Following Tuesday’s meeting of the Audit, Standards & Risk Committee, there have been a few comments raised around the financial position of Surrey Heath Borough Council. I’ve seen a few people commenting on this, and thought I’d lay down my thoughts as a Councillor and a member of that committee.
What is this all about?
While reviewing the “Treasury Management” (Council speak for finances), it was highlighted that the Council would need to spend more on interest payments than was allocated for in the Council’s budget for 2024-25 and in the Council’s “Medium Term Financial Strategy” (basically the plan for Council finances over the next few years. The projected interest costs for this year are now £6.5 million, this is much higher than was provided for in this year’s budget.
Why has this happened?
The Council leadership proposed a budget in February which included a projection for the Council’s estimated interest repayments. This is based on a number of factors including expectations of the movement in interest rates. One reason why there has been an issue is that the base rate of interest has not fallen by as much as anticipated when the current administration set their budget for 2024-25.
So is this all the current Council leadership’s fault?
Ultimately, the buck does stop with the Council’s leadership and administration when it comes to setting budgets. But in fairness to them, many of the factors affecting this are outside their control, in particular the interest rate fluctuations detailed above.
One thing that did concern me at the meeting on Tuesday was that the leadership appeared to be seeking to push the blame onto council officers. In particular, it was slightly farcical to see the leader of the Council state that he could trust his own Administration’s financial strategy and at one point have to ask the section 151 Officer (council jargon for the finance officer) what his Executive had signed off on and proposed to the Full Council in the budget.
There also seems to be an attempt from some (who frankly should know better!) to blame this on previous Council administrations. We can of course discuss the merits of decisions made but I cannot see how a previous Council administration can be to blame for the current year’s budget not providing sufficiently for interest repayments.
But is this all something to worry about?
Clearly it isn’t ideal as the Council will need to dip into its reserves more than expected in the current financial year. The Council does have money put aside to provide for this in the short term in what is called an Interest Equalisation Reserve.
It is also not sustainable to have a Council depleting its reserves year after year as eventually they will run out. However, we are still some way from that. The section 151 Officer (see above jargon explainer) confirmed to a House of Commons Select Committee towards the end of last year that Surrey Heath Borough Council was not in imminent danger of having to issue a section 114 (Council speak for going bankrupt) and I have not heard or seen anything during my time as a councillor that makes me think this is wrong. That said, we will need to be financially prudent over the coming years to avoid a more uncomfortable position.
As councillors, both in administration and in opposition it is our role to probe the finances and ensure that they are well run going forwards so that we can balance the books as quickly as possible. All local authorities are feeling the strain of current financial pressures and Surrey Heath is not in an unusual position in regard to this.
What Happens Next?
We will continue to have updates on the Council’s financial performance against the budget set throughout the year. It is hard to judge the performance of an entire budget on just the Q1 figures, but this does highlight to me the need for all councillors to probe both the Council’s financial performance and the budget setting process when it comes to 2025/26.
- Cllr Jonny Cope, Surrey Heath Borough Councillor for St. Paul's Ward
