Medium Term Financial Strategy Nov 08
If you can believe it (and we're not 100% sure about this at the moment - see the
end of this report) the absurdly named "Medium Term Financial Strategy Update" on this Thursday evening's Cabinet agenda (and which itself is a
clue to much of what is wrong at Fylde), is the civic equivalent of a Big Red Panic Button (see left).
Having destroyed the capability of the swimming pools to attract custom by failing to re-invest in them and keep them up to date, failing to adequately maintain their facilities and fabric, and failing to believe that public service should exist at
all, the Commissar has now entered into the same circle of decline and despair on behalf of the whole Council. The day of reckoning approaches.
You should now start to see those councillors opposed to his rule easing a sigh of relief. According to the report, from now on they won't have to win the next election. They can sit back and take it easy, confident in the knowledge that it is the
Commissar's to lose.
They can afford to start saying - "Things are so bad financially, it's going to take us years just to get back to where were before he started." Sadly, it's time for them to manage down the expectations of the electorate that have been raped
and asset-stripped by a financial incompetent suffering from deluded civic megalomania.
This 'Medium Term Financial Strategy Update' is really nothing more than a budget exception report and financial forecast. But the forecast is disaster.
Its headline recommendations are:
- All new spending except contractual obligations and basic statutory services to stop. Now.
- Management Team to find £380,000 savings from the CURRENT year's budget
- Discretionary fees and charges to be immediately increased to maximise income generation
- Power to set fees and charges to be removed from the whole Council and delegated to individual Cabinet members
- The Chief Executive (on whose watch the disastrous implementation of the Civica computer accounting system that is at the root of much of this financial trouble arose) is to be sent cap-in-hand to Government like Oliver Twist to ask for more.
(You can guess what they will tell him - Fylde? Yes, you're the Council that spent over half a million on aborted plans for a new town hall and lost £1.2 million in an accounting disaster aren't you. Now what was it you are wanting?)
- There is an immediate freeze on all recruitment, even temps and agency staff.
- They will enter into discussions with trades unions about the possibility of cost-saving staff redundancies before the end of the current financial year.
- Emergency powers are to be given to the Chief Executive and Finance Director monitor the situation on an ongoing basis.
- Emergency powers for the Commissar and the Executive Member for 'Finance and Efficiency' (surely they must be joking here!) to be authorised to take any executive action required to ensure the Council remains in a sustainable financial
That's the civic equivalent of the Iraq War's "All necessary means" power accorded to George Bush.
Looks like we've had a steady hand at the financial tiller then doesn't it!
So how did we get into this mess and how bad is it?
Well, as we showed back in August 2007 in 'No Accounting for Fylde' the seeds of this disaster were being sown when the introduction of a new accounting system went disastrously wrong. It ended up with
agency accountants (who would have no idea how local authority accounts work) trying to set up a new computerised accounting system. They didn't make it. The 2007 financial year began with the cash was entered in one system and the spending
entered in another, with no communication between the two.
Result: by November there had been no bank reconciliation undertaken, and the first budget monitoring (halfway into the spending year) showed massive overspending (by approximately £1.2 million) because spending departments couldn't get at any figures
on what they had spent and how much they had left. This disaster was enough on its own, but when added to the terrible depot fire and consequences that we know all too well at Streetscene, and you had a huge financial black hole.
Fylde should really think of itself as a large parish council. It should think of its spending in terms of tens, and rarely, hundreds of thousands of pounds.
'Millions' are (or at least should be) off the scale for an authority the size of Fylde.
To plug the gap, (after the former finance chief went to work somewhere else), they appointed a new Finance Chief - who clearly knows what he is doing, even if he is a bit too secretive and control-freaky for our taste (we have a rather
old-fashioned view about what local authority accountants are there for).
The new finance chief must have had the equivalent of a financial coronary when he saw the books. He immediately (and quite properly) raided the balances, wiping out everything except the money he was legally required to leave there. Much as we
deplore the loss of what these funds were being held for, he had no other choice. But his action did put the books back into balance.
To cut the future spending, the Commissar responded by closing the swimming pools that required public subsidy, raising charges, closing other facilities and so on. We said at the time he has met his nemesis.
But then he carried on spending like there was no tomorrow in other areas. He still doesn't get it. He doesn't realise that officers spending their time, and consultants being paid for their time on policy development and aborted schemes and grandiose
plans that Fylde will never have the money to fulfil, are at the very root of the financial life blood that is draining from the Borough in ever greater torrents.
