Uttlesford District Council row over £4m 'black hole'

Picture of cash notes. A row has broken out at Uttlesford District Council about the use of rental income

Uttlesford District Council will not be able to use as much money from its investments to support council services - Credit: PA

A war of words has broken out about finance changes which will mean less money to support Uttlesford District Council services in future years, amid claims of a "£4m black hole".

Rule changes, introduced by central Government just before Christmas, will limit the use of rental income from UDC's commercial property investment portfolios to cover council expenditure.

The current rental income is forecast to be £7.1m by 2023/24. The government’s changes will progressively allow less of this income to be used, reducing it by about £1m a year over four years, up to 2027.

Uttlesford’s Green and Liberal Democrat councillors are calling for an independent financial audit.

They claim that ruling party Residents for Uttlesford (R4U) have not followed the Prudential Code on borrowing, and are not being transparent about a £4m of future budget cuts "black hole".  These claims have been strongly refuted by the council.

UDC point out that the current commercial strategy started in 2017, they have complied with the relevant requirements, and the rules changed in December 2021.

They also point to the property portfolio, whose latest independent quarterly external valuation states it is worth an estimated £40 million more than the council paid for it – and is still returning at or above the levels of predicted rental income from commercial tenants.

Cllr Petrina Lees, Residents for Uttlesford

Cllr Petrina Lees, Residents for Uttlesford - Credit: Residents for Uttlesford (R4U)

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Cllr Petrina Lees, Leader of the Council, said: “These national government changes are out of our control and affect many councils. They will not have an instant impact on us – but we are being proactive so that we can adjust to the new reality.

“As we make budgetary changes over the next few years I can assure residents that our underlying values and ambitions to support improved outcomes for them remains as strong as ever, as does our commitment to delivering good services.”

Councillor Neil Hargreaves. Picture: R4U

Councillor Neil Hargreaves - Credit: Residents For Uttlesford

Cllr Neil Hargreaves, Deputy Leader and portfolio holder for finance and budget, said: “The government has been continually reducing local authority funding.

"UDC has managed to avoid passing on those major spending cuts to residents, largely due to income from our highly successful and low risk commercial investment strategy.

“Although the government is mandating that we are no longer allowed to use a significant amount of our £7.1m a year income, it has offered no replacement funding.

“However, in the past we’ve shown we are good at finding solutions and we will adapt and continue to innovate so that we can continue to meet the needs of our residents.”

Opposition party members have strongly disagreed with the statements made.

Councillor Melvin Caton, Liberal Democrat group leader

Councillor Melvin Caton, Liberal Democrat group leader - Credit: Uttlesford District Council

Leader of the Lib Dem opposition group, Cllr Melvin Caton said: “Once again, R4U cynically blames the Government for this financial debacle.

"Liberal Democrat and Green councillors have regularly expressed their concerns over the way the council’s investment programme has been run and called for better transparency and improved governance in the process. These concerns were dismissed as playing politics." 

Councillor Vere Isham, Green Party member of Uttlesford District Council

Councillor Vere Isham, Green Party member of Uttlesford District Council - Credit: Uttlesford District Council

Councillor Vere Isham, co-leader of the council’s Green group, said: “The council leadership ignored clear signals from the Government starting in October 2019, when the government raised interest rates on borrowing by Local Authorities.”

Lib Dem: Alan Dean.

Uttlesford Lib Dem councillor Alan Dean. - Credit: Archant

Lib Dem Cllr Alan Dean said: “The Lib Dems and Greens are very concerned at the inevitable cutting of services and the staff job losses that this budget black hole will bring and we are calling for an independent forensic audit to be conducted and an explanation why no assessment of the risk of the government changing the rules was undertaken until it was too late.”

Uttlesford District Council has said that over the coming months they will explore different options and solutions to minimise the future impact.

They have said the impact of these changes will not be felt until the 2023/24 financial year and therefore no alterations are proposed in the draft 2022/23 budget.

Draft proposals for the 2022/23 budget will be put before the Scrutiny Committee on February 3, before going to Cabinet on February10  and then for final approval by Full Council on February 22.