Peterborough council should not be a bank - LETTER
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My understanding is that the council’s borrowings from the Government Public Works Loans Board currently total £369 million and we have also borrowed £82.5 million from other local authorities.
Cllr Seaton suggests that it makes sense to take on these huge liabilities if, by so doing, the council can raise revenue by lending the money out at a higher rate of interest than that at which it has been borrowed.
I do not dispute this simple economic fact. However, as any commercial lending institution will tell you, the success of such a strategy depends largely upon the creditworthiness of its borrowers.
In the case of the council the loan of £23 million to Empower Community Management LLP has caused much agony and sleepless nights. In the meantime, £15 million will be used to fund private developers of the new Hilton Hotel at Fletton Quays. Whilst I very much hope that in due course these ‘investments’ will bear fruit, does it really make sense for the council to lend to what are essentially private commercial enterprises when at the same time the council’s own borrowings are approaching £500 million?
My point is simple, the council is not a bank, and it should not be acting like one, particularly when the stakes involve taxpayers’ money. This is not what local government is about. These huge liabilities have been taken on by the Conservative-led council and have now reached the point where many of the electorate are asking how the council has managed to be so very deep in debt.
Sadly, it appears that like the banks in 2008, our council is in over its head, managing debts it doesn’t understand, lending money it should never have dispensed in the first place. Let’s get our own house in order and our books balanced before we pretend to be a funder to private companies.
Once we’ve achieved that, then we can indeed pursue a strategy of lending to other local authorities, if, as Cllr Seaton says, this is such a good thing! I remain to be convinced; I believe the public shares my view.
I’d like to correct two other misstatements. I am not a member of the council Audit Committee and have not been so since May 2019. This does not of course prevent me from having a good understanding of finance as it applies in the public sector. Secondly, I do indeed criticise unnecessary expenditure whilst at the same time acknowledging the benefit of expert professional advice.
My point regarding the instruction of an alternative firm, rather than the council’s existing auditors, was that surely the extremely large firm which were already familiar with the council’s financial affairs might be best-placed to advise, given that a larger firm will likely have internal procedures in place to safeguard against conflicts of interest. I would have liked to have had that point clarified by the auditors themselves, rather than relying on an assumption that a conflict of interest necessarily existed.
Finally, I wish Cllr Seaton every success in his activities after he stands down from public office in May, and I do hope that the guiding economic principles that he has so clearly embraced will stand him in good stead.
Cllr Shaz Nawaz
Labour group leader