Response to article in the Daily Telegraph

7 March 2011

Today 7^th March 2011 the Daily Telegraph carried a comment piece about the council’s financial management, which contains several major inaccuracies. We have sent a letter to the newspaper’s editor correcting the errors and await his response. In the meantime, below is the complete set of questions put to us by the Telegraph’s reporter and our detailed answers, followed by a link to the Cabinet report which also fully explains the funding situation the council faces in an open and transparent way.

Questions

1. In a press release on 16 November 2010 you stated that “the level of cuts is now so severe” you would have to make savings “in the region of £60m next year alone.” The current (Feb/Mar) issue of Haringey People says that “Haringey will be forced to make savings of £46m next year alone.” However your actual figure for cuts is now £41 million, two-thirds of the amount you first claimed. What is the explanation for the discrepancy and the steady reduction in the amount of the cut? Has the council been sabre-rattling?

The figure of up to £60m was the worst case scenario based on limited information provided by the government in their spending review, before the provisional formula grant notification in mid-December.

Following December’s grant notification, the projection was £46m. This has since been reduced to £41m following confirmation on various levies, provisions and the New Homes Bonus. This latter figure was confirmed to us only on February 8.

2. In his report to February’s cabinet, long after the grant settlement was announced, Joe Goldberg said that “for every £10 we had, we will only have £6.50,” ie a 35% cut. What is the basis for this claim? £41m is nothing like a 35% cut.

As has been made clear previously, the figure of £6.50 is over a three-year planning period and reflects the real terms cut, taking account of the inflation at the government’s own estimates.

Government grants

3. You blame these cuts on the loss of government grants. According to DCLG figures, however, the formula grant to Haringey will actually increase next year, from £144m to £153m. I understand that some grants previously separate from the formula grant have been “rolled into” it – is this the explanation? Could you give me a breakdown of exactly what grants you received this year and will lose next year?

Yes, this is because some grants have been rolled in. The like-for-like comparison figure provided by the government for 2011/12 is £172.7m, so the formula grant reduction alone is £19.5m.

4. In a report to December’s cabinet, after the grant settlement was announced (agenda item 91, para 7.7) you state that you have suffered a total reduction in grant, after adjustment for the roll-in, of £26.9m. In February, you state that the 2011/12 settlement “represents a confirmed grant loss of £34m” in 2011/12 (agenda item 125, par 7.2). Then in par 8.8 of the same report you go back to the £26.9m figure. Which is it?

£34m relates to all grants that have been either reduced or removed. £26.9m is a like-for-like comparison of what the government now terms formula grants and core grants. The government has chosen to exclude from its own assessment of grant reduction grants that have been abolished.

5. If, as you say, the loss of grant for 2011/12 is £26.9m (or £34m), why are you cutting £41m?

In addition to formula and core grant reductions, there are other reductions and there is also the impact of increased service demand pressures, particularly regarding children’s services, homelessness and concessionary fares, together with the impact of forecast inflation. The net impact of all these changes has led us to have to identify £41m savings.

6. You state in your report to December’s cabinet (agenda item 91, par 7.7) that the total loss of grant over the three-year period to 2014 will be £42.3m. Why then are you talking about the need to cut £84m over this period?

As explained above, the £42.3m only included formula and core grants, on top of this grant loss has to be added the service demand and inflationary pressures set out above.

7. You state that the figures you give for government grant exclude council tax grant. How much is this worth? Why hasn’t it been included in your calculations?

Council Tax grant of £2.5m was excluded from a table in the Cabinet report as the government excluded it from its own year-on-year grant comparisons. The report does however make it clear that this grant has been included in the overall medium term financial plan projections on the basis that the council would not increase council tax.

Your overall expenditure

8. Your total general fund expenditure in 2011/12 will be £286m (Feb cabinet, agenda item 125, par 3.15). This is £44m higher than in 2009/10. Even after inflation, it is still higher. How is this a cut?

You are not comparing like with like. The government has chosen to ‘roll grants in’ to the formula grant which had previously been netted off. We have therefore grossed up grants in determining the overall budget requirement for 2011/12. A similar exercise in 2009/10 would have given a much greater number.

9. The need for most cuts appears to arise from the sudden arrival in the accounts of a mysterious “change and variation” – increased demand for spending - of £26.4m in 2011/12 alone (Appendix 1 to agenda item 125, Feb cabinet.) What is this?

Changes and variations are included each year in the council’s budget. This includes increases in demand for services which the council has a statutory duty to provide – including children’s safeguarding, homelessness, older people’s welfare, concessionary fares and an estimate of future inflationary cost pressures. For 2011/12 this also includes a small amount covering the government’s increase in employers’ National Insurance.

10. You say that there will be more “pressure on,” ie demand for, services - £16.8m over the next three years. Is it plausible to expect, as you do, that £14.2m of this extra demand will come next year alone? Are you frontloading to make the squeeze look worse?

No. The increase in demand for 2011/12 reflects the pressures we have already experienced in 2010/11 in areas where the council has a statutory duty. On-going changes to the benefits system, higher unemployment and inflation carry the serious risk of driving up the number of vulnerable people and families the council has to support.

