All those residents in true blue wards to the south of the borough, who dream of the day when Coulsdon can declare their own little version of UDI and hitch themselves to a neighbouring council, might want to be careful what they wish for.
Surrey County Council could be the next large local authority to go bust, with a budget shortfall for the next financial year of nearly £100million, according to the findings of an independent report.
Croydon’s southern neighbours face an “unbridgeable budget gap in 2019-2020”, says the report into the council’s struggling finances.
Surrey County Council is Conservative-run. Over the past eight years, it has consistently received a better settlement from central government, per head of population, than many urban local authorities, including Croydon.
MPs in Surrey – all of them Tories – include cabinet “big beasts” Michael Gove, Jeremy Hunt, Philip Hammond and Chris Grayling.
Earlier this year another Conservative-run county council, Northampton, effectively declared itself bankrupt, becoming the first local authority in nearly 20 years to issue a Section 114 notice, which stops all new expenditure apart from statutory services for safeguarding vulnerable people. Northampton was unable to deliver a balanced budget, which is required by law.
In Surrey, the authority’s new chief executive, Joanna Killian, commissioned the finance review upon her appointment in March.
Killian was previously the head of Essex and Brentwood, where in 2011 her salary of £289,143, including pension, made her the country’s highest paid local authority chief exec.
Soon after Killian arrived at her new job at Kingston County Hall, Sheila Little, Surrey council’s finance director resigned, giving just 24 hours’ notice of her decision to quit.
Killian’s finance review, conducted by CIPFA, the Chartered Institute of Public Finance and Accountancy, found that Surrey’s finance department is “too top-heavy” , and it discovered there is no “Plan B” for meeting the £94million budget shortfall.
The report says that Surrey’s finance department is “too passive”, lacking sufficient drive and initiative to tackle the escalating budget issues.
“As things stand, the council will not have sufficient reserves to meet its expected budget gap in 2019-2020,” the report’s authors said.
In March, Surrey approved a 6 per cent Council Tax increase – the maximum allowed – and further budget cuts to services of £66million.
The Tory council’s leadership had announced that it would seek a Council Tax increase of 15 per cent – something which would have required a referendum of residents.
But council leader David Hodge and his Conservative colleagues quickly dropped that idea. They said that they changed their plans because the government had “listened” – code for Tory High Command agreeing a state-funded financial sweetheart package.
“The simple fact remains that demand for our services continues to rise but government funding continues to fall,” Hodge told the budget-setting council meeting. According to Hodge, Surrey has cut £540million from its annual budget since 2010.
The CIPFA report, released yesterday, says, “Surrey County Council will need to reform fundamentally how it provides services to its communities.”
CIPFA estimates that Surrey’s gross expenditure is expected to increase by 6.5 per cent by 2020-2021 but gross funding will only rise by 2.4 per cent over the same period. This will result in a funding gap of £36million in 2018-2019 rising to £86million by March 2020, and £94million by March 2021.
Responding to the review, Hodge said: “It is well-known that local government budgets across the country are under severe pressure.
“However we have a duty to ensure the council remains as financially sound as possible in these unprecedented times and that’s why we asked CIPFA to do this review.”
As well as Surrey and Northamptonshire – which gave up the battle when confronted with a funding gap of £70million for this financial year – other authorities struggling financially include Somerset and East Sussex county councils.
Surrey’s financial woes come despite the authority having received millions of pounds in preferential treatment from the Tory government since 2010.
In a letter to The Guardian yesterday, Jon Collins, the Labour leader of Nottingham city council, wrote, “Surrey county council, one of the wealthiest authorities in the country, benefited from £24million of a fund designed to soften the blow of the cuts – the most for any council – while councils like ours received nothing.
“The government has refused to tell us its criteria for allocation.
“However, what’s clear is that Conservative-led authorities benefited from 89 per cent of the £300million provided over two years, and are now set to get 86 per cent of the further £153million being allocated under a new scheme. Surrey will get £17million and, again, we get nothing.”
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