Lib Dem Council Crisis Worsens

Regular readers of this blog will be aware of the problems facing Gainsborough Town Council, currently run by a Liberal Democrat administration. 


A review of the council’s governance has cost £4,000 and with a string of resignations forcing by-elections, caused by the resignation of councillors who simply could not face the ‘maladministration’ and ‘embarrassing level of incompetence’, the council is in real trouble. Some have even been calling for the authority to be abolished or opt into special measures; with West Lindsey District Council taking over.

The crisis has got so bad that an urgent review of the authority’s finances has been undertaken by the finance team at West Lindsey District Council. So perilous is the position that it is understood they have only around £2,000 as a reserve.

Councillors met last week to approve an revised budget to make emergency cuts. Staff hours are being cut, community grants have been suspended and all areas of the council’s expenditure are being reviewed to see where money can be clawed back.

Financial Services Manager, Mr. Russell Stone, at West Lindsey District Council gave a presentation to Town Councillors on the current state of the books. He said it was not clear how much the council had overspent, but that the dwindling of reserve funds highlighted the seriousness of the situation, leaving less than £2,000 in contingency funds.

"The reserves the council has had have been depleted over the last four years or so through sustained overspending in that period to the tune of about £100,000."

The Gainsborough Standard reports that he told councillors that immediate action was needed to prevent the authority sliding into a fifth year of overspending.

"The council should be holding reserves of around £50,000. That is not the level we have at the moment… At the start of the year it was about £8,000… That raises concerns about what is going on around financial management."

Mr. Stone said weeks of work had already been done to present a balanced budget for the rest of the year and stressed that any excess spending would alter the current position, and there is no contingency.

"Any unplanned spends like creditors we are not aware of or elections occurring, these figures will change… As a council you budgeted for one election and we have had three already which has cost an additional £10,000."

A review will now look to remove non-essential council spending and find more ways of generating income. Staffing alone costs the Gainsborough Town Council around £300,000 a year – by far the largest area of spending in its budget.  A review of how the town’s cemeteries are run will also cut costs. Mr. Stone revealed the council had been spending twice as much on its two cemeteries as it generates in income from them. Amenities like Roses Sports Ground, Marshalls Sports Club and Richmond Park are also to be reviewed. Spending on grants, events, Christmas lights and the Town Centre Partnership might have to be reined in. Mr. Stone warned councillors that:

"There aren’t any quick fixes. You need to take action now… Hopefully in two or three year’s time we will be back on a sound footing."

Cllr. Paul Key, who chairs the Management and Finance Committee is reported to have said: 

"It gets my goat when you read people on social networking sites pulling down the Lib Dem party, when it is not the Lib Dem party that was in control from 2008 – 2011."

Cllr. Key is correct, but the lamentable situation has been exacerbated by the Liberal Democrat administration that took control of the council in 2011. A reduction in the authority’s portion of the Council Tax – known as the precept – of 3.8%, was heralded at the time, by the Liberal Democrats as a proud achievement: The consequence is that the decision has destabilised the financial base of the authority. 
Mrs. Pearl Banyard, who was the Mayor of Gainsborough during 2008/9, who resigned as a Councillor earlier in the year owing to ill-health, speaking to the Gainsborough Standard, said ‘everything was alright’ when she was Chairman the Finance Committee.

"The Lib Dems have had control of the budget for the last two years. They threw out the clerk’s budget in favour of their own."

The Bank of England governor has hinted that Gordon Brown's plans to reform UK banking through regulation alone may not be enough.

Mervyn King said it was a 'delusion' that tightening regulation could stop banks' most risky activities from failing and leading to huge losses.

In his starkest warning to date, the Governor said banks may have to separate their day-to-day business from more speculative practices if they are to get state aid.

Mr. King also predicted that the United Kingdom's economy would grow in the remaining two quarters of the year.

He did not commit himself to saying the economy had come out of recession between July and September. Initial data on the economy's performance during that period is expected on Friday.

The Governor added that while it should become easier for households and businesses to borrow money, everone should be under no illusion that the path to sustained recovery will be smooth an painless, citing high unemployment and lower industrial output.

"We shall all be paying for the impact of this crisis on the public finances for a generation."

In his speech to Scottish business organisations in Edinburgh, Mr. King hinted that G20 plans for tighter regulations may not be sufficient, because if banks knew they would be bailed out if they hit difficulties, they would continue to take risks.

"The belief that appropriate regulation can ensure that speculative activities do not result in failures is a delusion,"

Banks have been criticised for making risky investments - which in previous years had brought hefty profits and large bonuses for their staff. However, when these investments went wrong, it contributed to the global economic crisis which saw several banks, including Royal Bank of Scotland and Lloyds, being part-nationalised.

Mr King suggested it was hard to see why taxpayer support could not be limited to retail banking.

"Anyone who proposed giving government guarantees to retail depositors and other creditors, and then suggested that such funding could be used to finance highly risky and speculative activities, would be thought rather unworldly. But that is where we now are."

Direct or guaranteed investment in banks from the government was close to one trillion pounds, Mr King said.

"The sheer scale of support to the banking sector is breathtaking.

"Never has so much money been owed by so few to so many. And, one might add, so far with little real reform."

"It is hard to see how the existence of institutions that are 'too important to fail' is consistent with their being in the private sector.

"Encouraging banks to take risks that result in large dividend and remuneration payouts when things go well, and losses for taxpayers when they don't, distorts the allocation of resources and management of risk."

Mr. King said that those banks which continued to get public money to prop them up and aid their recovery should not be encouraged to try and earn profits to get out of government support by resuming the very activities that got them into trouble in the first place.