Woking Borough Council Finances - What's The Future?

On Wednesday 7 June 2023, the Section 151 Officer and Interim Director of Finance issued Woking Borough Council with a Section 114 Notice in response to the unprecedented financial challenges facing the authority.

In previous podcasts Lib Dem Councillors Peter Graves and Dale Roberts have discussed the prospects of WBC being issued with a Section 114 notice.  Now that such a notice has been formally issued how is it going to affect the residents of Woking?  Whilst much will depend upon the findings of the accountants Councillor Roberts identifies some of the ideas being explored which will result in Woking Council being a successful local authority and less of a failing bank.  Service redesign, good value for money, resident engagement, openness and transparency of decision making are all part of the mix.

Transcript

WBC Finances What's The Future? Draft 02

Peter Graves 0:11

Hello and welcome to the Woking Examiner Podcast. In this series of podcasts, we interview the counselors, portfolio holders and supporters who are assisting the Lib Dem run council to implement Operation Recovery as we seek to address the many years of mismanagement committed by previous administrations. I am Peter Graves, Councillor for Pyrford ward and over the course of the series, the people I interview disclose the realities that lie behind the decisions they're making as they continue to unravel the complexities of the financial dissonance we inherited in May, 2022. Today I am with Dale Roberts Finance portfolio holder since May of last year, having been elected as Councillor for St. John's in May of 2021. It's been Dale's role in the last few months to unravel the council finances by engaging with the officers and with other external agencies, and then define an affordable plan for moving us onto a positive and sustainable footing. It's been his role to set a realistic and affordable medium term financial strategy. Dale in recent weeks has been very heavily involved in how we move forward with the issue of Section 114 So Dale, good to see you again and, uh, how, how are you keeping

Dale Roberts 1:40

Very well, Peter. Great to see you too.

Peter Graves 1:42

It's a while since we last spoke, and I think we've put the last podcast together back in March, and clearly there's a lot of water under the bridge since then. At the time we discussed the arrival of DLUHC and more importantly, we discussed the possibility of a Section 114. And the Section 114 has come to pass, as it were. And I think this is really the main, focus of our discussion tonight, isn't it Dale?

Dale Roberts 2:13

I think that's right, Peter. a lot's happened over the last, few weeks if you'll allow me to use an already overused literary reference, there are a couple of characters in, in a Hemingway story,"The Sun Also Rises", in a cafe in Pamplona and, and the conversation goes like this. How did you go bankrupt? Bill asked, and Mike replies two ways gradually and then suddenly, and it feels like that's happened. We've talked, I think, as, as a group about the financial challenges in Woking for some time, and then all this has happened over the last few weeks a long awaited report from the government appointed review team was published 25th of May, along with details of the government intervention. That's for a minimum of a year. the Government appointed review team were then appointed as commissioners. Jim Taylor, Carol Culley and Mervin Greer. That was rapidly followed by the Section 114 issued on the 7th of June by the council's interim director of finance. And then there was a response outlining a set of recommendations from the chief executive, which was debated and accepted in an extraordinary, council meeting on the 20th of June. yeah, a lot really has happened, hasn't it?

Peter Graves 3:33

So should we start by discussing the implications if you like of the Section 114 and with reference, if we could to how that impacts on Woking as a town and Woking as a borough and what, how that might play out, as we go forward.

Dale Roberts 3:51

Absolutely. I think, the Section 114 has a sort of very specific purpose and so all the detail that we need, I think to answer those questions are not all in the Section 114 but what it does do is. It confirms what we've been saying for some time that borrowing was unaffordable, inadequate steps have been taken to ensuring that borrowing could be repaid. There was a, there was, a high probability of irre recoverable loans. It's a very serious situation, and it also confirmed that it came about as a result of this 50 year business model with very long payback periods, taking revenue loans, the minimum revenue provision, MRP, and that the issues date back to at least 2018. Actually, the, the Section 114 notes that understatement of MRP might date back to as far as 2007, 2008, or albeit smaller amounts. it's confirmed that there hasn't really been a balanced budget for many years. indeed the council couldn't afford to provide services at all and would still be delivering a net budget shortfall. So it's exposed this sort of extraordinary situation. and then it's required us to take some immediate action. it's really a process, or at least part of a process where requires us to, it requires the head of paid services. Woking Borough Council, CEO to respond, put together a plan, and then for council to meet within 21 days to consider that plan, and agree it, which of course we've done.