11. Is your estimate of £25m for 1000 redundancies (an average redundancy payment of £25,000 per person) too high?

No. This figure takes account not only of statutory redundancy payments, but also significant payments to the Local Government pension fund for staff who have retired early on the grounds of redundancy. These are statutory payments under the government’s national LG pension fund scheme.

12. I see no evidence in the documents that you have accounted for the public-sector pay freeze this year and next. How much will this save you? Has this saving been factored in to your budget?

No provision has been included for a pay increase in 2011/12, only an increase in employers’ national insurance contribution. Any saving due to the pay freeze has already been factored into the council’s budget.

13. From next year the Localism Bill will introduce various changes that should make financial planning easier, such as far greater flexibility over how you spend government grants, changes to the HRA and a reduction in your duty to the homeless. Have these been factored in to your budget for 2012/13 onwards?

There is nothing in the Localism Bill to date which suggests that balancing budgets in the future will be any easier – the government has not removed any of the statutory responsibilities for providing services. The proposals relating to the HRA have no impact on Council Tax as the HRA account continues to be ring fenced.

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Your claims about the impact of the cuts

14. Mr Goldberg claims that these cuts represent a “disaster for the sustainability of much-valued frontline services” and Claire Kober describes them as a “hammer blow to the people of Haringey.” However, I have examined the detailed list of cuts attached to the February report to Cabinet and note that around £9m of them in FY 11/12 – ie just under a quarter, by value - are assessed by even the council itself as having a nil, minimal, or indeed beneficial impact on service users. Have you exaggerated these cuts’ impact?

No. £41m of cuts will have a devastating impact. The council has sought to protect frontline services where possible but every saving will impact on services and on residents.

Even by your own reckoning, ¾ of the cuts will have a devastating impact. Many of these savings are expressed in terms of the relative direct impact on residents and inequalities – this is not to say that any of these can be implemented with ‘no impact’ on our service offer overall.

Are you cutting the right things?

15. Undeniably, some important frontline services will be cut. But could the council have saved at least some of these by cutting other areas instead? I have examined your monthly expenditure returns and note that in December alone, for instance, you spent £82,844 on taxis (compared to £13,344 on Tube travel) and £225,917 on food and drink. These are high figures – were they necessary?

The expenditure on ‘taxis’ is mostly made up of contact and escort visits for looked after children, and for school runs.

The food and drink category is a mixture of spending on meals on wheels and contracted suppliers for school catering and care homes.

16. I have also noted cumulatively quite substantial payments to bodies such as the Haringey Race and Equality Council, the Haringey Women’s Forum, African Caribbean Leadership Council, the Bangladeshi Women’s Association, etc – these all seem to be absent from the list of proposed cuts even though youth services and care homes are being closed. These may be worthy bodies but should they be more sheltered from cuts than frontline services? Is the council correct to claim that it has been given “very little room for manoeuvre?”

In light of government cuts, we are undertaking a comprehensive review of funding arrangements for all voluntary sector groups in Haringey, and are consulting with the sector before making any final decision on those we will continue funding. We will focus resources on those services which help and protect the most vulnerable and which are consistent with our overall voluntary sector funding criteria.

17. What is the status of your project to deliver a new civic centre? Is it proceeding?

There are no plans to sell the Civic Centre and redevelopment plans have been put on hold indefinitely.

18. What are the payments in the expenditure returns to the Tottenham Hotspur Foundation for “leisure and entertainment?”

The expenditure with the Tottenham Hotspur Foundation was for youth holiday provision during the October half-term.

19. I note that Haringey has 64% more staff on salaries over £50,000 than Hackney does (554 to their 337) – even though the two boroughs have similar populations and ethnic mix and Hackney has greater levels of deprivation. Hackney also has 12 people earning over £100k, compared to your 21. (All figures from 2009/10.) Is Haringey overpaying its staff?

According to the statement of accounts for 2009/10, Haringey Council employed 268 staff on £50,000 or more, nothing like the figure you give and well below the number employed by Hackney. It also states that the council employs 11 staff on £100,000 of more. The statement of employee salaries, on page 44 of the accounts, captures salaries from £50k to £150k.

There were two members of staff earning more than this figure, the chief executive and director of children’s services. Add these to the above and you get 270 staff earning £50,000 or more and 13 earning £100,000 or more.

20. I note that members’ allowances – at just under £1.4m – rose by 58 per cent over a four-year period (2005-9) and remain substantially higher than most comparable boroughs (eg Hackney £1.1m, Camden £947,000). Is Haringey overpaying its councillors? Shouldn’t they be sharing the pain?

Members’ allowances have not been increased since 2008/09. Unlike many authorities, members have to cover their expenses out of their allowance, including phone bills and travel within the M25.

The number of Cabinet members has been reduced from 10 to eight.

Following a governance review in January, the number of councillors in receipt of a special responsibility allowance has been reduced, delivering a saving of £125,000.

Cabinet reports

The following reports were presented to Cabinet on 8 February 2011:

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