The Commissar also pulled two financial con-tricks at the March 08 budget meeting - headlining the agenda was the pools closure of course, but hidden in the small print were two other measures - firstly the so called "equitable taxation" scheme with
which regular readers will be familiar - suffice to say by conning Parish Councils into charging their residents to look after parks and gardens in their areas we was able to dump £500,000 of spending onto them without cutting his own spending (an
effective increase in Council tax by FBC of £500,000). We will be returning to this in a future article.
Secondly, he hid within the accounts, a whole series of (unidentified) 'savings' adding up to almost £400,000 overall.
What had probably happened, is that even with the pool closures and the extra £500,000 of income, he still couldn't balance the budget, so he included presumed or anticipated "cuts" AS PART OF THE BUDGET, (technically called 'Savings to be
identified') thus artificially reducing the spending by another £400,000.
We were quite surprised that officers allowed this to get through without comment to the full council meeting who should have been in possession of all the information they needed to make proper budget decisions.
All would have been OK if the officers had subsequently managed to find the £400,000 or so of savings as the year has gone on.
But they haven't.
And that's no surprise. There is almost nothing to cut from now except the stupid, wasteful, grandiose schemes that produce nothing except hot air - and the Commissar isn't going to have his delusions of grandeur shattered, you can bet on that.
So now, before the end of the financial year, we have to find a bit less than the £400,000 that should already have been saved so far.
As the headlines show, there is going to be pain.
The whole of this mess is down to three people:
- a former Chief Executive who instituted a disastrous "finance follows function" policy for Fylde, reversing years of careful, prudent financial management. In layman's terms this policy means we won't cut our cloth according to our means,
we'll decide what we want to do and find the money somehow. In Civic terms this is the same mindset that brought the populous sub-prime mortgages, bankrupt banks, equity release, maxing out credit cards, and trillions of debt in everyday life.
- a commissar leader who was a protege of the former Chief Executive and who began by despising the interference and very existence of regional assemblies and governance structures, but who has now been sucked into the puffed-up unreal world of
the regional set, and offers enthusiastic support for their objectives. He has lost touch with reality as it should be in Fylde.
- a current Chief Executive who either doesn't understand the need to, or at least seems unable or unwilling to stand up to the demands of a tyrant that is leeching the life blood out of a delightful borough.
Fortunately, (despite some of our misgivings) the present financial officer is up to his job, and with his solid professionalism he, at least, is telling it like it is.
And it's bad.
There are several points of interest to glean from his 'Medium Term Financial Strategy Update.' (and for our councillor and financial anorak readers we have set them out below, so skip this next bit if you're not of a financial bent). You can
download a copy of the report here if you wish.
At 6.1 it is assumed that gas and electricity prices will increase by 110% when the present contract ends. That's quite an increase.
At 6.2 the Concessionary fares scheme is mentioned. The budgeting for this item is based on monitoring information from the first four months of the scheme. There are all sorts of problems with using this small, unrepresentative sample as the basis.
For example, Preston (a key transport hub) didn't have a proper analysis system in place to cost out its journeys so everything from Preston has been averaged out, and that impacts on what everyone else had to pay (see 'Bus Pass
Update'). So, based on the research we have done, the extra £362,000 that the financial report's Appendix D says Fylde needs to pay may be exaggerated.
At 6.2 (iii) the Council says it is going to lose £60,000 a year as a result of not being allowed to charge more for house searches than the service actually costs to provide.
At 6.2 (v) Dim Tim has been moaning all year about the high cost of parking warden charges he pays to LCC who run the service. It seems that in part at least, this is due to the fact that some Councils have been claiming excessive overheads on the
work. (Charging the scheme for 'back-office' work they do themselves).
It has now been decided to limit any Council's overhead claims to a maximum of 71% of the actual cost of performing the service. As a result of having charged more than this in the past, Fylde has to pay back £19,000 from last year's accounts. It
also means the cost of the service to Fylde will increase for this and subsequent years. Maybe he should have kept quiet.
At 6.2 (ix) is one of the real gems of the report. It says the Wyre refuse contract needed some more bins and boxes which Fylde is contractually obliged to provide (although it doesn't mention how much they will cost here, (that comes later in
Appendix D, when councillors will have forgotten what it is).