Peter Graves 5:30

Okay, Dale, just for the benefit of the residents and our listeners, I think it is worth going back over some of the numbers because we've heard an awful lot of numbers over the last six months to a year. and, I think it's worth reminding the listeners where we stand now and if maybe some of these numbers have changed because we've done an awful lot of work. And if for the, if we've actually discovered that, things aren't as bad. Optimistically than we thought they were. but what can you give our listener, today in the way of an update on some of those figures?

Dale Roberts 6:01

I think. I think we have a new number, Peter, and that's 1.2 billion. That's the deficit. And so that's the balance in our, if you will, our current account. the council's, general fund, which is not the same as our debt, our borrowing, and we talked about this number, didn't we 2.4 billion, which is our committed borrowing. and that stands today at about 1.9 billion. We're paying. just to give you an idea, to give this some scale, we're paying in interest 62 million pounds a year. that's what our borrowing is costing as an interest. we collect, 11 million in council tax.

Peter Graves 6:44

It's extraordinary.

Dale Roberts 6:45

it's, and we could add to that perhaps, government grants and what we retain from non-domestic rates and that would make it more like, 14 million, we get commercial income on top of that, but it gives you an idea of the scale. 61 million pounds in interest, by the way, is 170,000 pounds every single day. so these numbers are staggering aren't they.

Peter Graves 7:10

They are. Yeah, I and I, but I do think it's worth reminding, the listeners of those numbers, just to put it into context one thing, and to show them where we are. That's really interesting, Dale. Thank you. the, of course, as a resident myself, the question that comes to mind is what are the implications as far as council tax and council services are concerned? is there, any way that we can reassure people on those two issues?

Dale Roberts 7:38

I think the first thing to say is that right now, in our medium term financial plan, the assumption is council tax next year will rise 3%. So in fact, in real terms, the council will have less income. It doesn't mean that it won't change between now and then, but there's no plan to, raise council tax. nor by the way, Would it make a significant difference? The scale of that deficit is so large that, a rising Council tax wouldn't really address it. And so we're thinking about this and to answer your second question, Peter, we're thinking about this as two problems, right? So the first problem is, We have a budget gap, which we talked about right back in February. it's, it was 9.5 million then, and it's about 11 million as we speak. So we've got a budget gap, which is about living within our means. So that's the first problem. income's gone down, costs have gone up. And so we've got this, budget gap to deal with now that will impact. council services. To answer your second question, now, we, as a responsible Council, we will, we absolutely should do everything we can to live within our means, right? So to address that budget gap, that's work that's being done as we speak. Yeah. We need to. Demonstrate that we're, a responsible council. We need to frankly rebuild, trust with government that we can do all the right things. We can live prudently and we can act responsibly so that we can begin to have the conversation about the second problem, which is simply beyond our reach, isn't it? 1.2 billion is, an enormous problem to solve, given our core spending power is 14 million.

Peter Graves 9:31

so really we are obliged to provide certain services. We have to act as a responsible Council, but we still have to address. that budget gap, which you've so eloquently described. could we move on to, to talk about the solutions that we are, that we're actually implementing? and I know that you've been right at the center of a lot of this Dale when it comes to moving forward with. with Grant Thornton, for example. so could you give us some more detail behind that and how we're moving forward with Grant Thornton?

Dale Roberts 10:07

I think you would, you'd expect, wouldn't you? And, residents would expect that as a, as an executive, as a leadership team, we'd be very focused on fixing the solution and that's absolutely where we spend our time. residents understandably are angry and frustrated, frankly, how this happened, these enormous amounts, they're inconceivable. How on earth did th this all happen? So we've engaged Grant Thorn on um, a value for money review. and so we've given them, some key lines of inquiry. They'll be looking at the investment strategy, effectiveness of scrutiny, the implementation of strategy, business cases, structures that supported the council and companies, joint ventures, planning assumptions, all those monitoring, reporting, all of those things that might have, been behind how this occurred. And we know a lot already. We've had this assurance report from government inspectors that talks about capacity and capability, that wasn't put in place to manage the scale that the council had grown to the projects that it was. working on The government, the assurance report talks about process, governance, controls, record keeping poor management information. so we, we know a lot already that suggests that the ambitions of the council historically haven't really been matched by the capacity and capability that were put in place to, to manage that, those ambitious projects, but we still want to know, more. And as a leadership team, we'll focus on the solution and then we, will work with Grant Thorton of the, of the coming months who are reviewing, conduct a review in terms of why this has happened.

