Somerset Council declares a “financial emergency”
Today the financial position of Somerset Council was once again under discussion. At the council’s Executive Committee Deputy Leader Liz Leyshon noted: “This is the first time we have publicly used the term financial emergency. We were previously trying not to cause greater concern for staff at this stage in the LGR (local government reorganisation) process but the situation is now too serious to avoid the word emergency any longer.”
When the new council came together one of the questions The Leveller raised was about the property investments. There were nearly £300m of property investments made by the four district councils prior to the formation of Somerset Council. We understood current government requirements to be that all would have to be sold before the council could borrow more. And given that it would need to borrow, then these assets would need to be sold in good order.
At the time we were assured that this would not be a problem. That government would give special dispensation for the council because it had “inherited” the problem from predecessor councils.
Today Cllr Leyshon has accepted that our understanding was correct. She told the Executive: “In order for Jason Vaughan to speak to DLUHC on the subject of a Capitalisation Directive, we have to satisfy Govt that we are planning to sell any commercial assets to reduce our borrowing. It does not mean a firesale. A Capitalisation Directive allows a council to use borrowing or capital receipts to fund services which are usually funded from the revenue budget. This is now essential to our planning.”
However the council is also being pushed into making sensible savings it might otherwise have deferred. Liz Leyshon again. “It is clear that the size and shape of the new Council will change over the next year. It is important that we get potential sale of council office buildings into the public domain as that is the reality.”
The council is not yet in territory where it must issue a s114. A s114 is the council equivalent of bankruptcy. But if the pace of action does not accelerate, and accelerate soon, then that will change.