Letter: Is Guildford Really Facing a Bankrupty Crisis?

Published on: 18 Feb, 2024
Updated on: 17 Feb, 2024

From: John Murray

According to a report in the Guildford Dragon of February 12 Triple Whammy for Guildford Tenants as Motion to Reduce Rent Hike Fails the spectre of Section 114, a procedure that broadly equates to bankruptcy and results in the control of a local authority being taken over by government-appointed commissioners instead of elected councillors, was raised at the budget meeting to support an increase in housing charges.

But is Guildford really on the brink? Looking at the council’s published information on its financial position it is very hard to say.

The current problems seem to go back to the budget passed in February of 2023 which forecast a deficit in the revenue account of £3.1 million in the year ended March 31 2024 and an aggregate deficit of £18.3 million over the coming four-year council term.

This was on top of an aggregate £46.9 million deficit run-up in the preceding four years. Moreover, the budget included substantial projected borrowing to fund an ambitious building programme, as though at some £300 million the council was not sufficiently indebted and it did not already have enough money tied up in property.

Why it was even proposed, let alone adopted, is anybody’s guess.

At March 31 2023 GBC was shown as having £32.2 million in General Fund reserves. But was this really a reserve?

The council uses terms such as ‘ringfenced’ and ‘earmarked’ reserves (and sometimes applies both to the same number) which suggests that the money is already committed to be spent on something and not a reserve in the usual sense at all.

Whatever the true position may be, in July last year panic set in when certain accounting errors were identified reducing the reserve number from £32.2 million to £15.2 million, insufficient to cover the projected deficit.

Talk began of S 114 being invoked unless drastic measures were taken to cut costs and borrowing. So that seemed clear enough.

Then came the 2024 budget. This included a schedule (appendix 5 to agenda item 11) unsupported by specific comment, which showed the 2023 General Reserve number restated as £28.9 million (£17.6 million of it ‘earmarked’) when just a few months earlier it had been reduced to some £15million.

And this reserve is shown as increasing to £35.9 million by March 31 2024. We shall see.

Calculating the reserve numbers for GBC is not simply a question of taking last year’s number and adding or subtracting a surplus or deficit. The number is also modified by something called ‘adjustment between accounting and funding under regulation’.

Whatever this number will be it cannot be easy to predict and what role it plays in the revised surplus is not clear from the said schedule.

Reducing borrowing was another key feature of the July panic document. There was talk of cutting capital spending and even selling existing property to reduce debt. But capital spending in the budget for the coming 23/24 year mandates a further borrowing of £153million. It is not clear why this was allowed to stand.

So how close to the precipice is Guildford? Who can say? This uncertainty makes the adoption of the latest budget very hard to comprehend.

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