Haringey Lib Dem leader fears council now in 'debt spiral'

Luke Cawley-Harrison argues Haringey Council “has repeatedly failed to hit its budgeted savings”, reports Joe Ives, Local Democracy Reporter

Haringey Civic Centre and (inset) Luke Cawley-Harrison

Haringey Council is in a “debt spiral” with no clear way out, the leader of the borough’s Lib Dem opposition has warned.

Luke Cawley-Harrison’s stark comments follow earlier concerns raised by council leader Mark Blake, whose Green-minority administration took charge following the local election in May, at Labour’s expense.

Speaking to the Local Democracy Reporting Service (LDRS) in July, following the publication of a damning financial audit by KPMG, Cllr Blake issued his own warning about the council’s “burgeoning debt”.

The auditors described “a continued deterioration in the council’s financial position”, reflected by a “recurrent reliance” on government borrowing and a “widening budget gap”.

Although not prepared to let the previous Labour administration off the hook, Cllr Blake – himself a Labour councillor until three years ago – described the council’s financial issues as primarily systemic; suggesting it was something no party could have fixed.

His Lib Dem counterpart is not quite so forgiving.

Cllr Cawley-Harrison argues “the financial situation was clearly not taken seriously” by Labour, which continued funding certain projects “without having any money budgeted”.

Speaking in March, outgoing council leader Peray Ahmet defended her party’s financial record. Labour, she said, was still “picking up the pieces” of underfunding caused by austerity measures enforced by previous coalition and Conservative governments, with the former having included the Lib Dems.

Haringey Labour did manage to find £23.2m of “efficiency savings” for the current financial year, but Cllr Cawley-Harrison believes that although “Haringey has faced large budget cuts, similar to other local authorities” its financial situation “is the exception rather than the rule, and is in many ways self-inflicted”.

The leader of Haringey’s Lib Dem group argues the council “has repeatedly failed to hit its budgeted savings”, leading to unsustainable levels of borrowing. This includes a combined total of £138m in ‘exceptional financial support’ (EFS) from the government to balance the last two budgets.

EFS allows councils to treat some day-to-day spending as longer-term capital expenditure, which is usually funded through borrowing. But this is not without consequences. As KPMG’s report warned, at current rates, each £1m of EFS borrowing could cost the council “approximately” £62,000 a year.

At this rate, the last two instalments of EFS alone could set the local authority back an extra £8.5m a year in additional debt repayments.

“The EFS system,” Cllr Cawley-Harrison argues, “is akin to a payday loan – and Haringey now finds itself in a debt spiral”.

This, he says, is a significant part of why “it is indeed not easy to see a way out” for the local authority.

The Lib Dem leader added: “This, though, doesn’t mean we can just give up.”

If the council can start achieving its budgeted savings targets he believes that “the situation should be stabilised” even if the authority would “still be in a hole”.

On the other hand, Cllr Cawley-Harrison warns that the longer the “debt spiral” continues “the greater the chance the government will send in commissioners, who would slash services to essentially nothing”.

Although the Lib Dems support Cllr Blake’s idea of lobbying the government for reform of the EFS system, Cllr Cawley-Harrison says the council needs “to be realistic about the chances of success”.

He added: “With many competing priorities for money, the government has not shown any appetite to bail out overspending councils.”

Cllr Cawley-Harrison continued: “Most likely the very best case scenario the council could hope for would be a partial debt write-off at some time in future – but this would still require a stabilisation at the current levels of EFS, with further cuts to services and/or large increases in council tax.”

The Lib Dem leader does not support Cllr Blake’s idea of lobbying for rent controls, arguing they can be “counter-productive” and reduce the supply of new homes.

Cllr Cawley-Harrison also believes the council needs to “rethink its internal culture” and “look fundamentally at how it delivers services, rather than salami slicing cuts”.

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