Tel. +44 (0)20 7287 4414
Tel. +44 (0)20 7287 4414
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.

Bruges Group Blog

Spearheading the intellectual battle against the EU. And for new thinking in international affairs.

Maxing-Out. The Recklessness of Local Authorities.

chest-1293748_128_20240621-154655_1 Treasure for Some

Multiple credit cards and a carefree attitude to paying-off bills was at one time the preserve of the more feckless section of society. These days it seems to be a universal ill of local finances and it is a trend that central government has fostered. As local authorities teeter on the brink of insolvency – indeed by any 'normal' accounting assessment they would be insolvent – authorities endlessly borrow from each other in a complex web of deals and counter-deals. At the trecento of this is HM Treasury that turns a blind eye to the abuse of funding that is, seemingly, endless.

As a Somerset resident my particular knowledge is from this county but I do not doubt that what I have discovered is unknown and unseen by taxpayers across the country. The Public Works Loans Board (PWLB) is seen as a bottomless pot of gold over which scant care is taken. Established in the 19th century and used to finance some of the great Victorian public works scheme, the PWLB was revived by an act of 1968 which remains the legislative basis of it today.

Blair took it away from direct overlordship of the Treasury but it was really in the Cameron years that local councils consumed it like a sweet tooth in a bakery. In South Somerset it was the Liberal Democrats who espoused capitalism with the most enthusiasm racking up £130 million in loans on anything and everything.

Long before Covid, astute pension fund managers spotted that the value of office space and retail premises were on the slide and in South Somerset the investment portfolio holders waded in and hoovered-up offices across the UK- Newport, Exeter, Bristol, Milton Keynes and so on - – indeed everywhere EXCEPT the local area the council was empowered to serve.

Boris Johnson's government, in the immediate post Covid Treasury reckoning issued a warning that PWLB loans were not to be used for speculative investments. Presumably the civil service belatedly spotted that too many lemons had been bought. However he adroitly emphasised that responsibility for PWLB loans lay with local finance officers and locally elected councillors - Johnson tightened the rules but blindfolded the referees. This important elevation of the status of councillors was, and remains, disastrous. A perusal of a typical panel of elected councillors suggest they are not people with the acumen and experience to handle billion pound budgets. The move in effect exonerated Johnson, May and Cameron from any part in the creation of local authority Armageddon.

Somerset investments include a Marks and Spencer's store bought in 2018 for £7.3 million which is up-for-grabs at £2.8 million and a former Wilkinson's bought in 2018 for £4.3 million which the County's 'estates manager' admits cannot find a buyer. A so-called environmental investment in a 'mains grid battery ', described as being in partnership with a Danish company, but in fact with the Chinese BYD Corporation, cost a £43 million investment and returned just £600,000 in a year of record high energy prices. A manager involved in the project was previously employed running Bristol Energy and we all know how painfully that ended. Though I would like to think this is incompetence is exclusive to Somerset, I very much doubt it.

Even though Somerset's finance director Jason Vaughan declared finances 'precarious' and on Nov 2nd 2023 admitted planning to sell £220 million of the County's property portfolio at a £70 million loss (BBC Somerset) the authority has just loaned £78 million to other councils – Cornwall, Surrey, Greater London. Stockport among them. In turn Somerset has borrowed £38 million from 'various authorities' – Freedom of Information request not yet returned.

In addition £18 more millions, bringing the total to £802 million, has again come from the PWLB, an FOI request revealing that it is for 'various purposes not yet assigned'. But, one can safely assume, not for public works' The terms of the PWLB are clearly stated in an official document called "Public Sector Funds" from which I will quote. Monies can be borrowed "to finance capital projects.... provided they can afford to service their debts out of revenues". I would argue that most if not all of the PWLB borrowing in Somerset is not for 'capital projects' in the established sense of the words, nor is it being financed out of revenues.

Local authorities are taking huge liberties with the English language and definitions are being flouted. The definitions of statue law are being ignored by disinterested or complicit Treasury officials. the Law states that local authorities are under a "statutory requirement" to abide by these laws. Laws are passed to protect citizens and direct institutions but he Law is being openly flouted and the Public are the worse-off for it. 

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Tel: 020 7287 4414
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The Bruges Group
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The Rt Hon. the Baroness Thatcher of Kesteven LG, OM, FRS 
Vice-President : The Rt Hon. the Lord Lamont of Lerwick,
Chairman: Barry Legg
Director : Robert Oulds MA, FRSA
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