Mehboob Khan in a Santa hat
Santa’s warning: Greenwich West councillor Mehboob Khan predicted London councils would lose more money

Greenwich councillors signed off for Christmas after hearing a warning about the council’s spending – having been told the borough faces “significant financial risk” because of the uncertain future for local government.

Councillors heard auditor Paul Dossett, from Grant Thornton, warned them about overspending and emphasising the importance of the borough keeping healthy reserves in case of a crisis.

Like many other councils, Greenwich has had to dip into its reserves to keep services running against a background of government austerity policies, with the council’s health and adult care department overspending by £11.5m last financial year after huge demand on its services. While Greenwich has traditionally had healthier reserves to fall back on than many other councils, last year its reserves fell from £370m to £330m.

With many councillors and officers donning Christmas jumpers for the Greenwich and Bexley Community Hospice, the soberly-dressed Mr Dossett, presenting his annual audit letter, told Wednesday’s full council meeting at Woolwich Town Hall that “Whilst we noted the the council’s financial position was relatively strong compared with many others, obviously there has been a use of reserves within the last couple of years, and we’ve taken a strong recommendation that the council makes sure it brings itself back into a current balance, and that those reserves are really genuinely used for a rainy day or for particular projects that they’re earmarked for.” (watch video here)

Dossett said he had discussed the council’s savings plans with officers and added: “This is not an area to let up on, none of us would really think that the days for financial challenges for local government would be over any time soon. Trying to get to a place where you balance your budget each year is where you need to be.” He noted the ageing population as one challenge for councils.

While prime minister Boris Johnson claimed to have been opposed to austerity during the general election campaign, it remains to be seen whether councils actually will see any restoration of their funding under his new government. Government funding for London boroughs has fallen by nearly two thirds since 2010, and analysis by Centre for London showed that Greenwich’s budget has gone down by 15% per resident since then, without taking inflation into account.

In his letter, Dossett noted: “It is clear that you continue to face significant financial risk due to the demand pressures that you face and the uncertainty of the future.”

Greenwich West councillor Mehboob Khan, wearing a Santa hat, said: “The auditor’s letter is very clear, even though auditors tend to use mild and meek language, that the use of reserves to balance our budget is something that they strongly advise against. That leaves the council with a really serious problem because we are overspending on many of our core services, and only just covering those overspends by virements [cash transfers] from other parts of the organisation and dipping into reserves.”

Khan said the council only had a one-year settlement for the money it received from government, and did not know what next year’s settlement would be. “I’m very concerned that austerity has been baked into the government’s plans for the future, and in the past few years we have seen the most anti-London budgets come from this government. I think we will see money moving, not just in small amounts, but in significant lumps away from London, and London will be worse off as a consequence.”

Council leader Danny Thorpe, in a flashing festive jumper, said that while the audit letter referred to a “very very large sum in usable reserves” – £330 million – “I wouldn’t want anyone to be under the impression that sum is sat in the bank waiting to be spent – it comprises all the school budgets that we hold and capital receipts we’ve earmarked for investment into certain areas – the total unallocated reserve which we hold as a rainy day fund is £12.5 million, which is less than the London average.”

Finance cabinet member Christine Grice said the council had developed mechanisms to make sure “we do not overspend like we have done in the past”. She added: “It’s not through feckless management – it’s because the demand-led services have been under extreme pressure. This council for a long, long time, did not pass on those pressures to residents because we were acutely aware of the wage stagnation in the country and in our communities and the stresses that causes on families. We kept rents and council tax low and it’s only in the last couple of years, when the pressures have been so great, that we had to raise council tax.”

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