Tuesday, November 23, 2010

Old Town Council Budget explanations

In the run up to the 2001/12 budget I thought I would re-publish some of the old budgets explanations and why they were wrong.

The first is the 2008/09 budget.

From the outset this looked a good budget to our Liberal Democrat Councillors. But it wasn't. In the report on the 2008/09 accounts the Auditor found that there was little detail on how this budget was formulated. This meant this was a budget whose figures could not be relied on.

Whose fault is this? Well, the Deputy Town Clerk, at the time, has much to answer for. The former Town Clerk had the responsibility of supervision of the Deputy Town Clerk. The Chairman and Deputy Chairman (Cllrs Giles and Thorpe) of the Policy and Resources Committee were in charge of the budget process. [7] [9]

What was missing from this budget?

The Council decided to cancel most of the Grounds Maintenance contracts and start its own department. This is known as bringing the service in-house. Despite a detailed study that should have identified the costs involved these weren't included into the accounts. This totalled £95,000 in costs over a full year. As this was started during the year then roughly £55,000 that should have been added to this budget.

The Capital Receipt of £60,000 is a large problem. The reason why it is a problem is the amount against reserves. The inclusion of a £60,000 against a reserves of say £16 million is minimal risk to the budget if things go wrong. In the case of the Town Council the inclusion of a £60,000 Capital Receipt against balances of  virtually zero is a gamble and a gamble that didn't pay off.

This casino budget caused many problems for the Town Council. The inclusion of the extra £55,000 Ground Maintenance costs and the exclusion of £60,000 Capital Receipt would have given a budget of £874,873. This is up from £695,794. That would have been a £179,079 increase. That would have been a 25% increase in the precept or a 24% increase in the Towns portion of the Council Tax. This would have been politically unacceptable for the Liberal Democrats and would have outraged the Town.

So instead of a proper budget of £874,873 the Town Council passed a budget of £695,794. This caused many problems. During the financial year this underfunding led to the cancellation of many projects which should have gone ahead. From the cutting of the essential Town Plan to the Play Area Upgrades. This Town Council lost its way on a big gamble and lost. The gamblers were those in charge and time and again the former Liberal Democrat leadership of Cllrs Giles and Thorpe are those who gambled and lost. This is bad  government.

The second explanation is about the 2009/10 budget.

This budget was formulated (link to budget document) against the realisation of the problems caused by the 2008/09 casino budget.

In January 2009, the Liberal Democrat run Town Council had a massive problem. They weren't too sure how much money they had and were not sure of the whole financial situation. The Town Council Leadership (Cllr Giles and Cllr Thorpe) took a series of emergency measures. This left the Forward Plan, which the Town Council had passed less than 8 months earlier, in tatters.

So what did they dump?

Town Lottery (Saved £10,000 in 2008/09. Money transfered to a Traffic Scheme the County decided that wasn't important. The Town Council decided, without professional advice, that it was necessary.)
Play Areas Upgrade (Saved £40,000 in 2009/10. £55,000 in 2010/11)
New Cemetery (Saved £17,000 in 2009/10. Likely £29,000 from 2010/11 onwards)
Town Plan (Saved £30,000 in 2008/09. Money went to prop up the General Reserves. Saved £30,000 in 2009/10)
Town Wardens (No budget, so not happening)
Council Office Refurbishment/One Stop Shop (Saved £50,000 in 2009/10. £30,000 went to prop up the General Reserves. £20,000 to create a budget to fit out the Eatons Community Centre.)
Market Stalls (Saved £5,000 in 2008/09. Money transfered to fit out the Eatons Community Centre.)

By dumping all the above projects the Liberal Democrat leadership was able to prop up the 2008/09 Budget and have some money to put towards the fit out of the ECC which hadn't been budgeted for. This is partly why the Liberal Democrats were able to keep the rise to 5.05%.

In itself this was a major foul up by the Liberal Democrat leadership (Giles and Thorpe) and has gone pretty much un-noticed by residents.

So why did the Liberal Democrat leadership (Giles and Thorpe) get into this mess? Although they were Chairman and Deputy Chairman of the Policy and Resources Committee they seem to have little idea on what was happening with the finances. Below part of what the Policy and Resources Committee is for:
So what were the main problems that arose during 2008/09?

Ending the contracts for much of Grounds Maintenance and starting a new department cost this Town Council dear. During 2009/10 budget process this was predicted as an extra cost of £89,332 more than in 2008/09. This was despite the assurance this scheme had a detailed study.

The ECC was not properly funded and "mission creep" and other changes were not accounted for in the scheme. This led to a financial crisis which needed more money.

In the previous article I pointed out the Liberal Democrat leadership of Giles and Thorpe had understated the 2008/09 precept by £180,000. This casino budget caused problems for 2009/10.

After the January cuts in the 2008/09 casino budget the cuts continued into the 2009/10 budget process.
The £36k decrease in the Central Administration is because they only budgeted for a new Town Clerk for 6 months. So Giles and Thorpe had decided to under staff the Town Council for 6 months. If they employ another full-time Town Clerk with the same staff structure this will mean an increase for the 2010/11 budget of £36k.

