Scilly’s Council Could Borrow ‘Up To £4m’ To Plug Black Hole In Budget

Scilly’s Council could borrow up to £4m and raid cash kept aside for other services in order to fill a looming hole in its budget.

Councillors again discussed the growing crisis at the Finance, Audit and Scrutiny Committee on Tuesday, where Head of Development Diana Mompoloki told them the authority is likely to be overspent by up to £450,000 by the end of the financial year in March.

It’s the first time this important committee has met in six months, even though the Council is facing a severe financial crisis.

Committee Chairman Cllr Steve Sims described this as, “a bit of a cock-up really,” and blamed a lack of available finance officers for the delay.

It’s a worrying time for councillors because they found out in December, following an external audit by the accountancy firm Grant Thornton, that their cash reserves stand at just £500,000 – half what they thought at the start of the year.

Any overspend this year will need to come from reserves, which cannot legally go into the red.

In response to a question from Cllr Gordon Bilsborough, Ms Mompoloki said she couldn’t give a final figure for the level of the Council’s cash reserves by March as the accounts from last year hadn’t been signed off yet.

But she said they, “will not be healthy” and “below the threshold that members have set.”

One possible solution is for the Council to borrow its way out of the shortfall.

Ms Mompoloki told councillors that they had often taken a decision in the past to borrow for projects such as resurfacing the roads, but then taken the money from reserves rather than borrowing.

“It’s about catching up with the decisions that members made previously,” said Diana.

Cllr Sims agreed. “The reason why reserves are in the situation they are at the moment is because we did spend £1.5m on the roads. If we hadn’t done that they’d be very healthy,” he told councillors.

But St Martin’s councillor Colin Daly questioned the legality of borrowing money to “top-up” the authority’s reserves.

Ms Mompoloki said it wasn’t “topping-up reserves,” but instead was, “borrowing where we already said we were going to borrow.”

“It’s completely legal and that’s what every other authority does,” said Ms Mompoloki.

She explained to Colin that the Council would be borrowing against their assets.

“You wouldn’t want to just randomly borrow lots of money and then pay it all back. That would be like some dodgy debt consolidation scheme,” she told him.

“It all sounds like that to me,” he responded.

Cllr Daly also asked how much the Council would need to borrow and was told it could be up to £4m over five years.

Officers are also planning to review their so-called earmarked reserves, which are set aside for specific functions such as housing, water, sewerage and the airport.

Ms Mompoloki said they would be looking at whether some of that money could be brought back into the general reserves.

The final accounts for the year ending March 2015 are set to be signed off at the end of this month, by which time councillors will have a better idea of how serious their financial situation is.

8 Responses to Scilly’s Council Could Borrow ‘Up To £4m’ To Plug Black Hole In Budget

  1. Fran Grottick January 18, 2017 at 5:36 pm

    Please note that the 151 officer would have to approve any borrowing. Please also note that several members, including myself, had attempted to gain more information about finances and savings required since last March and are deeply disappointed to find ourselves in this position.
    Please also note that there is a public meeting to discuss finance and savings issues in the Old Wesleyan Chapel at eleven this Saturday, 21st January.
    Please do attend and give your views,
    Regards Fran 422424

    • Nemo January 20, 2017 at 2:41 pm

      Despite the claims made in the meeting reported above, there seems a distinct lack of a mention of anything to do with borrowing to ‘plug the black hole in the budget’ in next week’s budget savings option list which is now available..

      ..was it all just made up then?

      • Toxic Brand January 23, 2017 at 3:03 pm

        Dear Nemo,

        The reason the black hole wasn’t mentioned was because like everything else they’ve fallen behind and hit a cost overrun on its excavation oh; and there is a dispute with the auditors over when the bottom has been achieved.
        The meeting made it blindingly obvious just how incredibly badly things have been run for the last couple of years.

  2. We're paying for experts, so, um, where are they?? January 13, 2017 at 8:32 pm

    Where was the section151 officer and what does he say about all this borrowing out of trouble stuff? I wouldn’t believe a word of these others, I’d prefer to listen to the qualified experts only, and, imho, so should the members. I get that your flying s.151 may not be in the office every day, but surely you want him at your actual decision making meetings wouldn’t you?

    • D. Spare January 18, 2017 at 5:11 pm

      Don’t be ridiculous, this is the Isles of Scilly Council.

  3. Mr Micawber January 13, 2017 at 8:16 pm

    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.” – (Chapter 12)

  4. Adam Morton, St.Martins January 13, 2017 at 9:43 am

    Surely loans have to be paid back plus interest? That works out more expensive?
    I suppose that quite a few will jump ship at the next election so the mess won’t matter to them.
    If the “smart grid” goes over budget by the same amount as the other projects, we could be looking at a massive bankruptcy.
    It’s all about creating jobs to handle funding not making the funding bring about any improvements.That’s why she keeps trying to create fishing bylaws so as they can then demand funding to enforce them!
    They don’t care about the future because they simply move on and leave scorched earth.
    I really don’t care if they empty the reserve IF its spent helping the economy plug the gap in the future but there is NO evidence that this is the case. “We” have a sports facility built off a free money tree and now the running costs can’t serviced , but let’s just grab whatever grants we can for any purpose irrelevant of need , just because we can (at the time)!
    Councilor Sims proposed 37% airport fees increase will look miniscule when the facility loses its current Tresco trade!
    When this smart grid is done , the “islands” will have had over £60m + on top of normal Council funding so they really cannot claim that Government cuts are to blame. Yet the economy is no better able to support itself long term . I see another Council workshop is up for grabs at an absolute gift rent, how’s the innovating going down at Porthmellon?

  5. Morris January 12, 2017 at 10:54 pm

    Look out fellow charge-payers Ms Mistress of Overspends, the current “fox in the financial hen house” has her eyes on the earmarked reserves. It cannot and ethically should not be the case that the earmarked reserves are “brought back into the General Reserves” because they have never been part of the General Reserves.
    What an absolute unmitigated shambles, the Chairman of the Finance Committee should be deeply ashamed that he has not held meetings and demanded effective coherent answers to the many questions he and others on the committee should have been posing to the relevant officers.
    This is what happens when the clueless are overseen by the feckless.