Peter Graves 12:00

Thank you. so really I suppose that leads on very nicely segues us into, one of the main questions we've gotten is how are we gonna fix things? what are the long term visions? and, what are we doing as a Lib Dem group to help, move us forward onto a more positive footing.

Dale Roberts 12:18

I suppose that is the$64,000 question, in fact, more than$64,000, by some way, you, the, my take on this, Peter, is we, we want to be a successful Borough Council, not a failing bank and what that means is we want to be focused on doing the things the council should do. providing, decent housing stock, emptying people's bins, making sure planning applications get processed efficiently, making sure, that we, support the homeless. all of those things. So we will, over time we'll be a smaller council that will do a focus number of things, really well. That's the, that's the vision. it would be my judgment that we weren't always doing the things we should have been doing well. for example, the percentage of non decent council homes has risen over the years and that, that, in my view at least, is that the council's been distracted by grand schemes and not focusing on what residents really need. So long term, let's get back to what we should have been doing as a council anyway, in terms of. Getting there. I think I've already said this in terms of getting to that point, there are broadly two issues. Fix the business as usual budget cap, that's 11 million pounds, and then deal with the deficit. The deficit is so big that will require conversations with government. It'll require significant government support, but if we want to have productive, constructive, and they have so far, being constructive and positive. When I continue to have positive and constructive discussions with government about that deficit, let's show that we're responsible council build up trust. And so the, the Section 114 led to the CEO statement that we talked about earlier. That made some recommendations to council that included bridging that budget gap. Keeping the expenditure controls in place, that, that are associated with Section 114. committed spending only, revised budgets which we'll prepare over the summer, early savings in at the end of this year a full year's, set of savings next year, develop a financial recovery plan. actions to bring, I mentioned the housing actions, to bring the housing revenue account back into balance. Put together an asset disposal strategy, but alongside, a commercial strategy. So the council is maintaining some level of commercial income, appropriate level of commercial income, and then this approach for government support. So that's what actually, that's what councilors have agreed to. The broad plan, the detail of it, 11 million pounds. savings will be in the medium term financial plan, which we're currently working through at the moment

Peter Graves 15:11

Mm okay, this may be going into too much specific, too much detail for the, for this conversation, but I'm often asked by residents in this part of Woking, what is happening? For example, with Sheerwater, which was started as a regeneration program. but I sense from the meetings that I've sat in, that may change, it may be paused, there may be a reassessment of what we can actually offer there. is that what you read in that as well? on the Sheerwater plan.

Dale Roberts 15:41

in terms of the major, council and companies, Victoria Square and Sheerwater, oh, Thamesway and therefore, the, the Shearwater project, I think their. Sheerwater has come to a natural breakpoint. there was always a plan to have a sort of, a, a review in the, Sheerwater project as it got to, this phase. And so that, that's where we are at the moment. So we are reviewing how we can best complete Sheerwater without continuing to borrow these large sums of money. And that review is underway. It will be under, it will take place over the, summer and autumn. We'll have something later in the year to report back. and, if you like, that's what, that same level of scrutiny is taking place with Victoria Place too. we, let's scrutinize those business plans. Let's look at what we can do with Victoria Place. without necessarily continuing those extraordinary levels of borrowing and let's put a plan in place so they're under review Peter.

Peter Graves 16:44

I was pleased to see today, the launch of the consultation and I hope that, will help promote the, transparency that we as a group are hoping to, impose on the council so that people can see and have a, will feel that they are able to input the, to, the decisions that we make. have you had a chance to have a look at the, the survey, and.

