Havering Town Hall (Credit: LDRS)
(Written by Local Democracy Reporter, Sebastian Mann)
The central government carried out a lengthy review of the council’s finances and structure last year, after it applied for a £53million loan.
The Chartered Institute of Public Finance and Accountancy (CIPFA)’s findings, published last week, identified “no deficiencies” in the council’s financial management.
Reserves, however, are low compared to other boroughs, the CIPFA said. The earmarked general fund sits at £35.4m, with £10.1m in general reserves.
It also advised the council to “immediately” enter a dialogue with the central government to seek better funding.
Council leader Ray Morgon said: “We have said all along that we are not in this position because of poor financial management, bad decisions or irresponsible investments. This CIPFA review only goes further to confirm that.
“The report once again highlights the severe financial pressures faced by the council. The rapidly increasing costs in social care and homelessness, coupled with years of reduced funding from the government, have forced us to seek another government loan.”
The £53m was needed to cover an overspend of £21m in 2023/24 and a projected shortfall of £32.5m in 2024/25. It was granted last February.
Despite making a total of £79m in cuts over the past seven years, Havering was forced to borrow an extra £70m last month. That eight-figure sum includes the £32.5m from last year.
The CIPFA said in its report, published by the Ministry of Housing, Communities and Local Government (MHCLG), that current forecasts showed the council “will not be able to set a balanced budget in future years” and would need to borrow more.
Cllr Morgon added: “We will continue to lobby for change in how we are funded to accurately reflect our rapidly changing population and needs, and we remain committed to delivering high-quality services to our residents and will continue to work diligently to address these financial challenges.”
As of 31st March 2024, Havering was in debt by around £137m. That figure preceded the extra £70m borrowed this year.
Though the debt will reduce as the council pays the loans back, the CIPFA indicates it will climb back to around £112m in 50 years’ time.
The review noted the council’s “ambitious” plan to build more housing in the borough. However, the town hall “should review” whether it was “appropriate” that the sole director of Mercury Land Holdings, a development company wholly owned by Havering, was chief executive Andrew Blake-Herbert in case of conflicts of interest.
Havering was also told to increase its investments in preventive services to prevent children relying on expensive care, which it says it will.
The CIPFA said the current financial pressures on the council were leading to children “unnecessarily entering the expensive care system and worse experiences and outcomes for children and families”.
The council says its next step is to undertake a formal review against the CIPFA financial management code, which offers guidance for “sustainable” administration.