It also says there will be a 3.5% increase in the Wyre contract's income for 2009/10 (which is next year). It then goes on to say Wyre has not ordered as many (extra) one-off jobs this year (these are unspecified ad-hoc tasks that produce income
outside the contract price, eg a special litter pick somewhere, or supplying rubbish bins for a new festival or whatever), so the ad-hoc income that was expected is down by £100,000.
Now when you put all this together using Appendix D, the extra bins and boxes will cost Fylde £80,000 this year (and every year from now on), the extra income from contract price increasing by inflation is nothing this year, but £85,000 next
year (which the more astute readers will see has more or less been wiped out by the cost of the extra boxes). AND the ad-hoc income is going to be down by £100,000 a year. So overall - even without the losses that were shown in this report last
year - we're another £100,000 a year down on this contract, and Fylde is subsidising Wyre yet again.
It is time this contract was binned, along with the incompetent Dim Tim that's in charge of it and who keeps telling us it's such a good thing.
We half expected to see an extra £500,000 here as well. Last year's report showed the £609,000 Streetscene overspend, and an extra £500,000 a year for the remainder for the contract term. But this sum doesn't show in this year's report. We can only
assume that either it's been fixed (unlikely) or that when it was reported last year it became part of the revised budget, so there's no need to show it any more as an exception.
At 6.2 (x) The report notes a reduction of £125,000 in car parking income and suggests this is because of the free bus scheme. It couldn't be that car users object to being fleeced for coming here then, or they're harassed by parking wardens who jump
out and book you whilst you're in church on a Sunday morning could it? This is part of the problem. The Commissar simply doesn't understand he is running public services. He thinks he's running a failing business that can't make a profit, so when the
income falls; the answer is to put up charges. That's the mindset that closed the pool.
As he now starts to apply this logic to parking, it will close the town centre.
At 6.2 (xii) it shows that income from sand sales is down £50,000 this year because of reduced demand. (Which will upset one of our regular readers).
Section 7 deals with reserves, but fails to provide any details, so we can't see what's going on with them.
Section 8 looks at the money Fylde gets from Government and notes that it will go up from £5.60m this year, to £5.62m next year and £5.86m the year after. The report then says in 'real terms' (ie when you take inflation into account) this
is equivalent to a rise of 0.9% this year, then 0.1% and a decrease of 0.1% the year after. But of course that pre-supposes you know what inflation is going to be, and at the moment that's a bit tricky. If, as some say, we're heading for a period
of deflation, the whole of that section is out of the window.
Section 12 looks at capital spending. The main feature in this is the £3.1 million this year and £2.86 million allocated next year for "Strategic Planning & Development" which
probably means the Town Hall scheme which (it says) is going to financed by asset sales that will produce £3.31m and £3.04 respectively (And you can tell that to the Marines in this economic climate). There's no hope for this scheme.
In the words of Monty Python, "it's a deceased project." We think by the time it is finally abandoned it will have wasted something in the order of £750,000 on plans and schemes that were never going to come to fruition. The losses on the
Ashton Theatre fire that still haunt older councillors pale into insignificance compared with this lunacy.
We will see later in this article that this project is being "put on hold" for the moment.
As an aside, we also hear that the nomadic staff in the Planning Department who migrated from the former planning offices (the building next to the Public Offices opposite the end of Wood Street) to Wesham in the 1990s, and thence back to
the Council Chamber in the Town Hall when Ken Lee sold the wonderful oak and leather council chamber seating on EBay, are now preparing to complete their circular migration and move back to the building next to the public offices (maybe they
will rename it "Winter Pastures"). This is actually a great shame for them. They are up to their ears in trying to cope with a planning system that is in meltdown because Government is continually changing the rules and interfering. A move
like this is just what they don't need at present. But it would release the old Council Chamber for - guess what - Yes, Council Meetings, in the spiritual home of Fylde Council, just where they should be. Watch this space.
There's another figure in the 'Updated 5 Year Capital Programme' that is of interest. Streetscene's capital requirement was £1.7m last year, £1.8m this year, £1.1m the year after, then just £30k for three years before leaping to £3m in 2011/12. We
think this movement ought to have a bit more explanation than is being given in the report.
