Last week was budget day at the County Council and we went through the bizarre ritual of noting an ‘officer budget’ with a £9.6 million deficit and proposing ways to fill it. The coming year is of course the first of five years in the MTFS (medium term financial strategy) but it’s only the first year that counts. Subsequent years can all be changed and there’s no need to worry about eliminating any deficits which remain after year one.
The important point to note is that there must be no deficit in year one. Councils are required by law to deliver a balanced budget. That’s why there’s so much looking down the backs of sofas to find money that might be used, as is what happens in Cambridgeshire, or abject requests to the Government for more money as Peterborough is doing this year.
The Tories proposed a little extra spending on footpaths and pavements. Actually not inconsiderable, £4million, but to be funded entirely from borrowing. You could argue that that’s not allowed, you can’t borrow to fund revenue spend. But it’s a grey area and if you say you’re not repairing but improving an asset then it looks like you can get away with it. Because this is ‘revenue investment’ only the financing of the borrowing needs to be shown in the revenue budget. Clever.
There’s also a little over £1 million proposed for flood attenuation and biodiversity in 2021/22, with the intention to reduce this to about £300 thousand the next year.
Finally there’s a proposal to build a road viz the B1050, or at least to improve it. All credit to the Tories for seeing the need to do this but isn’t it the job of central government? And if not where is this particular project in the Council’s already much debated Transport Investment Plan and why does it merit spending in advance of other projects on the list? The job itself will be funding from borrowing, that makes some sense, but the design work is in this year’s revenue budget.
That’s it. There’s curiously nothing in the budget to address the impact of Covid which is surely going to be felt this year.
Of course these extra expenditures increase the budget deficit and it’s proposed to address this by raiding two capital pots, £8 million in total from the MRP and Transformation funds, and an increase of total Council Tax including the Adult Social Care precept of just one percentage point taking it to 2.99% in total. Note that use of capital in this way is not sustainable, the problem will simply come round again in 12 months time.
The Lib Dem budget is less focussed, it generally is, and perhaps a little more fiscally sustainable.
It starts with a substantial increases in funding for communities (£600 thousand) and business support (£200 thousand) to address post Covid needs. It also proposes significant expenditures on green projects, road improvements and biodiversity; all to be funded from capital.
They also propose to raid the MRP and Transformation funds but would raise council tax by a further half a percentage point to a total of 3.49%. In addition the Lib Dems would address what they feel to be excesses in the number and sizes of councillors’ special responsibility allowances.
Labour’s budget proposal is a little difficult to understand.
To its credit it starts with a £4 million plus one off Covid recovery fund, a £1 million one off contingency fund to help with return to school and £300 thousand extra for adult social care.
To plug the deficit, now £16 million because of the above, Labour proposes a one percentage point increase in council tax and a massive £13 million raid on the transformation fund which it’s suggested would get paid back next year.
Of the three proposals this one is the one that perhaps focuses most on painting a good picture for 2021/22 and expecting future years to sort themselves out. But then that’s a luxury which you have in proposing a budget which has no chance of being accepted.
I’ve written before about the folly of implementing fiscally unsustainable budgets (click here) but what’s the point of presenting a MTFP when you know it’s not sustainable? I reckon it’s dishonest. Someone suggested in the budget debate that it was a case of ‘jam yesterday and jam tomorrow but never jam today’. I don’t think that’s right. It’s more a case of ‘no jam today and we suspect that there will be less jam tomorrow’.
I mentioned Peterborough above. Peterborough City Council is unable to balance its books and has been give permission from the Government to borrow and use those funds for social care. It’s not a sustainable solution of course unless more funding is forthcoming or more savings can be made. The same is true of Cambridgeshire County Council. OK we did not have to, or we chose not to, ask the Government for help but our budget will be no more sustainable. You can’t keep borrowing to keep yourself solvent, neither can you do the same by spending your reserves.
Last year I rated the three budgets poor, adequate, good or excellent. It’s difficult to rate any of them good and certainly not excellent. Maybe the Lib Dem one is adequate because it addresses Covid and is less unsustainable than the others because at least it’s brave enough to plan further council tax increases beyond 2021/22. The Tory proposal has got to be poor because it ignores Covid and seems to see virtue in maximising unsustainability. As noted above at least Labour addressed Covid but it didn’t address anything else and it appears to buy into the ‘something good is bound to happen’ school of planning beyond just the current year.