Is the Mayor Being Held to Account?
In what must be a welcome development, our sources tell us that the Budget Working Commission has written to the mayor sharing their “concern regarding the Council’s financial sustainability and resilience”.
The letter is unpublished. So far, see a copy below.
The members are to be commended for their diligence and their willingness to confront the mayor on a difficult problem that needs a solution. The commission members clearly have worries, both that the council is overspending its budget AND that it is failing to replenish the reserves as had been agreed prior.
We await a response from the mayor.
We are also awaiting a response from councillors and the cabinet. The cat is now truly out of the bag. There is a looming financial disaster awaiting Newham Council, will our councillors take the mayor to task and demand “better budget management and additional permanent savings”? The commission made it clear, that they were looking for permanent savings to the budget, not one-off savings to provide a temporary balance.
Now that we have an opposition, we’re interested to see what the response of the Green councillors will be. This should be political red-meat, (or whatever the appropriate vegetarian analogy is) to them. However, it is not beyond the realms of possibility that they will choose to concentrate on motions regarding personal pronouns.
We note the financial difficulties of authorities like Croydon and Northampton. Is Newham heading in the same direction?
Text of Email from Budget Working Commission to the Mayor and Cabinet
1 December 2022
Sent via email
Dear Mayor Fiaz and Cabinet Members,
Re: London Borough of Newham General Fund Reserves Policy
We are taking the unprecedented step of writing to you before the conclusion of the budget scrutiny process to share our concern regarding the Council’s financial sustainability and resilience. We have chosen to write to you at this juncture to provide time for you to reflect on our views and, if you choose, change course.
On 27 October 2022, the Cabinet Member for Finance reported to the Cabinet that the Council is to use the budgeted £3 million contribution to its General Fund Reserve to meet the nationally negotiated pay award in 2022/23. This is in the context of a forecast revenue overspend of £7.8 million at quarter two of 2022/23, which exceeds the Council’s General Fund Reserve of £7.1 million. Further, that forecast overspend is arrived at only after in-year forecast net uses of earmarked reserves of £15.9 million.
We acknowledge the position the Council is in: obliged to meet a level of pay award which was unforeseen when the 2022/23 budget was agreed, while also facing significant extrinsic pressures.
The Overall Financial Position 2022/23 (Quarter 2) report to Cabinet on 27 October highlights that medium-term financial stability requires a combination of significant real terms increases to funding, particularly in relation to the housing pressures, better budget management and additional permanent savings (as opposed to one-off mitigations).
It is our position that developing a good level of reserves is prudent and necessary for the long-term wellbeing and stability of Newham – it would be so in any context, but is particularly so when faced with economic recession and uncertainty and significant demand and cost pressures.
The executive should identify and action opportunities to make the planned £3 million contribution in 2022/23, 2023/24 and further contributions in the medium term in order to develop and then maintain, as recommended by the Chartered Institute of Public Finance and Accountancy, a General Fund Reserve of at least five per cent of the Council’s net budget requirement.
Please be advised that while we are writing to you in confidence today, we may publish or refer to this letter and any response as part of the Budget Working Commission’s report.
Yours sincerely,
Budget Working Commission
CC: Colin Ansell, Interim Chief Executive, and Conrad Hall, Corporate Director of Finance and Resources