Havering’s Bankruptcy and Margaret Thatcher

Thatcherite economics in 1979 was straight-forward. Income tax was reduced and capital assets lightly taxed to reward Conservative voters.¹ Lost revenue was replaced with massive increases in regressive taxes like VAT. George Osborne, a Thatcherite without the brains, introduced The Age of Austerity, 2010-24. His freezing of Council Tax ultimately made Havering bankrupt because lost revenue wasn’t replaced.

Ray Morgon borrowed £52m, at 7%, from the government to replace the lost revenue in 2024. This is like using credit cards for day-to-day spending, which is obviously insane. Worse, the council is selling capital assets to fill the hole Osborne made. (Bankrupt aristocrats call this, ‘selling the family silver.’) It’s a futile tactic to buy time.

In a full year, 2% of council tax will be needed to pay the interest on the loan.

Havering is bankrupt because council tax is too low.². Trivial *cuts* like four libraries reduce the deficit by £300,000.³ Havering’s budget is £180M.

What does inflation, 2010-24 tell us?

General inflation: 61%⁴

House price inflation: 100%+⁵

Council tax inflation: 46.7%⁶

The 2024-25 budget deficit is expected to be £32M.⁷This is caused by Council Tax not being inflation linked. Council Tax is a Property Tax.

House price inflation has been at least 100% because of the magic ofThatcherite economics. Wealth in assets is lightly taxed and rises in value. Or, as the Bible says, The rich get richer.⁸ Born-again Thatcherites like Andrew Rosindell probably know this. Meanwhile pot holes are a symptom of bankruptcy.

Ray Morgan and Gillian Ford should beg government for the freedom to set Havering’s Council Tax.

Notes

1 BBC Budget 97 “In his first [1979] Budget he raised VAT from….8% to a single rate of 15%….an increase in prescription charges from 20p to 45p and a major relaxation of exchange controls.” In the same budget higher rate taxation was reduced from 60% to 40%.

2 Havering Council Tax: Is It Too Low? – Politics in Havering

3 Havering launches new library strategy | London Borough of Havering

4 £1 in 2010 → 2024 | UK Inflation Calculator (in2013dollars.com)

5 House Prices in Hornchurch (rightmove.co.uk) 11 Ravensbourne Crescent, Romford increased 142%. 17 Ravenscourt Grove, Hornchurch increased 117%

6 Previous years’ bands | Council Tax bands and bills | London Borough of Havering Using Band D.

7 Cabinet agrees “toughest budget ever” | London Borough of Havering The actual out-turn won’t be £32M because much expenditure is demand led and not quantifiable accurately.

8 Matthew 25:29

Havering’s Cabinet, 12th June 2024

HRA have seamlessly become a minority administration. Opposition leaders Keith Prince and Keith Darvill were absent and only Martin Goode provided scrutiny. He understands ‘opposition’. The key ingredients: turning up and doing homework.

New cabinet member Natasha Summers spoke via Zoom (7 minutes).¹She then switched off her Zoom connexion. Someone should have asked a question to see if she’d left the meeting. (Cabinet members usually stay throughout meetings by-the-by.) Natasha’s presentation avoided the complex financial regime underpinning the contract for social housing (11 minutes) so perhaps that’s why she left.²

Ray Morgon wanted Chris Wilkins to be great. Chris dodged the bullet. His contributions at 1, 15, 18, 23 and 26 minutes were soulless readings of officer statements. Unlike Question Time super-star Barry Mugglestone, Chris doesn’t convince when he’s reading. Martin tried probing questions which Chris sidestepped, leaving answers to officers. Bizarrely³ (26 minutes), in an unscripted comment, he said he was going to lobby the new government. Good luck with that!

The £54M borrowing facility is untouched. It’s very expensive and could be a major expansion item in 2025-6. The systemic growth of Adult and Children’s services currently consumes 79% of the total budget (Gillian Ford 26 minutes). This is an increase of nine percentage points⁴ in two years. Avoiding the budget-killer £54M loan can’t be done.

