Newham Projects a Deficit of at Least £25 million.

There was worrying news at the Overview and Scrutiny Committee meeting, 20th July 2023, (from approx. 40 minutes in).

The members of the OSC were presented with a report that stated,

3.3. Whilst the outturn of the previous financial year is now known and confirmed, with the draft statement of accounts being presented to the Audit Committee at the end of June, there is less certainty on the budget position both in year and in the years ahead. Annex Two provides detailed information on the financial forecasts and pressures that the Council will be managing in 2023/24. It will be a difficult year to manage with inflation and the housing crisis threatening to cause major overspends on service budgets, but mitigations and spending controls have been introduced to contain the position and the Council will continue to find ways to address the residual overspend position. The forecast position as at Quarter One is for an overspend of £8.2m on the General Fund. 

3.4. Annex Three looks ahead and considers the uncertainty in which the Council has to plan for the future. Continuing high levels of inflation and a lack of clarity on government funding make this planning difficult, but scenario modelling certainly indicates a significant funding gap which will need to be closed, alongside setting a budget and medium term financial strategy which supports the corporate delivery plan and manifesto commitments. A funding gap of at least £25m is indicated, and it could be substantially more. Developing the capital strategy and the Green budget will also continue to be central to the new medium term financial strategy.

“A funding gap of £25m is indicated”!

Listening to the discussion on the report, it is clear that no-one actually knows what the overspend will be; figures like £100m were discussed by officers. Apparently, cuts of £25m are a “best case scenario”. According to an officer, “a worst-case scenario is substantially higher” (50.37 mins), and “the estimate of an overspend of £25m should not be relied upon at this point”. It appears, the shortfall could be £30m, £40m, or £50m. They don’t know.

Members of the committee were reasonably concerned that there will have to be savings and they wanted to know where they will be made. The Chair, Cllr McAlmont, (49 mins) intervened, “£25m is a lot of money, but based on the report, it could be a lot worse. And if it’s a lot worse, then selling the family silver is not the only option…” He then asked Cllr Ali specifically, “at what point will you revisit the manifesto (spending) promises, to address the funding gap?”

Frankly it was difficult to make sense of Cllr Ali’s reply (50 mins). Cllr McAlmont tried again, “Are you willing to go back to the mayor and tell her, these are our spending commitments, but we don’t have the money for them”? Ali confirmed that the manifesto commitments would have to be “reviewed”, if there is no money for them. But it seems there is no urgency and this can be done at another time.

Cllr Terry Paul, a former cabinet member for finance quizzed Cllr Ali and officers about the contribution of decanting Victoria St (Focus E15/Brimstone House) to the debt. Specifically, about the costs incurred when the mayor made unilateral promises (albeit promises that she later reneged on) without reference to her finance or housing staff or cabinet colleagues. “What was the loss of income?” he asked of removing 216 housing units from the available housing stock. It seems that not all of the properties have been decanted, currently 103 units still have tenants. 

It was reported that mayor’s unilateral decision has meant a financial loss to the council of £0.6m (three times what would normally be expected), and this continues to grow. Overspend on temporary accommodation is one of the major areas where Newham is struggling. Currently there is an overspend of some £7.4m.

The interchange between Councillors Paul and Ali are instructive. Paul took a forensic approach to the figures and sought to find out what the costs were, why they were incurred and what was going to be done about it. Cllr Ali’s response could reasonably be paraphrased as, “Err…umm, err”, “you can’t look at just one thing” and “we’ll work it out later”. 

It appears, according to Cllr Ali, that “there are plans being worked on to rebuild or refurbish the property”, which is fine, but it is becoming a financial liability and Newham has to find 216 more properties just to maintain its current level of housing stock. And the money (i.e., debt) required to rebuild or refurbish.

It seems fair to say that the members of the committee were not reassured.

Open Newham has been critical of Mayor Fiaz for her willingness to spend and her unwillingness to save. The choices of the last four years are now coming back to haunt her. Or rather, to haunt the Newham staff who will be made redundant and the residents who will lose services. It does appear that her commitment to spending on her pet projects is greater than her commitment to balancing the finances of the council. We will have to see how many Newham staff are sacked to enable her to run her pet projects.

A question that some elected members might wish to consider is this. Given that Mayor Fiaz inherited cash reserves in excess of £50m and that even after Covid the council still had a balanced budget, why is it now that the finance officers are projecting a massive loss? What has changed?

And whilst the obvious answer might be that Cllr Ali has replaced Cllr Paul on the cabinet, we suspect that the malaise is much deeper. 

The innocuous words “manifesto commitments” keep popping up. It is known that some councillors are concerned that the mayor’s pet projects (Newham Sparks for instance) are swallowing cash. We understand that Populo, the mayor’s pet housing programme, is overspent by £35m. 

Not to be left out, Cllr  Keeling asked, “why are we spending three times more on the mayor’s office than we are on tackling the climate emergency?”. Good question! To which the answer was “Well I think that the, the, err simple answer there is the mayor’s office is important obviously to coordinate what’s going on…we had staffing difficulties…I think it's because of the temporary staff…”. Sometimes he should just let an officer answer.

It seems that £300k is the cost of having a director and an office for responding to the climate emergency. We are not sure what policy changes or savings this director has made, but it does give us an idea of a way of saving £300k from the council budget fairly quickly! 

And almost £1 million to run the mayor’s office. You’ve got to be kidding.

Here’s some free advice. Cut the Climate Action directorate and half the mayor’s office. There is a saving of over £500k pa.