Budget Report reveals Ealing Borrowing Binge

Liabilities now equal £4,000 for every household in the borough

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Ealing Council has taken advantage of looser central government controls on borrowing to go £74 million deeper into the red. The extra debt will take the Council's liabilities over £300 million making it one of the most heavily indebted local government authorities in the country.

Combined with the recently revealed £178 million deficit in the borough's pension fund this equates to a £4,000 liability for every home in the borough.

The figures were released in the budget report that disclosed that residents were to see a 6.9% increase in their Council Tax bills this year on top of a 25.9% increase last year. The threat of 'rate-capping' by Local Government Minister, Nick Raynsford, has prevented such large rises occuring this year. Ealing has still seen the second biggest rise in Council Tax in London over the last two years.

Council Tax bands - Ealing (2004/5)
Band A 794.43
Band B 926.83
Band C 1059.24
Band D 1191.64
Band E 1456.45
Band F 1721.26
Band G 1986.07
Band H 2383.28

Ealing has sought to increase revenues in other ways such as introducing charges for day care centres and increasing rent for council homes and meals on wheels charges. Councillors at the budget debate at Ealing Town Hall earlier this week were presented with a 1,000 signature petition collected by the local branches of Mencap and Alzheimer's Concern which opposed charges for day services for the elderly and disabled.

Other measures to increase revenue include the ending of the provision of free black bags for refuse collection and taking over the policing and fining of minor motoring offences.

Much of the borrowing relates to the controversial 'response' programme - Making a World of Difference. During the coming financial year there will be capital spending of £26 million on the project which aims to improve the way that the Council deals with the public. There is additional spending of £1.113 million from the revenue budget and the Council is also seeking to capitalise £3.8 million of costs; this would allow them to fund them through borrowing.

It is possible that the true cost of the response programme is being understated as the report states some elements of the scheme have been 'mainstreamed' into the Council�s day-to-day business activities.

The Council embarked on the project in response to initially being rated a 'weak' authority by the Audit Commission. They claim that financial commitments to the Response Programme will only be made to the extent that targeted savings have been secured and that the programme will have paid for itself withing four years. They have set up a Finance Strategy Group which will meet fortnightly to monitor progress.

Council Leader John Cudmore described the budget as 'prudent' and said. ""Yes, we have had to make a total of £12.6m in cuts to help deliver this budget, but we have minimised the impact on direct front line provision. Next year we will be investing in high quality services and our capital programme will deliver new schools, care homes and other benefits for people who live and work in our borough."

They intend to begin construction on a new older people's residential home shortly, the first of three, while in the summer three re-built primary schools will be opened and in the autumn a new high school will be completed. All these projects will receive PFI funding from the private sector.

A locally based financial analyst said, "When I saw the numbers I thought immediately of Orange County. If Ealing hasn't fixed the interest rates at which it is servicing all this debt then they are completely hostage to any rise in rates and if they rise the cuts in services so far will seem like a cake walk." Orange County was a municipal authority in the State of California that went bankrupt.

As well as the £4.6 million already spent on the Response Programme the Council's budget has been put under further pressure by spending on social services coming in at £4 million over budget.

The Council has also been told by auditor's KPMG that it must rebuild its reserves. These had fallen to around £1 million from a previous level of over £10 million. The 2004/5 budget has earmarked funding for reserves to be increased to £6 million. Initial forecasts for the next two years suggest Council Tax rises around 7% each year are likely.

March 5, 2004