GBC ‘Will No Longer Be Able to Afford the Current Range of Services’ Provided

Published on: 26 Jul, 2023
Updated on: 28 Jul, 2023

By Chris Caulfield local democracy reporter

and Martin Giles

Services will be cut back to the bone as Guildford Borough Council looks to carve out more than £18 million from its medium-term projected budget deficit to avoid effective bankruptcy.

The level of cuts was agreed at yesterday’s, July 25, full council meeting to address the authority’s £300 million debt.

Cllr Richard Lucas, speaking in last night’s debate.

Cllr Richard Lucas (Lib Dem, Ash Vale), lead member for finance and property said , the borough would have to make “structural changes” and dispose of some assets if it wanted to get its house in order ahead of a revised November budget.

He told the meeting: “Our officers are trying to deal with the reality of the situation.

“We won’t deal with this by pretending there is no problem.

“This is going to result in difficult decisions for the operational spending and capital disposal.

“This is not Section 114. We are taking action to avoid this.

“However, if we do nothing Section 114 comes into play which would pretty much make this council useless.”

See General Fund Budget Update Report here

A Section 114 notice is when a council declares itself effectively bankrupt and can no longer run a balanced budget.

It stops all but essential spending to ensure a council can continue to provide its legally obligated services to its most vulnerable residents.

The approved measures, however, are not too dissimilar after the council said that new spending would need the explicit agreement of its chief finance officer (CFO) until further notice, and that breaches would be “considered a disciplinary matter”.

Recruitment and contract renewals have to be signed off by the corporate management board and the council’s investment programme has been suspended immediately, save for existing contracts that need to be fulfilled.

This applies to all council services, including statutory ones. The only exemptions are the council-owned housing company North Downs Housing Ltd and the Housing Revenue Account.

These controls will remain until at least the end of the 2023-24 financial year.

Conservative group leader Philip Brooker

Cllr Philip Brooker (Con, Worplesdon) said: “We as a council must take immediate action to solve this” but called on it to be done in a way that minimises the impact on services.

Cllr Bob Hughes

Cllr Bob Hughes (Con, Shere) said: “it was doubtless services would go” and that people “would get hurt”.

The authority will undergo radical change as it “reconfigures services so they can be managed within the financial resources available to the council”.

He concluded the report should be “noted” rather than “endorsed”, as described in the motion, because details of the remedial plan were not yet known and everyone should know “who knew what, and when”.

Cllr Joss Bigmore

Cllr Joss Bigmore (Merrow) leader of the Residents for Guildford Villages, also found it impossible to endorse the report and offered the only criticism of its content.

He felt it painted too pessimistic a picture. While praising its openness, he said: “I find it very odd that it talks about debt without any mention of assets. £300 million of debt sounds a huge number but when the council is sitting on £1.1 billion of assets it becomes less big and less scary, making the report unbalanced.

“I find odd the conflation of the HRA (housing revenue account) and the general fund. We are talking about general fund issues yet we are assessing debt that is assigned to the HRA which is completely separate.” He also questioned the figures relating to the Ash Road bridge project.

Peter Vickers, interim chief finance officer

But Peter Vickers the interim CFO countered the criticism. He agreed that the impact was not all on the general fund. “There is housing debt within that and there are housing reserves. Those elements absolutely have nothing to do with the general fund. They aren’t ring-fenced monies that belong to and are tied to the HRA.

“So it’s appropriate to understand that nuance that the HRA assets are not in scope. We’re absolutely not about to sell any housing asset that we have.”

“Yes, this authority has got a significant asset base, however, as a local authority, there is absolutely no link whatsoever, on the balance sheet, between the assets and the debt.

“This report tells us we don’t have four years to find it [the four-year deficit shortfall] at the moment. We’ve literally got the next six months, plus a bit more, depending on how good a plan we come up with, to resolve this issue because the reserves are not there.”

Every service and budget, the bleak report reads, will undergo a review to establish minimum viable service levels and options for savings and income growth.

The report  states: “The council will no longer be able to afford to deliver the current range of services or maintain some services at existing levels and significant rationalisation of the current service offer will be required to live within a reduced financial envelope.”

Services that protect the most vulnerable residents would be prioritised for protection with the remaining services transformed “to ensure they are as efficient and cost-effective as possible”.

The authority announced it had to impose a series of strict cuts to its budgets to cover an £18 million deficit by the end of the financial year if it was to avoid effectively declaring itself bankrupt this autumn.

The deficit, council papers said, equates to 145 per cent of its net budget and “will fundamentally change the services the council delivers and will require political will and a step change in activity to reconfigure services accordingly”.

The motion to endorse the report was passed by 27 votes to no votes against with 13 abstentions (figures to be confirmed). The voting was largely on party lines: the Lib Dems, Labour and GGG councillors voting in favour and the Conservatives and R4GV abstaining.

See webcast of council meeting here.

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