The collapse of icelandic banks in which Cambridge City Council had invested £9m left a major hole in the council’s finances. While the government had instructed local authorities not to budget for the loss of the capital, they had not made any allowance for loss of interest which councils had expected to be paid. The interest Cambridge City Council had been expecting on its remaining £71m investments will now be significantly reduced following the reduction in interest rates (each 1% reduction in interest rates reduces Cambridge City Council’s anticipated income by over 1/2 a million pounds a year). These losses have been compounded by the £618K owed to the council by SecureTicket UK Ltd., the company which ran the online ticket sales for the 2008 Folk Festival, which is now undergoing a voluntary winding up.

Further losses of expected income of the order of £400K are expected to arise from the slow-down in development which will reduce revenue from charges for planning applications (reduced fee income in the development control budget). Planning officers have defended the need to maintain their current staffing levels through the downturn on the grounds it takes years to put together skilled teams and there is a continuing need for long term forward planning and preparation for the growth of the city. The loss of that income might have to be largely balanced elsewhere. A central government grant linked to the growth of the city makes up some of the shortfall.

I would expect other council income streams, from car parks to the corn exchange to be negatively affected by the recession, though current council projections suggest parking revenues will be higher than previous years

A statement from the Liberal Democrat leader of the council, Ian Nimmo-Smith, has been given at two recent council meetings. I have heard senior council officers summarise the statement by saying the council’s budgets for the coming year are to be torn up. The Liberal Democrat ruling group have been meeting in secret during recent weeks deciding where to make cuts in the budget. Already there have been exchanges between opposition and Liberal councillors discussing areas where additional savings might be made. The environmental improvements program, which includes traffic calming schemes, footpaths and recycling areas – many of which have been proposed and championed by local residents groups and ward councillors, looks as if it might be seen as an “easy target”, but there is cross party opposition to a blanket cut in this area.

With £71 million left in reserves councillors might decide that the proverbial rainy-day is now upon us and the time has come to dip into those reserves in-order to fund next-year’s spending. Certainly this is not the time for a council tax increase above the 4.5% decided in September.

The leader of the council has let me have a written copy of his statement, which as far as I can tell has not yet been made available on the council or his party’s website. He has told me he expects it to be published in the minutes of those meetings, but as they might not be released, even in draft form, for many weeks I am publishing it in full below:

Statement on budget preparation.

This was always going to be a difficult year to set a budget, what with the niggardly 0.5% increase in government grant likely to be confirmed later this month, the need to subsidise the concessionary fares scheme, the initial effect of the credit crunch in the collapse of our investment income, and of the economic slowdown in falling income from planning fees.

For these and other reasons it has not been possible to constrain the process of preparing next year’s (2009/10) budget to follow the framework laid down in September when the Council agreed the Medium Term Strategy.

It had been planned that by the time of the current cycle of scrutiny committee meetings we would have identified in the various committee papers all the ingredients to create a balanced budget.

The Budget Setting Report that will be considered by Strategy and Resources scrutiny committee next Monday (19 Jan 09) identifies many of the exceptional factors that have made it difficult to follow in full the timetable.

On top of those factors, the government has now changed its mind during the past four weeks, on how we are to reflect the retrospective and prospective effects of deposits currently frozen in the Icelandic banks. And we now need to make provision for a potential bad debt in relation to the Folk Festival online ticket sales.

As if this were not enough, there has been a further collapse in bank interest rates and a consequential impact on estimates of likely future income from investments.

The Budget Setting Report concludes by stating that there is a requirement to identify further budget reduction measures.

Executive councillors are currently working with the officers on the components of an additional package of measures to achieve a balanced budget for the Executive to recommend to the Council.
There will be opportunities to debate the handling of the budget process at Strategy and Resources next Monday, and to scrutinise the further budget reduction proposals at the meeting of the Executive in two weeks time, and at the Council’s budget setting meeting in February.

– Ian Nimmo-Smith, 12 Jan 09

If the council is planning to balance its budgets in 2008/9 there are a couple of million pounds worth of savings which need to be made.

It might surprise some readers to learn that Cambridge City Council employs 1200 staff (1), now might be the time to review what some of them are doing for the residents of Cambridge. In recent weeks I have drawn attention to two questionable posts, the Pinder and the Punting Enforcement Officer, I question if these roles need dedicated individuals. I was also shocked when I learnt earlier in the year that the council has not only the one arboricultural officer who is regularly in the public eye, but at least three. These are dedicated tree officers, in addition to the “green space” team and others who work in closely related areas, and despite their presence we still see key decisions on the city’s trees being outsourced to consultants.