” and “increased income” also featured in Kingston’s most recent budget. In Kingston the process is called “no stone unturned (NSU)”, in Northamptonshire it was called “next generation”.

Today, Northamptonshire is effectively bankrupt (Council’s cannot go fully bankrupt – but see ‘What happens when councils run out of money’ for the catastrophic effect of effective bankruptcy).

Kingston’s latest budget document for 2018/192 is littered with references to this new way of working:

  • “equally developing innovative ways of raising money” para 3, p4
  • “long term solutions to our situation are to be found in increasing our revenue base, demand management in all services, increasing customer and client income, increasing commercialism, and prudent investment” para 9, p5
  • “We are further reviewing our corporate services to maximise the savings we can take from them in the medium term, and also develop the commercial opportunities they present.” Para 52 p 12
  • “The Council has continued to make provision for increased capital spend to improve outcomes for residents and to generate an additional revenue return which will help keep costs down and services financially sustainable.” Para 53, p12
  • “savings delivered from the organisational redesign of the council and the move towards being an ‘enabling council’” para 63, p16
  • “The savings delivered through the No Stone Unturned (NSU) programme contain a mixture of service specific proposals and items that will be corporately delivered. Where it is possible to allocate or apportion these to departments they are shown within the relevant services but where further work is required to determine how the savings will be applied to specific departments, they are shown as being corporately held.” Para 115, p27
  • Financial risks inherent in any significant subsidiaries; new partnership arrangements; major outsourcing arrangements of major capital developments have been considered along with the correct reflection of the revenue effects of the capital programme” para 121, p28
  • Much of the report reads like it is purely officers, and the conservative administration, that is pushing this move to run the Council as a business but,
  • The proposals have been developed in collaboration with Portfolio Holders and reflect their political priorities.” Para 7, p4

And most telling is the Conservative Portfolio holders response to the budget debate talking not about services or people, but about productivity. In fact one Conservative Councillor, quietly, after the meeting, told me that we had been right to raise the Northamptonshire problems.

Unidentifed cuts and diminishing reserves

Now following a path of increased commercial property income, reduced staffing and transforming services is not in itself wrong. Indeed many of these aspects have been successfully implemented not only by other councils but also are a way to address the ever reducing funding available to councils. BUT only if you are able to achieve what you set out to achieve.

So we need to look at what needs to be done to achieve these ambitions and the likelihood on that being achieved.

In Kingston for the coming financial year, the Conservative budget had almost £17m of savings arising from the NSU programme3.  The total cuts required in 2018/19 financial year is £22m, so over 3 quarter of the savings are from this ‘transformational’ programme.

The majority of these savings are not defined in the budget papers, and bear in mind these savings come into effect on 1st April 2018 (a little over a month after the budget is set). The information for making these millions of pounds of savings are limited to generic titles, for example:4

  • Budget line 45

Income, Commercialisation & Commissioning - Fees & Charges  - saving £715k in 2018/19

"Generate income by increasing our discretionary fees and charges in line with benchmarking data and ensuring that all items include full cost recovery including corporate services recharges."

  • Budget line 47

Income, Commercialisation & Commissioning- Low Value High Volume Spend – saving £875 in 2018/19

"Reduce the amount of tail end spend by consolidating low value high volume contracts. £28m spent a year on transactions under 10k. This projection is based on a spend reduction of 5% increasing to 10% over the course of the MTFP"

  • Budget line 49

Income, Commercialisation & Commissioning - Contract Management – saving £1,126k in 2018/19

"Reduce the overall contract expenditure across the whole organisation. Overall £198m annual spend on third party payments and suppliers and services. This forecast is based on a 3% reduction rising to 5% over the course of the MTFP"

  • Budget line 50

Assets - Operational Property – saving £400k

"Generate income and reduce operational costs by reducing our corporate property footprint, reducing utility costs, disposing of assets, reviewing rent prices, reviewing the outcome on communities and services of peppercorn rent arrangements and working with other public sector providers to collocate functions at a charge"

  • Budget line 51

Assets - Strategic Property – saving £501 in 2018/19

"Generate income and reduce operational costs through specific property market interventions e.g. building housing, developing care homes to reduce the cost of out of borough placements or selling beds to other boroughs"

  • Budget line 54

Assets - Investment Property Future Investment – saving £2,160k in 2018/19

"Generate income from borrowing capital and investing it in buying properties that will generate an income from tenants/occupiers. Estimates are currently based on a capital investment of £68m providing a net yield of 2.48%"

  • Budget line 55

Adults - Demand Management – saving £1,000k

"Reduce workforce and third party costs through collaborative cross functional initiatives to deliver shared outcomes"

  • Budget lines 56-62

Various ‘Workforce’ a total of a whooping £6m cuts

 

It has also been much lauded that general reserves are due to increase from £8m to £11m in 2018/2019. However, general reserves are only part of the reserves Kingston Council holds. Taking the full reserves (including schools, housing, traffic and ringfenced reserves) the total at 31st March 2017 was £55m, by 31st March 2018 it is expected to be £43m.5

Kingston Council also intends to make sure of ‘Flexible use of capital receipts’.6 What this means is that the Council will use the £9m capital receipts (money from sale of Council land and buildings) received in 2017/18 to fund transformation within the council, rather than reduce capital borrowing for infrastructure projects such as the investment in a new dementia care home which is £10.3m.7 The implications of these decisions is that the general revenue account will need to spend the best part of £1m more on paying back capital borrowed.