Worst Team Player: Paul McGeary, who didn’t wear a green tie but at least his wasn’t red!

Notes

1 Annotator Player (mediasite.com) All times relate to this webcast

2 Officer presentation. Natasha reappeared at 20 minutes

3 The definition of insanity is doing the same thing over and over again and expecting a different result. Albert Einstein

4 This is 12.9% growth

Libraries or 30 Minutes Free Parking in Hornchurch and Upminster?

By maintaining the remaining six most visited libraries….the borough will save more than £300,000 per year, with these essential savings going towards the Council’s responsibilities to meet a balanced budget.

Have your say on the future of Havering libraries, disruptions to waste collections, good luck to Romford FC – 12hedonic@gmail.com – Gmail (google.com)

Ray Morgon has identified four libraries that are on life-support machines. As an act of mercy, he’s going to put them out of their misery. Luckily, the resources freed up will create a new Golden Age for the remaining libraries. Even better, they will also help in the battle against bankruptcy. That’s the story.

Balderdash!

What’s actually happening is that the unaffordable 30 minutes free parking period in HRA/Labour’s heartlands will continue. HRA/Labour voters are being rewarded, unlike those in Conservative Romford. The revenue savings from the closure of the libraries is trivial at £300,000. Trivial? Free carparking costs a cool million. Ah, but what about the “balanced budget?”

Balderdash!

HRA/Labour have borrowed £54m at 7% over 20 years. The annual interest to be paid on that is £3.78m. £300,000 doesn’t touch the sides. The Administration is trying to dig itself out of a hole by not taking up the full loan. (This explains the recent sale of four car parks by the way.¹) They are suffering from ‘buyer’s remorse’ when a supposed triumph turns into a nightmare.²

A helpful suggestion

Sell the Marks and Spencer site in Romford.³

Notes

1 Havering’s Impending Bankruptcy: selling carparks – Politics in Havering

2 Buyer’s remorse – Wikipedia

3 Damian White and Romford Marks and Spencer (M&S) July, 2019 – Politics in Havering

Havering’s Impending Bankruptcy: selling carparks

The Council borrowed £54m to pay its bills in Spring 2024 (see Addendum). They are also selling carparks to avoid (postpone?) bankruptcy. Four are going.¹The Romford Recorder ² says they’re worth £9m and that’s why they’re being sold. The other reasons are,

“…they are underused and the aim is to have a better use of the land that can help the council reduce its waiting list backlog for affordable homes..”³

“Underused” is slippery. Two figures need stating, (1) target income, and (2), how big was the shortfall? How long will it be before the lost income equals £9m and, will the council tax from the new properties compensate?

Why is this important?

Finance is paramount when facing bankruptcy and trumps other considerations.⁴ Will the sales help or hinder the council’s problems? £9m is 11% of the shortfall over two years: it’s a drop in the ocean. And the revenue is gone for ever.

Selling income generating assets to fund revenue is insanity. The government is privatising Havering by the deliberate under-funding of statutory services.⁵ Voters will notice when quality-of-life assets are lost. But by then no-one will be able to do anything about it.

The government is forcing Havering to sell assets. The government doesn’t want to fully fund statutory services which Havering must provide. They don’t like the truth that: Taxes are the price we pay for a civilised society.⁶

Addendum: The Loan

This is a government drawdown facility for unfunded statutory⁵ bills. The loan is charged at 7% for 20 years. The interest for 18 full years is £68m. In brief, it increases Council Tax until 2044.

Notes

1 Issue details – Site Disposals under the Asset Disposal Programme 2022-2028 | The London Borough Of Havering

2 Romford Recorder 26^th April 2024 front page

3 loc.cit

4 The massive negative response didn’t see it like that at all. p18

5 Statutory services are those that the council must provide before anything else.

6 Taxes Are What We Pay for Civilized Society – Quote Investigator®

Havering Council Meeting, 22nd November, 2023 (part two)

The principal debate wasn’t about Havering’s impending bankruptcy. Conservatives chose, instead, to discuss Romford Market. This illustrates why Havering is in a mess after 20 years of Conservative rule.