Dale Roberts 17:05

I have, and I agree. it's an important part of the process. I hope, Listeners to this podcast would agree that we've been unflinching in, our assessment of the financial situation, the impact. and we've been very open, and we've been as transparent as we possibly can be. you're absolutely right. This, resident engagement's an important part of what we're doing. And so at the moment we can only talk in broad terms about what we might do in terms of savings. So for example, in the. In the Place Directorate. we're looking at service redesign, ensuring any commercial activities, are self-funding. If we think about the Communities Directorate we're looking at. ensuring discretion, any discretionary services, are self-funding we'll have to reduce the leisure subsidy in some way, or grants will be reviewed. And then for Corporate Resources, there'll be a customer service redesign. We'll review discounts to, non-domestic rates. There'll be reductions to cost in running the civic offices. And there'll be a reduction in some discretionary services. So I'm conscious that they're very broad. It's a very broad plan. And so it should be because we need, as you pointed out, Peter, resident engagement

Peter Graves 18:22

Mm.

Dale Roberts 18:23

beyond that consultation with people that use those services beyond that statutory consultation with staff where they're, with council staff where those jobs might be impacted. Whilst we need to be transparent, we need to be, very open. We do need to do this in a, in a way that's fair to all the stakeholders, of the council, and then the detail of that. So once we've done all of that'll be subject to overview and scrutiny. One, one of those committees actually ran yesterday evening, executive approval. And then finally full counsel. We're likely to do this in two passes, one in September. I mentioned that we're looking for early savings and then a second pass as part of the usual budget timetable for February, 2024. So there's a lot of opportunity for stakeholders, for council, for executive scrutiny to, to get involved in this process so that everybody has an input to it.

Peter Graves 19:21

So looking at, looking again at how we fix things, I, is there a way in which we can actually deliver, the same services, the same outcomes, and, do so more efficiently? are there, initiatives that we can take that perhaps other councils have taken in the past, or which we are looking at the moment?

Dale Roberts 19:41

That's a great question, Peter. In fact, I think it's exactly the right question and I think in, in, in looking at services, what we've been very focused on, and you'll know this is outcomes. What are the outcomes we've been delivering rather than just looking at straight cost, just looking at it, purely from a financial perspective. And so can we've looked at ways can we deliver same, similar, even better outcomes, in different ways. And so that, that might mean invest to save. Transforming the service. many local authorities, have transformed over the last five to 10 years. Woking hasn't done that. It's been relying on other people's borrowed money. And so what services can we transform? What partners can we work with, that might help us with these services, deliver them, with us, for us, and deliver better outcomes? Digital transformation. What services can we deliver in a way that, residents can access them all the time? and so we'll look at all those things, transformation, invest to save, alternative delivery models, working with partners to try and deliver, outcomes rather than just think about it in straight financial terms.

Peter Graves 20:55

I know from my portfolio that there are residents who are prepared to volunteer their time to, to help us, for example, with putting together at the moment our climate change strategy or whatever it might be. And, it's actually been heartening for me to speak to some of those residents and hear them say, look, we are prepared to give up our time and we'll help the council with the delivering some of these things. I think we could look at, we could look at that as a route forward perhaps for some other services that we provide.

Dale Roberts 21:24

Yeah, ab. Ab, absolutely agree

Peter Graves 21:28

Thank you, Dale, for such an insightful interview. I'm sure residents will be grateful for the clear way in which you've described not just the challenges we face, but also the transparency of the actions we've taken and the progress we've made in moving the council towards a sustainable financial footing. I think it's important to remember that DLUC themselves complemented the new leadership team, both political and officer on how we're working together to transform us into a smaller, leaner council, capable of providing appropriate services and good value for money for its residents. It was really good to hear about the appointment of Grant Thornton in conducting the Good Value for Money review. I was also delighted to hear about the improved governance we've introduced, the new approaches to managing risk that we have, and about the constructive discussions we've had with the government about the scale of the challenges we face, the 2. 4 billion pounds worth of debt. And the associated annual interest payments of 61m. I'm sure that residents can see that on a local authority income of just 14m, the magnitude of the task is enormous. As ever, I'm impressed by the colossal efforts of you and your officers as we seek to implement a balanced budget. And I hope that we can move forward positively into the future. Thank you, Dale, and look forward to seeing you again soon.