 

But it is the ability to make the savings that matter

Looking at Kingston Council’s record on achieving the predicted savings in 2017/18, there are several areas where undefined savings were not achieved and others where overspends have been allowed to flourish.

  • Special Education needs spends for our children has gone from £2m8 in surplus in 2014 to £12m9 deficit in 2018, 4 years overspending by a total of £14m. There is no real plan for getting out of this hole, only a half baked idea to take money from schools to prop up some of the predicted overspend next year. Nothing to address the already large deficit.
  • In 2016/17 (last year for all accounts) there was a net overspend of £4.250m on services, with overspends in Health & Adult Services and Learning & Children’s Services totalling more than £6.371m10
  • Directors pay up from £588k in 13/14 to a £910k for 20178/19, not the reduction claimed. Also spending over £3.5m on interims, including 5 senior officers that earn over £800 per day.11
  • Failed to make savings last year of £2m in One Council services, taking the money instead from ‘reserves earmarked for asset improvements’.12

Even the auditors are warning about the ability of Kingston Council to meet the planned savings. In October 2017, these messages were in the annual auditor’s report to Kingston Council. 13

  • “There was a lack of clarity over the delivery of planned savings, which may cast doubt over the achievability of future savings”
  • “Overspends against the Dedicated Schools Grant are particularly concerning and need to be resolved”
  • “ Your Outcomes Based Budgeting approach planned to deliver substantial savings in 16/17, but there was a lack of clarity over the delivery of the planned savings and the overall position was a large overspend”
  • “Similar substantial savings are required for 17/18. However, there is a lack of clarity over how the OBB approach is different from previous savings initiatives”

What happens if a council goes effectively bankrupt?

Cuts that Northamptonshire has had to make this year, due to bankruptcy include so far:

  • Closing 21 small libraries
  • Removing all bus subsidies, including CountyConnect and CallConnect, from the end of the school term in July
  • Reducing the trading standards budget by 42%
  • Reducing the highways maintenance budget for carriageway and footpath repairs and inspections
  • Increasing on-street parking controls in locations across Northamptonshire
  • A pay freeze for staff during 2018/19

However, it has also been revealed that adult social care is “on its knees” with 2,000 unallocated cases and other cuts are predicted to follow during the year.14

For all the above reasons, I see a real threat that Kingston Council, under this Conservative Administration, is heading towards bankruptcy, following Northamptonshire.

 

 

References

  1. https://www.theguardian.com/society/2014/dec/18/like-plc-northamptonshire-local-government-funding-cuts-council
  2. https://moderngov.kingston.gov.uk/documents/s77447/Budget%20Pack%20-%20print%20version.pdf
  3. Annex 4, end of page 50 https://moderngov.kingston.gov.uk/documents/s77447/Budget%20Pack%20-%20print%20version.pdf
  4. Annex 4, pages 48 to 50 https://moderngov.kingston.gov.uk/documents/s77447/Budget%20Pack%20-%20print%20version.pdf
  5. Answer to Councillor Liz Green question provided by Stephen Fitzgerald, Finance Officer
  6. Annex 7 page 53 https://moderngov.kingston.gov.uk/documents/s77447/Budget%20Pack%20-%20print%20version.pdf
  7. https://moderngov.kingston.gov.uk/documents/s74796/Older%20Peoples%20Accomodation%20-%20Cover%20Report.pdf
  8. Para 36 https://moderngov.kingston.gov.uk/documents/s52637/Revenue%20Capital%20Outturn%20FINAL.pdf
  9. Para 5 https://moderngov.kingston.gov.uk/documents/s77175/Dedicated%20Schools%20Grant%20-%20Background%20to%20reported%20overspend%202017-18.pdf
  10. Key points para B page 1 https://moderngov.kingston.gov.uk/documents/s73623/Budget%20Outturn%20Position%202016-17.pdf
  11. Answer to Councillor Liz Green question provided by Stephen Fitzgerald, Finance Officer
  12. Para 26 https://moderngov.kingston.gov.uk/documents/s75311/Budget%20Monitoring%20Report%20-%20Month%206.pdf
  13. https://moderngov.kingston.gov.uk/documents/s75139/Annual%20Audit%20Letter%20Final.pdf
  14. http://www.bbc.co.uk/news/uk-england-northamptonshire-43226339

 


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