WARRINGTON Borough Council’s Deputy leader and finance spokesperson Cllr Cathy Mitchell has defended the council’s borrowing, saying investment assets have a higher value than the money borrowed.
With the vast majority of the investments in bricks and mortar Cllr Mitchell says the borrowing, a direct result of Government funding cuts, provides a return of £20m which is used to maintain frontline services.
Cllr Mitchell said: “As the fourth new Conservative Prime Minister in six years, I sincerely hope that Liz Truss has the courage and foresight to do what is needed to get the country through the storm and to build up our resilience to respond to whatever else comes our way.
“The state is in crisis – and was before COVID and energy prices happened. Help for adult social care has been promised for years. Cuts to adult social care cause hospital delays and then delays for ambulances at A & E – that is not a new problem. Adult social care is a responsibility of local councils – their funding has been cut by 60p in the £1 since 2010.
“How does the council pay for services? There are largely four sources of income – government funding, council tax, business rates and fees and charges. Warrington Council’s most recent budget was £177m. Demand for services is increasing.
“Back in 2010, we received £70m per year from Government. That government funding is now just over £1m per year. None of the other sources have really increased – council tax is capped.
So what should the council do? Two-thirds of the budget goes to children’s services and adult social care. You can’t borrow money to pay for services, only for capital projects, buildings, equipment etc.
Cllr Mitchell added: “In Warrington, we decided to borrow money to buy buildings, which generate income which can be used to pay for these important services. The vast majority of our investments are secured on bricks and mortar, so it’s like a mortgage. The whole portfolio produces a yearly net income over £20m, which is used to pay for the services which people need.
“Some of our critics focus heavily on individual investments which make up a very small part of the overall portfolio. Our investments help the community too, for example producing green energy from our solar farms, and building affordable homes by investing in housing associations.
“Our opposition called for a council tax freeze – which would have made our funding position worse and would have meant even more cuts to services.
“They highlighted the borrowing. The council’s investment assets have a higher value than the money borrowed, so could to sold to repay the borrowing in full. The problem is that you would lose the income that the portfolio generates. That would make the funding position worse and would mean more cuts to services. You wouldn’t be able to use the money raised by selling the assets to pay for them.
“Selling our assets and paying back the borrowing would make a few of our critics happy, but would be devastating for families that rely on those services. Since two-thirds of our budget goes to protecting children and caring for adults who need support, you can see who would feel those cuts the most.”
2 Comments
I’m sorry, but I can’t take this version of events seriously.
That £20 million p.a. figure has been trotted out repeatedly. It stays the same regardless of situation – Together Energy goes bust, no change. Redwood Bank is worth half what we put into it (and our share is only a third of that) – no change to the £20 million figure. It all looks like we’re being taken for idiots.
If the assets are genuinely worth more than we paid – that’s great. It suggests that the situation might not be dire. A little evidence wouldn’t go amiss, though – you know, what with it being our money and all.
There have been some notable failures of commonsense, let alone due diligence. The Together Energy investment was widely criticised. I recall several people pointing out that similar brokerages had gone bust recently, and also that a call centre doesn’t have many assets if it fails. The Redwood Bank investment looks questionable in the extreme.
I hope that the other investments are more solid – though I’m pessimistic. The only investments we know much about are the failed TE and the dodgy-looking Redwood. Hardly a recipe for inspiring confidence!
It’s worth noting that we only heard about the details of this administration’s questionable “investments” in Together Energy and Redwood from outside (the council) sources or when they were published in the national and local media and/or were the results of knowledgeable investigation by two local council taxpayers.