In the 1990s Arthur Latham listened to the traders and spent £1,000s on cobble stones and £1,000s removing them because shoppers hated them. Traders spoke, Latham listened: it was an expensive mistake.

David Taylor (@1:06)¹discussed the survival of the market. Adopting a conspiracy theory, he accused HRA of attacking Romford itself. Graham Williamson (@1:11) pointed out the market was very costly.

Romford Market is in a death spiral. The,

“….number of traders was in long-term decline with 339 traders in 1985, 266 traders in 1995 and 170 traders in 2005. By 2015 the number of regular traders had declined to 90.”² Reducing once more to 60 in 2023 according to Williamson.

Veteran councillor Michael White (@1:29) said blaming Conservatives for doing nothing after 20 years in power was unfair. Timothy Ryan (@1:32) recounted stories about his childhood. Ray Morgon (@1:35) was surprisingly enthusiastic.

Conservatives demanding subsidies for lame ducks is strange. The Administration refused to say that subsidising Romford Market was throwing good money after bad. This is despite the fact that Romford Market has been on life-support for 30 years.

What would Margaret Thatcher do?

Addendum: Margaret Thatcher on lame duck industries

“…her policies had consigned out-dated, lame-duck industries to the nostalgia books…”³Ironically she’s revered by Romford’s Conservatives, especially their MP.

Notes

1 Annotator Player (sonicfoundry.com) Times in brackets indicate when speeches begin and relate to this webcast

2 Romford Market – Wikipedia

3 An economic dawn in the wastelands | The Northern Echo

Havering’s Budget Proposal for 30 Minutes Free Parking

Havering council is facing bankruptcy¹ and has a reckless budget proposal. The maintenance of 30 minutes free parking in Hornchurch and Upminster is expensive² and untenable. Worse, there’s no evidence that it helps shopkeepers, which is, allegedly, the justification for the policy.

Havering council’s free car parking policy is gesture politics. It’s claimed that shoppers demand free parking or shopkeepers will suffer along with the borough. The evidence is that the cost of car parking is less important than access to good quality parking. This is especially the case where shopping centres are pedestrianised or where cars have restrictions placed on them,

“Studies from the UK found an increase in trading of up to 40% across a number of pedestrianised sites.”³

Additionally, the other car parking proposals make the policy quixotic. The council intends to create £3 million of additional revenue. There will be charges for Sunday car parking, and increases for on and off-street parking, parking permits and in parks.⁴ Car parking charges in parks is a blow to the principal leisure activity for residents. (It could be halved if the 30 minutes charge was abandoned.)

Does anyone believe this policy will survive the bankruptcy solutions of Government Commissioners?

Notes

1 Havering’s Impending Bankruptcy: The Road to Disaster (part one) – Politics in Havering

2 Council passes Havering budget for 2023/24 | The London Borough Of Havering It cost £650K in lost revenue in 2023-4. This will increase to about £750K in 2024-5.

3 Reclaiming the streets: the increasing trend of pedestrianisation around the world | Rapid Transition Alliance

4 (Public Pack)Agenda Document for Cabinet, 08/11/2023 19:30 (havering.gov.uk)

Havering Cabinet Meeting: 8th November, 2023

Havering is facing bankruptcy because of Conservative government policies. It has off-loaded statutory duties onto Havering without funding them.¹ Consequently, the council taxpayer meets the costs of social care for adults and children. The direction of travel is that the entire budget will be consumed by these items.

Ray Morgon (@2)² led a blistering attack on the incompetence of the Conservative government. He scorned the Austerity programme, 2010-23. Chris Wilkins (@6), denounced the government’s use of the 2011 Census for Havering’s funding formula.

Gillian Ford (@11) said a 102-year-old woman could be evicted to save money. This might suit Boris Johnson but Gillian was outraged. Oscar Ford (@14) identified *hedge funds* as profiteers from children’s services. He prefers the Scottish no-profit system. Keith Darvill (@15) quoted woeful statistics about homelessness, which made him despair.

