Cash-strapped council raises rates and defers interest repayments

holdich17:20 Friday 29th January 2016
BBC Radio Cambridgeshire

CHRIS MANN: It looks like council tax will be going up by 4% in Peterborough next year. It’s one of the proposals in the City Council budget, announced today. Despite facing a deficit of £24 million next year, the Council is maintaining that no services will be cut. Our Political Reporter Hannah Olsson has more.
HANNAH OLSSON: It’s a legal requirement that every council must present a balanced budget, and this year hasn’t bee easy. Councils are facing a significant reduction in the amount of money they get from central government, alongside an ever-growing demand on their services. Peterborough City Council has a £24 million gap in its budget for next year. The first half of savings were announced at the end of last year, and today we found out about the second half. Many councils including Cambridgeshire say they’ll have no choice but to cut services, but Peterborough City Council say they’ve managed to pull the political rabbit out of the hat and balance their budget, and still provide the same services they are at the moment. I asked David Seaton who’s in charge of finance at the Council how they’ve done it.
DAVID SEATON: We’ve done it through things like the benefits of growth that we’ve seen, the extra income from council tax, the extra income from business rates, our innovative ways of doing things. And we’ve talked before about our customer experience programme, what that can do for us, and also the joint working we’re doing with other councils, and the income we’re getting from that.
HANNAH OLSSON: As David mentioned there, the key reason that Peterborough is in a healthier position that other councils is that it’s had so much growth in recent years. Peterborough is the third fastest growing city in the UK, and with new homes being built and new businesses opening, the Council simply gets more money.
CHRIS MANN: Yes Hannah but even with that, the Council still needs to find an extra £24 million next year. So how are they going to do that?
HANNAH OLSSON: Well one of the ways they’re saving money is through some clever refinancing of the Council’s debt. They’ve already told us in budget part one how they’ll be extending the debt on their assets from 25 to 42 years. They’ve now said they’re also going to be making these debt repayments more like mortgages, so the rate of interest is higher, but means the repayment is the same over the whole period, which in short means they won’t cost them as much now. There’s also going to be some savings in their staff costs. They’ll be closing their office between Christmas and New Year, stopping all the automatic pay increases for around 20% of council staff, and changing the way their staff are paid for travel. And of course they’re also planning to raise money by putting up council tax by 4%. Councils always have the option of increasing tax by 2%, but this year the Government also said they could add on an extra 2% as long as this money is spent on adult social care. Earlier in the week we heard that Cambridgeshire County Council isn’t planning on taking the Government up on this extra 2% offer, but Peterborough is.
CHRIS MANN: So ratepayers will want to know just how much does this extra money, this 4% rise, work out at.
HANNAH OLSSON: Well for the average Band D property, the council tax increase would work out at an extra 87p a week. Now the Band D property is a benchmark people use when we’re talking about tax rises. But it’s worth saying that the average property in Peterborough is actually Band B, so they would see an increase of 67p a week. This rise would add up to an extra £2.4 million for the Council’s coffers, although as I said half of this will have to be spent on adult social care. At the moment these are all still proposals. The final decision will be made on 9th march following a public consultation.
CHRIS MANN: Hannah Olsson there with that special report. Well let’s bring in the Leader of Peterborough City Council, John Holdich. Evening John.
JOHN HOLDICH: (DELAY) … believe me after an introduction like that. She’s really understood it.
CHRIS MANN: Good. (LAUGHS) Well glad that we’re presenting the facts.
CHRIS MANN: But you’re caught between a rock and a hard place, because you say that you’re not cutting any services, but you have to save money. Are you sure nothing is going to be cut?
JOHN HOLDICH: Well I think over the years, and I think I said when I became Leader, that there’ll be no great surprises in my leadership, because we’ve made £50 million worth of reductions to our service, at the same time taking a similar amount of extra responsibilities, and I really need to stocktake and see what is going on. So we’ve decided we don’t want to cut any more in our highways budget, street cleaning, and things of that nature; and public health, and again elderly care. So the only way you could achieve that is put it up.
CHRIS MANN: You see ..
JOHN HOLDICH: I think where this is honest Chris, and it wasn’t in the programme, if we don’t put it up this year, in two years time we’ve got to find £50 million in one year.
CHRIS MANN: You see if you’re making all these cutbacks and not cutting services, the Government will say right, well there was fat there, so we’ll cut some more, won’t they?
JOHN HOLDICH: Well you heard in the introduction, you know, we’ve gone out and we’ve shared services with other councils. The Chief Executive is a case in point, which saved us £100,000. We’re sharing planning services with Fenland and other places, and we’re doing jobs for other people.
CHRIS MANN: So the Government’s right to say that councils could save money then.
JOHN HOLDICH: Well you know .. (LAUGHS) . there’s degrees of it.
CHRIS MANN: Are they right? You’ve had a save (on) the Chief Executive. You haven’t cut any services you say, but you’ve saved money. So the Government has forced councils to actually look at things a bit more closely, and make savings that could have been made all along.
JOHN HOLDICH: I think you could make that as an argument Chris, and that would be fair. But I think we’ve come to a point in Peterborough where enough is enough in terms of elderly care, because you’ve been talking about that in Paul’s programme this morning. This 2% only replaces the reduction that the councils give. We’d like to improve that.
CHRIS MANN: OK John. Let me ask you something that will concern some people. This is the refinancing of your debt.
CHRIS MANN: Are you just putting this off on the next generation?
JOHN HOLDICH: No not really. I mean it’s fair.
CHRIS MANN: you are by extending the period of repayment.
JOHN HOLDICH: It’s fair to the next generation, because they .. the people are paying now for the schools that other people will be going to in the future. It’s only spreading it out. It’s no different than you paying your mortgage by spreading it across the life of the property.
CHRIS MANN: If we extend what you’ve done, we could say why don’t we get rid of a lot of these local councils. Too much bureaucracy. Too many headquarters. Too many officials. Why don’t we have fewer councillors and save a lot more money?
JOHN HOLDICH: (LAUGHS) Can I put it to you, even if the 4% increase goes through, we will still be the cheapest council in Cambridgeshire, and the fifth cheapest unitary authority in the country.
CHRIS MANN: Ok but what about taking over or working with some of the other local councils? Let’s get rid of. There are so many of them with expensive buildings and chief executives on six figure salaries. Do we need them?
JOHN HOLDICH: Yes well as you know there’s a thing called evolution around, which we’re looking at. And we’re looking at doing more services, particularly in elderly and health with Cambridgeshire County Council.
CHRIS MANN: OK so declare now John. Does Peterborough wants .. I don’t know .. to take over Fenland?
JOHN HOLDICH: Well .. (LAUGHS) .. I wouldn’t like to make that comment on the radio Paul. But they are part of the devolution deal that we’re doing with Cambridgeshire.
CHRIS MANN: Must have rattled you John. You’re calling me Paul now.
JOHN HOLDICH: Ah. Sorry about that. (THEY LAUGH) I must apologise profusely.
CHRIS MANN: No no no no. I’m sure I’ll take it as a compliment eventually. So now, you’re not taking over Fenland. Is that right?
JOHN HOLDICH: No no. We’re .. we’re .. we’re looking genuinely at what we can do to make services better and save money across Cambridgeshire as a whole, and that’s what the devolution deal is about.
JOHN HOLDICH: I don’t know whether there is any savings in that at this point in time. But we’re going to ask, and one of the things we’re going to ask the Government in terms of a deal is a university for Peterborough, and the money to generate that.
CHRIS MANN: John Holdich, thank you so much. From Peterborough City Council the Leader there.