GBC’s Lead Finance Councillor Answers on the Borough’s Financial Challenge

Published on: 29 Jul, 2023
Updated on: 29 Jul, 2023

Cllr Richard Lucas perusing The Dragon’s questions

By Martin Giles

The financial situation at Guildford Borough Council has become a major issue. There remains a risk that if the medium-term deficit cannot be tackled a section 114 notice would need to be issued, effectively declaring the council bankrupt, and the power to make major decisions taken away from councillors.

The underlying issues are complicated and complex but it is important for us all to understand what is at stake, the measures the council has decided are necessary and who will be held accountable.

The Guildford Dragon NEWS submitted written questions to the lead councillor for Finance Richard Lucas (Lib Dem, Ash Vale). Some of the questions were suggested by Dragon readers. Here are the questions and Cllr Lucas’ written responses…

There has been widespread support for the openness of the budget update report but also some criticism about its accuracy. Are the points on accuracy being addressed?

Thank you for acknowledging the major effort that we’ve made to be as open and transparent as possible. The criticism on accuracy was around some minor details which had already been corrected in the report. There was also a disagreement about the relevant debt figure that was to be used. In the council meeting it was clearly explained that we were referring to total debt as this report has multiple audiences.

What is the £300 million debt – how does it break down: what was it borrowed for, when was it borrowed, to whom is it owed; and what are the interest rates involved, are they fixed?

The £300 million debt is our total debt. It was borrowed for multiple projects on different terms and interest rates. Most notably major projects being Ash Road Bridge and Weyside Urban Village. The money has mostly been borrowed from central government in the form of the Public Loans Works Board.

For new borrowings, the current interest rate is approximately 5 per cent. The capital repayment for projects of this nature is 2 per cent. This gives a total repayment mortgage rate of 7 per cent for any new borrowing. The longer-term interest rates are fixed.

Against what is the debt secured?

The debt is not secured as we are one part of government borrowing from another. Borrowing from central government is normal practice among local authorities.

Can the council sell any assets to pay off the debt?

More than half of our assets sit in our Housing Revenue Account for social housing. These are ring-fenced and protected by law, so we cannot sell them. The remainder is made up of investment properties for income, properties used for operational service delivery and those for leisure and social use by the public. We’re evaluating these others to see what we can sell to pay down our debts.

What are the areas of discretionary spending that are being reviewed and most at risk? Will residents be consulted on where the cuts should be made (eg the Yvonne Arnaud Theatre, club and organisation grants, Guildford Museum, heritage assets and parks and gardens)?

We’re reviewing all our spending but will focus on keeping our statutory services going and those that affect our most vulnerable residents. The Executive will decide on the most suitable way of getting consensus on what will inevitably be very difficult decisions.

Many councillors are saying this is not the time for finger-pointing and blame games while, sometimes, at the same time, doing just that. Is this behaviour inevitable in a political environment and shouldn’t there be accountability?

Cllr Richard Lucas: “Some level of finger-pointing is inevitable…

Some level of finger-pointing is inevitable in a political environment, but we need to work together to solve this problem. The Executive has been very clear that there are serious financial issues. We’ve been open and transparent about these. We will continue to communicate regularly on what we are doing to fix the problem and the progress we’re making. At the end of the day, we will be accountable to Guildford Borough residents.

Have the individuals who made the accounting error been identified? Will they be
held accountable?

A combination of errors has led us to this point. It would be inappropriate for me to talk about specific officers. What is more important is identifying any systemic issues and what we are doing to fix them.

So will anyone be held accountable at any stage either at senior officer level or the political level? Shouldn’t someone be held responsible for what is obviously a serious error which probably gave a false sense of security about levels of available reserves which could have, in turn, affected decisions, perhaps making the current situation worse?

It would be inappropriate for me to talk about specific individuals.

Is the accounting error just caused by individual fallibility or was it just the systemic issues you mention? Obviously, the failure to have an audit conducted contributed.

In hindsight, some decisions made in the past could have been handled differently. They may have then turned out to be less of a risk. We embarked on a restructuring programme known as “Future Guildford” which changed our processes and took out cost.

In this case, cost-cutting included taking out skills and capacity in the finance function. At the same time, we changed our accounting system and, while all this was ongoing, Covid hit. This resulted in multiple urgent and ad-hoc accounting transactions to support local businesses. Mistakes were made.

We’ve reviewed the £10.2 million accounting error, corrected it, and understand how to avoid such an error in the future. Money came in from 16 different government grant schemes. We issued 8,000 grants to businesses that met the criteria and returned unused money to the government. This was all done correctly.

The way we allocated these grants in the accounts turned out to be wrong, but no money has gone missing. The audit process to catch such errors is running three years behind. The result is we are now only just uncovering these historic errors.

What would you say to a Guildford resident who says: “Look here I have dutifully paid my council tax over the years, and I expect the council to be run efficiently and maintain the levels of service. Now, because of council failures, I and other residents are going to suffer.”

We are going to continue to run essential council services and look to run them more efficiently. The level of services we offer has been squeezed by years of central government funding cuts, operational cost inflation, and more recently rapidly rising interest rates.

I’m sorry to say that some services we offer are going to get even further squeezed. We need to ensure our public services remain sustainable. Our job is to work hard to balance the budget and protect the services our residents need.

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