Paul Middleton (@22) confirmed libraries would be affected. Graham Williamson (@23) said the decline in the planning services continued. Barry Mugglestone (@27) defended his untenable 30 minutes free parking policy. The current financial situation makes this a luxury and there’s no evidence it works.

Keith Prince (@29) got Williamson to admit Havering’s police funding would be paid by ‘someone or other’. Mysterious! Martin Goode (@40) jog-trotted through the proposals. A feral cabinet³ attacked him. They didn’t like his pithy “scrambling in the dark” summary of their efforts.

The CEO (@58) reiterated his passion for lobbying. This is a triumph of hope over experience.

The Conservatives have thrown down the gauntlet to local government.⁴ Local councils should exploit the fact that 2024 is an election year and go into battle!

Notes

1 No solution to ‘broken’ children’s services that are crippling council budgets, MPs warned (msn.com)

2 All times relate to the webcast Annotator Player (sonicfoundry.com) @2 means 2 minutes into the webcast.

3 Mugglestone, Middleton, G. Ford and Darvill

4 Surrey Council tax rise of 15% scrapped – BBC News As there are 4 cabinet ministers in Surrey it’s widely believed a back stairs deal was done with the government. See also Havering Council Tax: Is It Too Low? – Politics in Havering

Havering’s Impending Bankruptcy: The Road to Disaster (part two)

Margaret Thatcher’s prime ministership ended after introducing the Poll Tax for council financing. Every property was charged the same amount. A one-bedroom flat was taxed like a mansion. It provoked riots and she lost support in her party.

Panic-stricken, the Conservative government introduced Council Tax. Eight bands, loosely based on 1991¹ evaluations, remain to this day. These valuation bands are supposed to reflect house prices across the country.

The intention was that bands would be reviewed every five years. This would have captured changes in real time. Political cowardice prevented revaluations happening. Winners are happy and losers scream blue murder with obvious electoral consequences. London’s 73 MPs absolutely opposed re-establishing the link between property values and council tax. London’s house prices had rocketed and they didn’t want council tax to double as a consequence.

In Havering, Band D house prices in Rainham have increased eight times since 1991.²The earliest statement of council tax bands are for 1993-4 when band D was set at £535.³ For 2023-4, Band D is £2,088 – four times more.

Havering’s council tax would double if it was a property tax.

Havering’s road to disaster began in 1991. A panic-stricken Conservative government tried to rescue themselves after Margaret Thatcher. They made disastrous decisions, which have lasted 32 years. Havering’s 2023-4 budget raised £149m from council tax.⁴ This should have been a minimum of £300 million. And more if upward revaluations are included.

Havering is a victim of national politics.

Notes

1 How domestic properties are assessed for Council Tax bands – GOV.UK (www.gov.uk)

2 House Prices in Guysfield Drive, Rainham, Havering, London, RM13 (rightmove.co.uk)

3 Previous years’ bands | Council Tax bands and bills | The London Borough Of Havering

4 Decision – The 23/24 Council Budget setting report and 2023-2027 Medium Term Financial Strategy | The London Borough Of Havering

Havering’s Impending Bankruptcy: The Road to Disaster (part one)

Havering’s Strategy Director Kathy Freeman stated: “We are very close to issuing a section 114, [bankruptcy] even six months away from this happening. Our average resources cannot meet the financial requirements.¹

In 2010 Conservative chancellor, George Osborne,² (see addendum) began his attack on local government. Without profiling the financial needs of local government, he capped Council Tax increases to zero%.

Instantly, he demonstrated he didn’t understand two fundamental fiscal principles;

The corrosive impact of inflation
The corrosive impact of the compounding of inflation.

Osborne’s decision was based on ‘something for nothing’.⁴ He talked of ‘waste’ and ‘inefficiencies’ to confuse the electorate. Simultaneously, additional duties and responsibilities were imposed on councils.