The Other Costs/Income fall of £33k is to do with the loss of interest from the use of those reserves to pay for the ECC.

Because Grounds Maintenance was brought in-house this has added costs to the Depot and Operations section but has dropped the cost of both the Play Areas and Churchyard section. But this still represents an increase of £89,332 in costs over 2008/09.

The upping of the Promotions budget to £46k from £24k has much to do with the under budgeting in previous year.

The Town Promotion budget increased from £6k to £23k is to do with the inclusion of the xmas lights from the reserves budget.

The Priory Centre budget was cut by £26k which was a political decision.

The Capital Budget was a decrease from £188k to £48k meaning £140k reduction. Whilst this looks good cutting capital programmes will mean this will need to be reinstated in the future. To reinstate above £48k will mean tax increases.

The Town Council did put £25k aside for the running costs of the new ECC.

It should also be noted the 2009/10 budget left out Play Area Upgrades and Town Plan which saved another £70k. The leaving out of Play Area Upgrades will mean this will become a cost further down the line.

The 2009/10 budget was a slashing budget which the Liberal Democrat leadership of Giles and Thorpe used to rip up to tatters the Forward Plan and trash many of their programmes. The ECC carried on as the money pit. This budget has stored up problems for the future which can only be resolved by more tax rises. Of course the Liberal Democrats are hoping the 2011 annexation of parts of Eynesbury Hardwicke and St Neots Rural with all the extra housing will ease these budgetary problems.

Thirdly the 2010/11 budgets.

I went down to the Town Council offices to collect the draft budget. Only to find there are two draft budgets! I've scanned in the summaries for Option1 and Option 2.

There has been a bit of rearranging the deckchairs on the Titanic. The first thing to point out is neither option has regard to any provision for public toilets or the Eaton Socon Car Park. The second point is some of the under budgeting in the 2009/10 budget have come back to bite this council. I blame Giles and Thorpe for this.

Option 1
This draft budget increased from £803,576 to £892,997. An increase of £89,421.  This is equal to £87.59 band D or  + 4 pence increase over 2009/10. The main cost increase is a massive £67,996 on Central Administration. The vast majority of this is a hike in salaries of £67,991. About half of this of this increase is due to the under budgeting for the Town Clerk in 2009/10. The other part I don't know. Other increases are: Priory Centre + £13,542; Capital Projects + £14,751.

Option 2
This draft budget increased from £803,576 to £858,727. An increase of £55,151. This is equal to £84.23 band D or -£3.32 decrease on 2009/10.

The main changes to Option 1 are:

Capital Projects are now zero. -£26,500
Priory Centre -£2,000
Eatons Community Centre -£4,650

The changes at the ECC are strange. (ECC Option 1 + ECC Option 2)

Staff salary: Option 1 = ££ / Option 2 = £9,000
Hall Hire: Option 1 = £25,000 / Option 2 = £40,000
Pre School Lease: Option 1 = £12,000 / Option 2 = £6,000

In my opinion there are three problems with these budgets.

The first problem is central staffing. We seem to be in the savage circle. An increase in the central bureaucracy without a massive increase in services delivered to the residents. The Town Council is over staffed and needs to be cut back rather than keep increasing.

The second problem is the budget for the Eaton Community Centre. Option 1 has an entry is just ££ for staffing. So the Town Council has made no budget for this section in Option 1. This is wrong. An estimate should be made and a figure entered. There are major differences in the estimates on income and on the lease for the pre-school. The assumptions behind these figures should be the same. The lease cannot be £12,000 in one option and £6,000 in another. Nor can you have hall hire income at £25,000 in Option 1 and £40,000 in Option 2There should be only one view on these income items, not two.

The third is there is not much money for capital projects. This Council needs to keep setting aside large amounts of money in a capital programme to renew the Town Council facilities. Otherwise these facilities will continue to deteriorate and will cost more money in the future.

What we should remind ourselves is this budget would have been much worse if it wasn't for the extra £89,000 from the annexed areas. If we took the new council tax base and applied it to the old budget we would be paying £78.82.
Option 1 we would be paying £87.59. An extra £8.77 or 11%.
Under Option 2 we would be paying £84.23. An extra £5.41 or 6.4%.

Whilst this is not a cost increase for 2010/11 it should be remembered that Grounds Maintenance is still costing SNTC £83,000 more than in 2007/08. This is a major underlying cause of the budget problems.

In conclusion, this budget is partly a carry over from the 2008/09 casino budget which left SNTC in a right mess. What is troubling is the lack of funding for a capital programme or indeed a capital programme. But what is most troubling is the salaries increase of £67,991. We should be reducing the central bureaucracy instead of increasing it!

These draft budgets are due for discussion at a Special Town Council Meeting on 15th December 2009.

Option 1 Summary
Option 2 Summary
ECC Option 1
ECC Option 2
Salary Increase

No comments: