With a general election approaching, politicians, pundits and voters are watching the performance of Green Party led councils. Can they provide a new way of governing that addresses the need of their constituents, demonstrates financial responsibility, and still upholds their environmental ethic?
There are so many ‘Don’t Know’ voters wondering to whom to entrust their vote. So Mid Suffolk District Council is particularly in the spotlight. A Conservative dominated council since 2003 it is, following the 2023 local elections, now under Green Party control. This makes Mid Suffolk District Council the first Green Party run council in the UK.
Understanding their inheritance
Prior to taking over the council the new Green leader, Andy Mellen, expressed concern about the council’s financing. So, over the past nine months there has been much scrutiny over the level of debt, the long-term fixed-rate interest payments, its reserves and the financial performance of CIFCO.
CIFCO is a joint venture with Babergh District Council, with whom Mid Suffolk also share council offices and staff. Established in 2017 under the Tory administration, CIFCO, through purchase, renovation and rental of commercial properties across the UK, provides a long-term income stream for both councils. John Whitehead, Conservative councillor and cabinet member for finance until May 2023, has said “I think that in CIFCO we will have created a long-term very positive legacy asset. Given the choice of paying the full cost of having my bin emptied or having it subsidised by a CIFCO rent-paying tenant in say Milton Keynes, then I’d clearly choose the latter”.
While it acknowledges that CIFCO is well run, the Green Party is primarily concerned that none of the portfolio of 21 commercial investments are within Mid Suffolk constituency and that the investment money was not used to provide much-needed housing. That and the fact the CIFCO income only accounts for about 10% (£1.5m) of income into the General Fund budget and that the portfolio lost 12% of its capital value in FY22/23.
Rachel Eburne, Green Party cabinet member for finance and resources, tells us: “In taking over the council we have been meticulous in examining finances, to fully understand the council’s exposure and determine how we may ensure better due diligence, such that council staff are impressed by our thoroughness.” But in doing so the council have identified shortcomings including a ‘concerning’ backlog of needed house repairs which will cost £672,000.
Financing a local authority differs from running a business
Local authority financing is more complicated than that for ordinary businesses. There are restrictions on how a council may use its General Fund Revenue Account and, if it owns more than 199 council houses, its Housing Revenue Account. There is also an obligation to keep a Minimum Revenue Provision (MRP). This is the minimum amount which a council must set aside as provision for repaying external borrowing (loans).
As Mid Suffolk District Council has 3,357 council houses, it must have a Housing Revenue Account. This is ring-fenced money from council house rental income and may only be used for upgrading or retrofitting housing owned by the council. If the council wishes to build public housing, it must finance this from its General Fund and then sell the houses. Typically councils sell these to a Housing Association but in doing so they lose control of them. The General Fund is also used to finance all other council services, and receives the CIFCO income.
The previous Tory administration prided themselves on consistently reporting budget surpluses, increasing reserves, while either freezing or minimising council tax. In contrast, the Green Party’s approach is to spend the accumulated £23m reserves to improve residents’ services – community electric buses, foot and cycle paths, e-bikes, and home insulation, as well as increasing biodiversity and revitalising disused land.
More substantial projects, such as rejuvenating Stowmarket and providing key worker housing will be funded through reserves and a forthcoming 2% council tax rise.
The council hopes to reduce its existing £90m debt. The BBC’s LDRS has a useful guide to national local authority debt. This debt reduction includes investigating refinancing the inherited commitments of an Innovation Centre at Gateway 14 and a Sports and Leisure Centre at Stowmarket and outstanding long-term public loans with high interest rates. One has a 7.88% interest rate, another 4.6% until 2053.
A new budget
It’s only nine months since the local elections and change of administration. The new council will be announcing their budget on 6 February. Mellen said that the proposed budget addresses the challenging financial outlook, but also allows delivery of the new administration’s plans.
During the May election, campaigning Local Conservatives were concerned that a council under Green Party control will “spend all the money and leave little for a rainy day”.
Time will tell whether a Green Council can deliver a financially responsible budget that also wins future votes. The country will be watching.