Newham’s Own Liz Truss and Kwasi Kwarteng

It takes some doing to collapse your economy overnight. Some politicians do this over a much longer period.

What we have discovered is that Newham Council is going broke.

OK, let’s be a bit more specific.

Newham has lost control of its spending. Currently, they are spending £17.6 in the 2022-23 financial year more than they get in as income.

It is unclear whether either the mayor or her financial cabinet member have explained the implications of the fact that they are going broke to councillors yet. We suspect not, or it may be that our elected leaders are sanguine about the prospect of running out of money. We provide a link here to the report from Cllr Ali to cabinet in October. It’s big on the problems but light on solutions.

We know the narrative that will be coming from Dockside. “It’s not our fault”. 

Happily, the Tories are still in power so they can be blamed. If that doesn’t work, there is the perennial favourite, “It’s all the fault of Robin Wales”, clearly leaving the Fiaz regime with reserves of £50m was not enough and it was only five years since he left office.

It seems that there are two parts.

Cabinet was told that some £7.8m would be taken from general reserves. An additional £9.8m was coming from ‘earmarked’ reserves.

Cllr Ali was not slow to praise his work. “The Council did a great job during the Covid period to protect the health and wellbeing of its residents. The government gave a commitment to fund the Councils costs. However, it is regrettable that the government did not honour its promise by compensating the Council for the costs it incurred. These have continually impacted on the Council’s overall financial position.”

Alternatively, he could have said, “we chose to spend at an excessive rate and now we are paying the price”. That is of course, the fault of the Tories.

And just in case you thought that he might have some responsibility for managing the council’s response, he reminds us that there is “a national economic crisis, with increasing cost of living, rising energy costs, higher inflation and increasing interest rates as well as the pay awards”. 

So clearly, it won’t be his fault if everything gets messed up.

We don’t know what the plans are but look forward to hearing them, at the moment the promise is to think “outside the box”. Hopefully, the products of such thinking will soon be made available to councillors and the public. As things stand, Ali has no plans to reduce the deficit.

The Areas of Overspend

The mayor has taken £5.6m from reserves to pay for temporary accommodation for homeless people. In addition, there is a commitment to decant all of the residents of Victoria St, who will now jump the queue ahead of the other 34,000 on the housing list. This looks like an additional burden that is not yet accounted for.

Temporary accommodation costs were the worst, but were only one of the areas of significant overspend.

Children’s and Young People's Services (£0.8 million), 

Adult Services (£1.4 million mainly on social care placements).

In the Public Realm there is a real problem with parking income. You would think with the draconian measures taken by Newham’s parking enforcers that this would be a cash-cow for the council. It appears not. Even though they are raking in millions, they are spending even more resulting in an overspend of some £4.8 million. Parking enforcement is a licence to print money, yet the ineptitude of this regime cannot even make this work.

It seems that the pay offer being made to Newham workers who are currently in dispute is also contingent on £3m of the £8m coming from reserves.

The funny thing about reserves is that they can only be spent once. Newham has decided that it will not put £3m into reserves for the second year because it doesn’t have the money, so the well from which they will have to draw is that much shallower next year.

In all, there is a deficit currently running at £17.6m, though Ali continually refers to only a £7.8m overspend coming from general reserves.

It is not at all obvious how that figure will be reduced nor what changes will be made to balance the books in 2023-24.

Cuts?

This leaves the elephant in the room; CUTS. Of course, no-one is talking about them. Think of it, a Labour authority cutting jobs in the public sector. There are two ways of saving money; cut expenditure (jobs and services) or ‘transformation’, changing what you do and how you do it. The budget paper says nothing about either of these.

There is some hope from the national government who have lifted the cap on council tax rises, but this will not plug a £17m gap.

We previously tracked the employment history of Mayor Fiaz. She seems to have had a habit of spending all the money and then jumping ship. Our concern is that this is what she plans to do in Newham, leaving a mess for someone else to clear up.

If this is correct, we won’t be seeing major cuts next year. Instead, we will see a continued raiding of reserves and the sale of assets to hide the mismanagement of the budget.

An Alternative Economic Strategy

Rumours are circulating that Deputy Mayor, James Asser is unimpressed with the performance of the mayor and her cabinet member for finance. It is known that the previous incumbent in the role, (and wannabe MP), Cllr Terry Paul has become increasingly critical of Ali’s performance and Fiaz’s oversight of the budget.

Word is leaking out from Dockside that Asser is seeking to develop an alternative budget. All we can say is that we hope that this is true. It is clear that Ali has no idea what to do. It would be nice to think that someone does.