Friday, November 07, 2014

You Choose: Part II
– Understanding the Game

OK. It seems that the previous post was wrong, so let’s delve a bit deeper.

The first thing to note is that most of the grants that come from central government are ring-fenced monies. For example the education grant, which is a substantial sum, merely passes through the Town Hall and is dished out to individual schools who manage their own budgets. The council have no control over where or how that money is spent. The £43.19 million shown on You Choose under education is for support services and administration.

So let’s start tackling some of the numbers. It is said the £70 million cut is roughly a third of the council’s budget, so the budget must be 3 times that, ie, £210 million. If we add up all the budget expenditure lines on You Choose we come to a figure of £188.9 million which is in the same ball park, so we are on the right track. Let’s use a nice round figure of £200 million per year expenditure that the council actually controls out of a total expenditure of something like £700 million. Our elected local councillors actually only have a say over about 28% of the monies spent out of our taxes on local services and amenities. One might ask why we need so many of them as over two thirds of the budget is controlled by central government, you know those people in Westminster who have been devolving power to local communities for the last 35 years.

I digress. Now, as I now understand it, the £70 million is a forecast of what the deficit will be in year 4 of the current administration. For this current year it is said to be £25 million. The deficit is the difference between income and expenditure, so this year the council is spending £25 million more than its income and so the council’s overall debt will rise (or reserves decrease) by that amount. The council is already living beyond its means and we do not know what the overall debt/reserve figure is.

So, if the council carry on spending £200 million per year and the deficit rises from £25 million in year 1 to £70 million in year 4, and we interpolate years 2 and 3, we arrive at a table like this below, where we can calculate the reduction of income over that period.

So, in order for the council to start living within its means, that is reduce the deficit to zero from next year, without paying off any debt or diminishing reserves we can modify the table to that below:

So in order for the council to get the deficit down to zero next year we are facing a £40 million cut and then another two cumulative £15 million cuts in the following two years. If we assume that ring-fenced government grants rise during this period to deal with issues such as our expanding school population by say something like a modest 5% per year then by year 4 the total budget will be about £800 million with a mere £130 million administered and controlled through our local democratic processes – about 16%.

I find that quite frightening.

Now let’s have a look from a different perspective. Redbridge council receives revenue from things like gravel extraction. It has also in recent years increased revenues from parking and other measures. Now if the average council tax in Redbridge is £1,500 and there are 100,000 households that is an income of £150 million alone without the other revenue sources for which we do not have figures and the government grant that is being reduced year on year. This does not stack up with the income figures above and is more than the expenditure figure in year 4, so the question is where is all this money going?

Can anyone fill in some of the missing figures or give more accurate estimates for those shown above?

1 comment:

  1. Dear Editor,

    I think you missed one small item out - the cost of borrowing the Council does; we don't have the odd 6million to build a new school, of the odd £xxx to add an extension to a primary school.
    That money is borrowed, a slight change in the inflation figure and someone will have to start paddling up the Roding!