Responsible and cautious approach

Reports on page 12, in last week’s County Times, assume that Horsham District Council has neglected the fact that new homes will be built beyond 2012, but those assumptions are wrong. I can confirm that HDC’s financial projections do include an allowance for homes that might be built, in the years ahead.

Of course we know that the number of new homes built in Horsham district is likely to increase significantly (from under 250pa, being the average over the past five years) but we can’t be confident on the levels that will be sustained for the next four to five years, or whether the downward spiral in Government Formula Grant will continue.

Despite efforts to explain how we treat New Homes Bonus on numerous occasions including an interview with a WSCT reporter, your coverage has missed the point and has misled readers.

Whilst we did not build additional NHB for 2014-15 and 2015-16 into our revenue projections, the potential NHB was included when we calculated our reserves. We made that decision, i) because we didn’t want to rely on income that we are not able to control, ii) because the relationship between NHB and formula grant in future years, is not clear, and iii) because we hope at some stage to be able to return some NHB to the community

The comments, by councillor Holmes, suggest that HDC is being unduly pessimistic in its financial projections. Unfortunately his optimism is not supported by experience. Government funding to HDC, like all other local authorities, has been relentlessly reduced in real terms since the recession began.

At last week’s council meeting, I drew attention to the fact that the UK’s GDP is substantially lower than at the start of the recession and that it will be some years before the private sector is again big enough to support the (slimmed down) public sector.

Not only will GDP fail to get back to 2007 levels for many years, but the UK has to pay back national debt, which is currently over £1 trillion (around nine per cent of GDP) and is expected to soar to around £1.6 trillion by 2016.

The fact is that the Government’s cupboard is bare and in the circumstances, it would be naïve to rely on net Government funding to recover, or even flatten out, in the next two to three years.

The Government is also transferring financial risk to local authorities, by replacing half of their council tax revenue with Business Rate income, making HDC vulnerable to the failure of businesses in the district. Clearly HDC must keep enough in reserve to cover that additional risk.

Through the localisation of council tax benefits, the money that HDC previously received from council tax payments is also being reduced and the council will have to find ways to make up the difference.

Whilst the Council Tax Freeze Grant and New Homes Bonus may be seen as new money provided by the Government it has not offset the loss in formula grant.

The Government badged New Homes Bonus as additional money to help fund infrastructure needed for the development of new homes. The council took NHB that it received in 2011-12 and 2012-13, to reserves and did not treat it as a replacement for formula grant.

However, it is now clear that funds received from formula grant will be reduced in future years to pay for the New Homes Bonus and the council has included the NHB it expects to receive in 2013-14 to revenue, to compensate for that. Even with the inclusion of NHB and Council Tax Freeze Grant, it is expected that overall funding from Government will reduce year on year in keeping with Government projections.

Anyone who expected the New Home Bonus to compensate for loss in Formula grant will by now have been thoroughly disillusioned, noting that the Council Tax Freeze bonus will also fall from £203,000 to around £75,000 in 2013-14. It should be noted that the Freeze Grant received is not a year on year increase in funding but is compensation to HDC, for not increasing council tax.

Furthermore, the potential to obtain capital receipts, from development opportunities, is falling away and HDC has to find capital that it didn’t previously have to fund from revenue.

Unlike councillor Holmes, we do not have the luxury of being able to speculate and residents will not be surprised that we are taking a responsible and cautious approach, in the face of the worst recession in living memory, a recession that is not over yet.

HDC has already cut its costs by several million pounds per annum and has over 100 fewer staff than at the start of the recession. That was achieved by excellent teamwork between members and officers, whose productivity has increased significantly andd we should thank them for their continuing dedication.

Not only has productivity increased, but we have sustained discretionary services, such as ASB management, over £250k pa in funding of voluntary organisations, whilst facilitating the transfer of youth provision from WSCC to the parishes.

If as expected, Government funding does not improve, then we will need room to manoeuvre, so that we can continue to maintain such services, by minimising costs and increasing income.

We will make the best of the hand that has been dealt us, so that we can sustain our record of having one of the best and safest places in the UK, in which to live. We will not take irresponsible risks with that heritage.


(Con, Chanctonbury), cabinet member for finance and performance, Horsham District Coiuncil