Culture year costs threat to vital city services

Oct 3 2007 by David Bartlett, Liverpool Daily Post

VITAL town hall services in Liverpool may have to be cut to pay for the city’s culture year events.

The council’s chief financial officer, Phil Halsall, last night warned there could be “material” cuts in services if a number of options to fund next year’s extravaganza fall through, as the council is not allowed to fall into deficit.

The cost of funding the so- called “cultural legacy” of 2008 is also identified as a potential financial burden for the future.

Even increasing council tax could not cover the financial problems, a report from Mr Halsall says. He has ordered departments to keep to their budgets, hoard under-spends, and not approve any initiatives requiring funding to offset the £20m still needed for next year’s celebrations. Last night, deputy Labour leader Cllr Paul Brant said with three months to the start of the landmark year the situation was “dire”.

He said it had been brought on by the Liberal Democrat administration’s failure to build up a war chest to pay for the year-long festival, and vulnerable people now faced cuts.

But Cllr Keith Turner, executive member for resources, said none of the options had been ruled out, and all Mr Halsall was doing was laying out all the potential scenarios.

The council has identified three options for funding the £20m left to find: using money from land and building sales, mortgaging council property or using reserves.

But in a financial review Mr Halsall has warned that none of the three options are at all guaranteed.

The council is still awaiting to hear from the Government if it is allowed to spend income from the sale of land and buildings.

But the Government would be breaking its own rules if this were allowed, as capital receipts are supposed to be spent on further capital investment.

Mr Halsall also warns the option to raise a mortgage on council property such as Millennium House carries a “significant level of uncertainty”.

This is because of new accounting rules that come into force in April, 2008, in the wake of the American Enron scandal.

Council officials, the district auditor and the Audit Commission are currently in discussions about this.

The last option is to rely on reserves and balances. However, a budgeted balance of £9m is projected to fall to £800,000.

There is a £7m-plus overspend projected in social services, although a package of one-off measures has been put in place to cover this.

There is about £40m in reserves but these are primarily set aside for future expenditure such as Private Finance Initiative (PFI) contributions for major building projects.

“The option of relying upon the planned use of balances and reserves may not be available if forecast spending is not corrected,” Mr Halsall reports.

“Unless the current trend is reversed, the council will need to succeed in either persuading the Government to allow capitalisation or finalising an alternative financing mechanism.

“Otherwise, with present expenditure trends, it will be faced with a deficit forecast financial position for 2008/09 that it will not be able to resolve by increasing council tax and therefore be required to make material reductions in services.”

Cllr Brant said the Lib-Dem-run council had had since 2003 to start saving for the year-long festival.

He said: “It’s a dire position. Elderly and disabled people face cuts or paying higher charges to pay for Capital of Culture.”

But Cllr Turner said: “All of the options we have identified to fund the budget for next year are still on the table, and there is no question of any of them having been ruled out.

“All the report does is lay out all of the potential scenarios, which is merely good financial practice.

“It would be more helpful if Labour actually worked with us, as their own government has suggested, rather than running around scaremongering and trying to score cheap political points.

“People should remember that this is the same party that claimed at the beginning of the year that leisure centres and libraries would be closing across the city.

“They were proved wrong then and they will be proved wrong now.”

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