Many people will have heard the absurd comments from Cherwell’s lead councillor for Financial Management and Governance, Tony Ilott, on BBC Oxford breakfast radio on Tuesday. I thought it was worth covering a few of the comments made by the Conservative representative in more detail.
The programme featured a running topic on the amount of back rent owed to several councils in Oxfordshire and you can hear it here. This is not a problem unique to this county as so many councils now rely on commercial investment to make ends meet since central government no longer provide enough funding for even the basic services that we all rely on.
This problem is exacerbated by the fact that legislation requires local authorities to balance their budgets every year and prevents them from borrowing to cover any shortfalls. This leaves them in the position of trying to operate like private investors without having the same financial flexibility.
With many local authorities now heavily invested in commercial property they have all faced a huge shortfall in income from rents that have not been paid throughout the pandemic. To add insult to this injury, even though the Chancellor said he would provide “whatever it takes” to help local government, central government has excluded losses from commercial investments from it’s support payments to councils.
The need to balance the books each year results in councils being left with only 2 options when they have a shortfall in rents. Either they increase council tax (which can only be done up to certain limits without a costly referendum) or they cut services.
that’s going to be a pretty expensive chicken dinner for the residents of Cherwell!
This is what Cherwell District Council did in 2021 when they reported losses in the region of £1.6m against the Castle Quay shopping centre in Banbury. With similar losses predicted for the next financial year, this is likely to put the same pressures on the budget for the following year which will inevitably mean yet more cuts, along with additional charges like we’ve seen this year for things like garden waste collections.
Commercial landlords would usually carry these sorts of shortfalls over a period of years, often borrowing to cover the gaps, and recover as much of the rent as they could over that time with deferral agreements with tenants. Ultimately some of the losses may have to be written off. But as explained above, councils can’t do this. So as long as these shortfalls are on the books, more cuts or tax increases are the only way to deal with the problem each year.
It was clear though from the interview Cllr Ilott really didn’t understand any of the mechanics of this, which is quite staggering considering his role on the council. When he was asked if he thought there should be a change in legislation that would allow councils to deal with these problems, he said he didn’t think so. Instead he chose to make childish personal comments about me and avoided answering the interviewer’s questions about how the council will recover these losses.
it’s clear that they have no real vision for how to revitalise the development other than the idea that making it bigger will somehow make it better.
He did make mention of ‘working with tenants’ which of course is a good plan. As a retail consultant myself I’d always advocate such a move, but due to the limitations imposed on councils, this can only be done on a year by year basis. Any outstanding debts at the end of each year will need to be accounted for and action taken on increased taxation or services cuts.
Cllr Illot suggested that we look at things “in the round” and I agree we should do that. Unfortunately, time restraints on the programme prevented me from laying out the full details, but I’m happy to do so here :
- Losses in the last financial year attributable to Castle Quay – £1.6m
- Losses predicted in the next financial year due to Castle Quay – approx £1.6m
- Rent owed to Cherwell District Council at this point – nearly £2m
- Loss in value of Castle Quay shopping centre since the council took full ownership – over £30m (it’s now worth less than half what they paid for it 4 years ago)
- Additional investment being ploughed into expanding the centre – £73m (underwritten by council tax payers)
- Interest on the loans to finance all this (so far) – £2m+ per year
- Cuts required to the entire council budget this year – £4.4m
Yes some of this can be blamed on the pandemic, but retail was already on the decline when the council took the frankly bizarre decision to buy the scheme, especially as it’s clear that they have no real vision for how to revitalise the development other than the idea that making it bigger will somehow make it better. That and Cllr Ilott’s head in the sand optimism seems to be the main strategy from our Conservative councillors.
I don’t see that as good value for the council tax payers of Cherwell. Judging by Cllr Illott’s flippancy and lack of concern he seems to regard massive financial losses along with the associated financial impact on resident’s pockets as fine as long as he can get some chicken.
I’d say that taking all that into account that’s going to be a pretty expensive chicken dinner for the residents of Cherwell!
And let’s not forget that all this money is going into one town in Cherwell – Banbury. Meanwhile Bicester town centre’s retail area is being hollowed out due to the council’s planning decisions elsewhere, and the whole of the district – every single tax payer – is footing the bill for all this incompetence. As is often the case with Cherwell Council , the south of the district is left to fend for itself and pick up the tab. If I were a cynical soul I might suggest that this is because the majority of support for the councillors who agreed to this whole adventure comes from the north of the district.
But I think we should all be able to rely on decent fiscal management from our local councillors, no matter where we live. Sadly it seems clear to me that we can’t expect this as long as the Conservatives are in charge.
It’s about time the Tories got a proper grip on council finances and stopped playing chicken with all our money!