The Capital Estimate also shows that Fylde has borrowed £883,000 last year, and expects to borrow another £883.000 this year - both of which will cause the council to stop being debt free and will bring a cost to revenue spending as these loans
are repaid with interest. There is an incredible assumption that a further borrowing of £1.2m will arise in 2001/12 though no details of what it (or indeed the £1.6m borrowed over this and last year) is for -except to say it is "Prudential
Borrowing" - so maybe it has something to do with the Gordon Brown system of economics.
Section 15 is about Treasury Management a topic that gets a bit arcane even for counterbalance, but what it really says to councillors is - you approved a framework and I'm in charge now, so I don't need to report any details (We
mentioned secrecy and control-freakery earlier). It does suggest the main risks that can be seen are:
- unexpected movement in cash flow (not having enough to pay the bills);
- difference between the actual interest rate and rates used in the forecast. ( At the present time we'd be asking a lot of questions about the assumptions that have been used if were councillors); and
- the security of counterparties (lovely term that - it means whether the people we have invested with or lent money to will be able to pay us back. No mention Iceland though).
Then come the conclusions
FBC started the year with what it calls "the minimum level of balances and some exceedingly challenging savings targets to achieve" (so as not to need to raid the reserves again). It goes on to say that financial pressures outside the
Councils control (and we might want to argue a bit with that statement) are beyond what could have been foreseen, and that all councils are facing the same situation (we're surprised here the report doesn't adopt the Government mantra
and say its a global problem).
It goes on to say that Appendix D lists the budget exceptions, but even with these implemented; the General Reserve will fall below the recommended level.
THIS IS VERY BIG RED PANIC BUTTON THAT IS BEING PRESSED.
To make sure you understand this, on Appendix E where, instead of the minimum balance on the General Reserve being £500,000 or so, it is projected to be just £269,000 in March, and next to that there is a George Bush style reminder for you. It
says ALERT in bold red type.
This is why the headline emergency measures listed at the start of this counterbalance article are being implemented.
Appendix D has the spending detail. We've already highlighted some, but a few of the others are worth noting.
Puzzlingly the "Additional Forecast Changes" include instances where things that were going to be charged to capital (some salaries) have been brought back onto revenue spending. This absorbs £22k which would otherwise have been available
for day to day spending.
They have also stopped putting money aside for election costs (which happen every four years, so you normally save up a bit each year).
The report also predicts a £100k a year increase in fuel costs (but the petrol we get is now back below £1 so we wonder what's going on here).
There is a £362k provision for extra bus fare costs. As we said earlier, counterbalance will be surprised if Fylde would have had to spend anything like that much extra to meet EXTRA buss pass costs, and we're on the track of that story in
a future article.
There's also an extra sum hidden toward the bottom of the list that sets up a "base budget" for Standards Committee investigations. This must be something the Commissar forgot to budget for in March, and is having to slip it in as an extra
here. It's only £10,000, but once it is established you can watch that grow each year as the £10k fails to appear in this list next year (because it won't be an exception), and more spending gets added in as small amounts under the 'Minor Budget
Adjustments' heading which this year total £19k
There's also a loss of income from Games sites of £40,000. These are the bowls and tennis etc, and this story echoes the spiral of decline the Commissar has applied most noticeably to the baths, but is now doing to the Town Centres and will
complete with the whole council if he isn't removed first. There used to be a seasonal games attendant employed at each of these sites, nominally to take the money for admissions and hiring out of equipment such as bowls and racquets. But they
also were an on-site presence that deterred damage to the Council's equipment and buildings keeping repair costs low, and they could moderate the behaviour of potential vandals. But because in some instances, the games income was less than the
cost of the attendant over the season, the Commissar cut this service out completely.
As a result he made an apparent saving in cost that was deployed elsewhere. But what then happened was the beginning of a reduction in the games income that has continued year on year ever since.
With no-one on site for the Council, there was no proper collection of the money, so it started to diminish. We could have told him this would happen. You only have to look at the experience of some bowling greens that were piloted on this
model a few years before he came into power. We have no doubt his answer to this problem will be to increase charges even higher to 'make up for' the lost income. When he does this, even less people will use the facilities, and no one will be
there to do cleaning and running repairs, so even less people will use them and the games sites, like the swimming baths, will close, losing yet another public service that will be blamed on the fact that not enough people are using them when the
REAL cause is inexperienced, incompetent decisions at what in a company would be Board level.
As if all this trouble wasn't enough, the Medium Term Financial Strategy Update report then goes on to look at the implications of what might happen as a result of the changes. We won't go through all of them, but the following are worth noting.
