Alloa & Hillfoots Advertiser | News | Cash crisis looming for schools' project

Wednesday, 7th January, 2009

Published: Wednesday, 17th October, 2007 12:30

Cash crisis looming for schools' project

By Hamish Hutchinson

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THE project behind Clackmannanshire’s three new secondary schools could face a cash crisis if the SNP-led Scottish Government delivers its manifesto on council tax.

Previously the council agreed to partially fund the PPP project with a one per cent rise, year-on-year, in council tax.

This is in addition to making a contribution of £16.3 million on completion of the schools to reduce the rate of payments.

However, the Scottish Government is seeking to freeze council tax levels next year and, in the long term, replace council tax with a form of local income tax.

Clackmannanshire Council’s chief executive wrote to the Government but has still to receive word on the future of the taxation structure.

Leader of Clackmannanshire Council, Janet Cadenhead said, “I’m worried by the uncertainty of it. We made it known to the Scottish Government we had a one per cent surcharge paying part of the schools that we have a contractual obligation to get to continue. If they don’t allow us to continue with that they’ve got to find a way out for us.”

News of the cash crisis comes as the Scrutiny Committee heard on Thursday that the council’s controllable reserves are expected to fall to a “worryingly low level” after an overspend of £700,000 this year.

A report to councillors estimated that the reserve position would sink to £495,000 by next March – well below the council’s reserve minimum target of £1.8 million.

Officers say that external grants are expected to improve the situation but present funds would be too low to deal with “unexpected expenditure pressures”.

Continuing spending pressures from Social Services and Residential Schools was attributed to the overspend.

Councillor Donald Balsillie, leader of the SNP group, believes the council is now in a “dash for cash” and blamed the past Labour administration for failing to put in place preventative measures to curb the shortfall.

He said, “The council is now facing the consequences of four years of financial mismanagement by the previous Labour administration. In particular for the last four years the council on average has had an overspend of approximately £750,000 and has failed to put in place the necessary actions to address the overspends and their re-occurrence.

“This situation has been exacerbated by the Labour administration using £1.9 million over the last three years to fund ‘unbudgeted consultants’ fees’ for the schools’ PPP projects.

“It is clear the Labour council, over the last four years, has failed to properly manage the consultancy and advisory costs for the PPP, relying on the council tax payer and reserves to foot the bill.”

Cllr Balsillie urged the council to “investigate the SNP Minority Governments proposals for a ‘Scottish Futures Trust’ and examine whether it can be applied to Clackmannanshire even at this very late stage for our secondary schools, but also future options for primary school provision and other projects in Clackmannanshire”.

Ms Cadenhead denied that the council is in a “dash for cash” and said that she had “received assurances” that the £16.3 million for the PPP project would be met on time.

She blamed the continuing overspend on the irregular Care in the Community spending and added that the consultants’ fees on the schools project were budgeted for in the reserves’ fund.

“To get to financial close it took much longer then we thought it would, which meant we had the consultants on board for a longer time than we initially budgeted for,” she said. “We would have been in a worse position if we had gone with (SNP Councillor) Keith Brown’s recommendation of zero per cent rise on council tax last year.”

Recently an Audit Scotland report on the council’s accounts for 2006/2007 highlighted that the financial package for the schools’ project does not comply with current local government financial regulations.

It stated that money gained from capital receipts (sale of council land) cannot be used towards the £16.3 million required for the PPP project and recommends the council seek formal authorisation from the Scottish Government.

Last month the council discussed selling the Tullis site in Tullibody to raise cash for the PPP project.

But Clackmannanshire’s chief executive Dave Jones has reassured the Advertiser that external accountants, and the Scottish Executive, had already approved the financial management of the schools’ project earlier this year.

The council will discuss the audit report at the next full council meeting held in November.

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