We survived the Halloween weekend. In modern tradition, it is a time to be scared. The spooks have gone, but when it comes to Shropshire Council’s finances, you should be scared. I am very scared.
As has been widely reported, Shropshire Council is close to going broke. If it does so, the government will send in commissioners who will ignore local needs, local values and local wishes. They will tell Shropshire Council what to do. They will then walk away without having solved the fundamental challenges of supporting the people and communities in our county. That support has to be on a budget decimated by successive government budgets and by local Conservative mismanagement.
Shropshire Council is in a crisis situation. It is weeks, not months, from filing a Section 114 notice. Commonly called bankruptcy, this ignominious status is more akin to administration in the corporate world. Shropshire Council has a legal duty to balance its budget at the end of the financial year. If it can’t do so, the Section 151 officer – chief finance officer – issues a s114 notice. This is not a political decision by councillors. The s151 officer has a legal duty to issue the notice to inform the government that the council is bust.
No one knew the dire state of the Shropshire Council’s finances until the Lib Dems took control of the council on 22 May this year. The Lib Dems had previously taken part in a cross-party collaborative budget setting exercise. We withdrew when we were not given enough information to take part effectively. Now, after a “deep dive” into the council finances, we learn that no one had enough information to set a stable budget. Not the Conservatives. Not even the officers.
We have learnt that the Conservatives were like a landlord letting a near derelict property. A quick lick of paint. Stuff swept under the carpet. Then hoping to get away with it. They did this month after month, year after year. But behind the lick of paint, the property was rotten and at the point of collapse.
The biggest question is why wasn’t a deep dive into the finances not undertaken before? For the last few years, the council’s audit committee has been nervous about the state of finances. But when the annual audit report was presented to full council, the Conservatives were bullish. No hint that the council was spiralling into a black hole. Year after year, the council had pumped money into reserves at the beginning of the financial year, only to run those reserves down through the year. Money was moved from pot to pot to ensure the budget balanced at year end and looked healthy.
The squeeze on council finances began with the coalition government after the financial crash. Money went to support banks and not people. The Conservatives and now Labour have not reduced the financial squeeze on councils since the crash.
Many councils are in financial difficulties. Around 47 councils have applied to the government for Emergency Financial Support (EFS) over the last three years. Some because they don’t have enough money coming in to cover their costs. Some because they speculated on offices and shopping centres using borrowed money.
In Shropshire’s case, it is a mixture of underfunding and mismanagement. The government has cut the council’s funding massively over the last decade.
The cost of adult social care has soared as the council’s income has been cut. Two percent of your council tax bill, which is now increasing by 4.99% a year, is for adult social care.
At the same time we have faced increased costs for looked after children. The cost of transporting young people with special educational needs and disabilities (SEND) to education facilities has also grown rapidly.
Council staff have worked hard to reduce costs without reducing delivery. But social cae costs now make up 78% of the council’s budget.
The financial crisis is not just caused by soaring costs outside of Shropshire Council’s control. In the early years of the council, the Conservatives refused to put up council tax. That leaves the council £26m short year on year. The Conservatives bought the shopping centres using money in reserves (much of which inherited from the district councils and Shropshire County Council). We could now be using those reserves, with government permission, to bail out the council. But it was more important to the Conservatives spend money on a doomed vanity project than protect the council’s core services.
We are in a mess. A mess created by Conservatives. That is why we are faced with tough decisions when we should never have been in this position.
The Liberal Democrat administration has appointed an Improvement Board to pair internal and external expertise to help sort out the council’s finances and ways of working. It is also applied to the government for Emergency Financial Support. That is likely to be several tens of millions.
If the government does not give us Emergency Financial Support, the council will have to file for s114 with unpredictable consequences.
I am concerned for council staff. They have been under enormous pressure for years. Many work long hours. Many not knowing if they will have a job in the future. The Conservatives often treated staff as a commodity, not our most valued asset. In 2011, it sacked all its staff and took them back on at 5% lower wages. It transferred staff to a private company ip&e, only for that to fold. It now has no offices for most staff, who have to hot desk or work from home, whether that works for family life or not. The council has a lot of staff support schemes in place but when jobs are under threat, that becomes a veneer. The Conservatives threatened to cut 300 jobs (FTE), about one in ten. It later revised that to one in five. With that level of redundancies, the council will barely be able to operate. As it is, we don’t have enough staff in some areas to maximise income.
Did the Conservatives have a clue what was going on and the havoc they were creating. I can see no evidence of that.
I don’t know what is going to happen in the next weeks and months. No one does. But I am scared. Very scared.