They're going to cut back on investment that should be used to keep the Council's computer systems up to date.
Appendix G heralds the need for a new "People Strategy" (don't laugh) is destined to replace their "Human Resource" strategy which - if you remember - grew to be the cash consuming overhead monster it is now. That's forgetting when
it was one Personnel Officer and a part time secretary. Well this is going to need "financial support in the medium term" to develop new ways of working to "tackle future workforce challenges" and "develop an organisational
climate that encourages innovation"
It goes on to talk about the need to be "taking action to attract, develop and retain the leaders of today and tomorrow" (sic)
Pretty soon there are going to be 3 million people desperate to find work, and Fylde wants to spend our taxes attracting the leaders of tomorrow. We can only hope they will be better than the leaders of today. If there was ever a load of bunkum
this is it. CHUCK IT IN THE BIN NOW COMMISSAR! What a waste of our money.
Appendix I is about "Asset Management" and shows that maintenance is about to drop to the minimum that is necessary for safety reasons. HOWEVER, buried in the middle of this report is the admission that they can't now go ahead with the Town
Hall scheme and it will probably "mean a delay in taking the strategy forward thereby requiring the retention of existing facilities in the short term which may result in additional short term costs".
Many will cheer at this development, until they work out the huge waste of money on plans that will - in our view- now never come to fruition. So at least the Minton tiles and the ornate covings, and the beautiful craftsman staircase in Town Hall
looks set to survive. counterbalance's friends in the Civic Society will be delighted.
There's also a veiled threat to the future of Lowther Pavilion which says the facility may have to close in the future because of repairs and updates needed. Quite how he can say this with all the garbage a page or two earlier about needing extra
money for a "People Strategy" beggars belief, but this is just one more instance of what is wrong at Fylde.
It concludes neatly with a paragraph saying that "in line with the decision taken at the last budget meeting the two pools will have closed by the end of March 2009. There is no budget identified to undertake any substantial works at either
pool other than mothballing. Once members have decided the future of swimming in the Fylde the two pool buildings can be considered for disposal/redevelopment."
There you have the real truth.
This is despite the following agenda item called "Swimming Provision" which says they are looking to see if the YMCA can come up with a suitably robust business plan to take ownership (yes really) of both pools.
We predict that will never happen.
Unless the Commissar goes first, St Annes pool won't re-open. W also predict Kirkham will close, and a plan will be announced to work with Carr Hill School to put a 'dual use' swimming pool facility of some sort there. That would cost FBC nothing,
and release the present site for housing.
The most recent smokescreen in the press about the pools opening again (and then not), and now again appearing on this agenda being "offered" to the YMCA is probably nothing more than an clumsy attempt at media manipulation.
It was probably thought a good idea to have an emotional headline issue in the press that both distracted attention from the Commissar's failure to be supported by his own colleagues in his bid to become the next Fylde MP, and to divert attention
from the admission of financial disaster and incompetence that is both his hallmark and the inescapable conclusion of this Medium Term Financial Strategy Update report.
But there is a small caveat we offer on this story. We alluded to it at the start, and it's whether we have the whole story here or not.
Certainly the information in the report is right as far as it goes. But we must remember it is an exception report. It looks at variances from the planned budget, not the budget as a whole, so there are things we can't see. We also think there
could be £300,000 of bus money allocated in this report that may not be needed at this scale, and it could yet ride to the rescue like the Seventh Cavalry at the Eleventh Hour.
And is if that mixed metaphor wasn't enough to upset our grammatically sensitive readers, we will now (badly) paraphrase Donald Rumsfeld's immortal words - "We know what we know, but not what we don't know." There are monies elsewhere that
we can't see here.
But in all of this, something has been forgotten.
The report outlines exceptional emergency powers and measures that it hopes will stop a financial crisis from turning into a disaster. They need to find £380,000 or more in a hurry.
But recently, as counterbalance knows, the people objecting to the Heeley Road Hostel have quietly showed several Councillors how to provide the homeless accommodation they say they want elsewhere, and save both revenue costs and capital of
up to £400,000 in the process, but as usual the Council's listening was done with deaf ears.
We expect to detail that sorry saga of deceit and incompetence for our readers shortly.
And with that we will end this long, but hugely important article that quite probably marks the beginning of the endgame of the present Commissar's rule.
17 November 2008