'Turning point' for council finances after disruption and pain from pandemic

'For too long public services have been in retreat. But with this budget I hope we've turned a page'

By Euan Duncan
Tuesday, 22nd February 2022, 3:56 pm
Updated Tuesday, 22nd February 2022, 3:58 pm

After years of "public services in retreat", Luton's Labour ruling group hopes to have reached "a turning point" with its budget for 2022/23.

The borough council’s finances were inspected by the Chartered Institute for Public Finance and Accountancy (CIPFA) last year, after the local authority requested more funding support after the impact of the pandemic.

The budget is based on the council receiving no dividend again from Luton Rising (formerly London Luton Airport Limited) in 2022/23, as in 2021/22.

Luton Town Hall

The final dividend declared, but ultimately not paid by the airport company, in 2019/20 was £19.125m.

This issue was managed by the use of £15.7m of the capitalisation direction allowed by government, as well as the extra savings approved in the 2020/21 emergency budget, according to a report to full council on February 21.

"The CIPFA report, while praising a pro-active approach to the pressures arising from Covid, highlighted a major long-term financial challenge still facing the council," said the report.

The proposed increase in the local authority’s share of council tax is 1.99 per cent, with a one per cent adult social care precept.

Presenting the budget, Labour High Town councillor Andy Malcolm told the council: "Our strategy for growth and investment was hit hard, in particular London Luton Airport.

"But we collectively understood the importance of the airport to our town, and standing by it during a global pandemic was the right thing to do," he said.

"We agreed a stabilisation package for our airport company to see it through these difficult times. The last two years have caused significant disruption and pain.

"This is a budget which invests in services, such as cleaning our streets and repairing our roads, improving our playgrounds and strengthening our enforcement.

"These are things we've longed desired to do, but circumstance has constrained us. For too long public services have been in retreat. But with this budget I hope we've turned a page."

Liberal Democrat Barnfield councillor David Franks referred to borrowing being predicted to reach £963m by March 2025.

"That's almost twice the council's total annual expenditure ... is that a sensible way to run a local authority?" he asked.

"He's struggling to get auditors to sign off accounts which should have been finalised almost four years ago.

"He says the business rate increases linked to the enterprise zone are important.

"Since there's little prospect of a robust business case for the access road we can't see how he'll ever get business rates out of the enterprise zone.

"Time must be running out for that. It's probably already run out, as the government rules around that were time limited."

Councillor Franks noted plans to loan the airport company a further £8.3m in 2022/23 and £1.8m in 2023/24.

Councillor Malcolm, who's the portfolio holder for finance, replied: "The spending over the next couple of years is for projects which have been agreed and accessed already. That spending doesn't always happen immediately.

"The value of the airport is around three times the amount of the outstanding loans."

Regulatory changes on how councils are required to make their minimum revenue provision could be introduced by the government, after a consultation period which ended earlier this month.

"If implemented in its current form, this will have a multi-million pound negative impact on the council’s budget and savings requirements annually from 2023/24," warned the report.

"The government proposes to require councils to make an annual minimum revenue provision on all capital loans.

"LBC currently has approved loans of up to £508m to Luton Rising, and doesn't make a charge to revenue for those loans on the basis they're repayable in full when the airport concession is re-let."

The budget was opposed by the Liberal Democrats, but approved by the majority Labour group.