BT helps fill Culture cash hole - but only if it keeps contract

Mar 1 2008 by David Bartlett, Liverpool Daily Post

LIVERPOOL council has been forced to turn to one of its private sector partners to help create a Plan B to fill the £20m hole in Capital of Culture finances.

Liverpool Direct Limited, a joint venture with BT set up in 2001, has agreed to double its sponsorship of the Culture Company from £2m to £4m, but has said the new £2m must be repaid if the council terminates its contract early.

LDL also agreed to help the council juggle money between accounts to free up £8m.

Of the remaining £10m deficit, around £7m would come from reserves and £3m from cash set aside that was no longer needed.

Last night, council officials stressed their preferred option was still for the government to allow the authority to raise the £20m through selling off assets in a process known as capitalisation. It is understood council representatives will meet with Local Government Minister John Healy today to lobby for permission to capitalise the £20m.

But the council was forced to come up with a Plan B because it has to set its budget on Wednesday.

The £8m cash shuffle with LDL involves the council paying £8m to LDL for capital investment works not previously charged to the authority.

In return, LDL has agreed to pay the council £8m for accommodation and other services which was also previously not charged for.

This effectively transfers £8m from the council’s capital account – which is only allowed to be spent on investments – to its revenue account which is for everyday spending and can be used for Capital of Culture.

District Auditor Tim Watkinson has already raised concerns due to the unusual nature of the transaction, and the council is currently taking external advice on whether the transaction complies with accountancy rules.

If this route cannot be pursued, the council will use money from its Public Finance Initiative (PFI) reserve which currently has £12.8m.

A council report warns that the council risks “further undermining its low financial standing” in pursuing the Plan B for funding the showcase year.

Council leader Warren Bradley said: “Liverpool will have invested close to £67m in Capital of Culture, putting our money where our mouth is and bringing economic opportunities to the people of this city.

“This is a budget that retains front-line services and delivers the £20m that’s needed for Capital of Culture.”

But deputy Labour leader Paul Brant said: “This package uses the smoke and mirrors of accountancy tricks to find the £20m needed.

“These extraordinary proposals are risky for the council, and show once again why the Audit Commission called Lib- Dem-run Liverpool the worst financially managed council in the country.

“I only hope that no financial shocks hit Liverpool during the next year, because we have virtually no contingencies available.”

davidbartlett