Government minister concerned Peterborough council ‘not grasping’ seriousness of financial challenge facing authority

The Minister of State for Equalities and Levelling Up Communities, Kemi Badenoch MP wrote the letter to leader of the city council, cllr Wayne Fitzgerald, following an external assurance review of Peterborough City Council’s financial position and the strength of its wider governance arrangements.

In the letter, Ms Badenoch said; “I am, however, concerned that the scale of financial challenge facing the Council is not yet fully grasped and that further steps can be taken by the Council to remedy the situation. I trust that the findings will help you to focus your Council on activity that will lead to sustainable change.”

In the letter she adds: “I will need assurance that the Council accepts the Reviews findings and are motivated to improve the Council’s financial standing. This includes the principal recommendations of agreeing a revised Medium Term Financial Strategy, producing an improvement plan, and appointing an independent Improvement and Assurance Panel. I will also be expecting to see the Council’s plans relating to the recommendation of a four year “all out” electoral cycle in due course.

“As such, I would ask that you set out in writing, within the next month, the steps you are taking in the immediate and longer term to respond to my Review. Any faltering in this area would be of considerable concern and could lead to a reconsideration as to whether a different approach might be appropriate to secure the improvements that are necessary.”

Following the review, a report has been published. The report says: “Of most concern is the inclusion of amounts for an increase in Council Tax above the statutory level for which there is no agreement. The Council also has limited reserves to support them through the Medium Term Financial Strategy (MTFS) period and at the end of 2019/20 had the lowest ratio of reserves to service expenditure of any of the Council’s Near Neighbours. In summary there is a significant risk that the Council will not be able to balance its budget over the period of the MTFS.”

The report adds: “The financial challenges facing the Council are significant and urgent. The financial difficulty that led to these requests has been apparent for some time but although the Council has made savings these have not been at the level to meet the scale of the challenge and the Council has continued to increase its net service spend and spend on capital projects. As a result, the Council has used one off receipts to balance the budget including reducing reserves.”

The report says that ‘Whilst the Council has taken steps to reduce the Capital programme in order to reduce the revenue consequences, we think the current borrowing requirement is unsustainable and the programme still contains unaffordable growth. We also consider the Council has assets that can be realised in order to contribute to balancing the budget before any exceptional financial support is provided.”

In response, cllr Wayne Fitzgerald said; “This is a serious report with some important recommendations for us to consider. We have already been actively working on many of the areas that the recommendations cover – and because of this we are now able to confirm that we will not be seeking any further exceptional financial support in-year (2021/22)

“I am committed to the locally-led approach which is supported by the two reports and in the Minister’s statement and I will continue to work with CIPFA, DLUHC and the new Improvement Board in order to get the council to a position of financial sustainability as quickly as possible.

“The report acknowledges the very significant challenges we have faced in the past but also recognises that Peterborough’s services perform well and are low cost. It is clear though that I as Leader, including all other members regardless of political party, must take on board the seriousness of these reports and set about implementing some of the recommendations which will mean that very difficult choices are ahead. Going forward I want to invest more in services for residents and see the city continue to prosper and grow, but we will need the finances to do so.”

The council has already taken a number of actions following the review:

- a cross-party member working group (Financial Sustainability Working Group) has been established and there are now recommendations going to Cabinet and then Full Council which amount to circa £10m of savings in the first phase of the budget;

- increased staff resource for developing phase two of the budget has been put in place, to work up transformation and budget options to deliver savings.

- a programme of ongoing challenge and support from CIPFA has started which will examine all major areas of spend across the Council;

- preparation for establishing an Improvement Board has begun, meaning the Board can be commissioned immediately on publication of these reports;

- a review of the Audit function of the council has now begun which is likely to see the appointment of an external independent chair.

- appointment of a new Chief Executive to give the council dedicated and additional management capacity is in progress;

- the council is now working to a single improvement plan, covering all revenue and capital budgets; emerging pressures and risks. This will detail and review all of the council’s assets, capital programme and contracts.

To read the full reports and letter, visit https://www.gov.uk/government/publications/peterborough-city-council-external-assurance-review