Since 2010, British inflation has been 46.88%.⁵Havering’s stand still council tax should have increased at the same pace. In 2010-11 a band D was £1,505. This year, 2023-4, it’s £2,088.13. Inflation linked council tax would have brought the figure to £2,210.56. Havering is minus £122.43 per band D house. There are 107,798 houses in Havering and band D is the average. Osborne’s misunderstanding about inflation has cost Havering approximately £14 million annually.

But the Conservative chancellors weren’t finished with their attack on local government. They reduced government funding. In 2010, Havering received £70 million. In 2023-4, it was £2.9 million. A real reduction of £100 million per year.

The cost of Conservative policies, 2010-23, for Havering is £119 million per year. This is why Havering will probably go bankrupt.

Addendum: Conservative chancellors 2010-23 (their university degree in brackets)

George Osborne (History)
Philip Hammond (Philosophy, politics and economics)
Sajid Javid (Economics and politics)
Rishi Sunak (Philosophy, politics and economics)
Nadhim Zahawi (Chemical engineering)
Kwasi Kwartang (Classics and history)
Jeremy Hunt (Philosophy, politics and economics)

Notes

1 Havering Council balancing on the brink of bankruptcy-A ‘114’ could be issued within months. – The Havering Daily

2 Osborne was educated at private schools: George Osborne – Wikipedia

3 Council funding for taxi trips for Havering school children with special needs to cease (taxi-point.co.uk) “….reimbursement for fuel or a trip via ride-hailing service Uber would cost approximately £30 per day….disabled children will experience changes, ‘appropriate measures’ will be taken to ensure their needs are appropriately addressed.” The human cost of bankruptcy. The weakest and most vulnerable suffer first

4 The 2016 Brexit referendum ‘battle-bus’ is identical with the false claim that leaving the EU would ‘free up’ £350m a week for the NHS.

5 Inflation calculator | Bank of England

Havering’s Budget: Between a Rock and Hard Place

Havering’s administration is delusional. They refuse to accept that government underfunding of Havering is policy. The government is in perma-turmoil and their policies are too.¹ The administration ignores all the evidence and asks MPs to assist. It’s as if Havering’s MPs are an unknown.²

On consecutive nights, government underfunding was demonstrated.^3,4On the 7^th February, officers used many slides showing the iniquities of Outer London’s funding formula. Havering is hardest hit because of our peculiar demographics.

Gillian Ford is a fan of lobbying despite knowing the funding formula hasn’t changed since 2013.⁵ Oscar Ford focused on demographic changes in Havering with costs associated with increasing the numbers of children.⁶ Lobbying won’t change anything. Paul McGeary said rents only increased by 7% instead of 13.6% because of government intervention. A government decision to reduce rent increases from 13.6% to 7% was for Housing Benefits⁷ reasons not to help tenants during the cost-of-living crisis.

The council should lobby to increase the council tax cap.⁸ An increase to 10% would mean Havering avoiding bankruptcy in 2026. Lobbying to avoid bankruptcy would embarrass the government. It’s high-risk but death by a 1,000 government generated cuts is worse. Government will blame Havering whatever decisions are made. Why not take the battle to the government and pillory them for capricious incompetence?

Notes

1 Three Prime Ministers and four Chancellors of the Exchequer

2 Julia Lopez is a minister and wont bite the hand that feeds her. Andrew Rosindell’s a veteran MP who always supports the government on financial matters.

3 Overview and Scrutiny Board meeting 7^th February 2023 Annotator Player (sonicfoundry.com)

4 Cabinet meeting 8^th February 2023 Annotator Player (sonicfoundry.com)

5 Go to 38-43 mins where she cites two organisations, which, allegedly, have influence

6 Go to 45 minutes. He says the government is “incapable”. This implies he knows the government is incompetent insofar as they don’t understand their own policy.

7 At 9 minutes

8 Four bankrupt councils have increased their council tax by 10%+. They were all bankrupted by searching for additional revenue to pay for statutory services through commercial activities. They all failed