Tuesday, 13 September 2011

H&F launches "debtometer" to track progress against debt


H&F Council has oft-complained of the "debt mountain" it inherited from the previous Labour council, complete with glum-looking pics of Council Leader Stephen Greenhalgh, accusing their predecessors of racking up crippling levels of indebtedness that saw the council taxpayer forking out huge amounts in interest payments before any of their hard earned cash was left for vital public services.

This assault on what they termed Labour's profligacy helped propel them to a whopping majority at the Town Hall in the election before last, effectively wiping out the local Labour Party. Among those losing their seats that night was Labour Council Leader Stephen Burke, as the Tories swept to power with a majority of 20.

Since then their guiding light has been the mission, as they see it, to reduce the Council's debt and to do more for less, to use a mantra from David Cameron. When I reported on the Prime Minister's visit to the area during the General Election it was clear he viewed what was happening here as a blue print for the rest of the UK's approach to belt-tightening in the public services, as he spoke of his "pride" in what H&F were doing.

The controversies to follow have been inevitable with the selling off of what seems like every Council building apart from the Town Hall itself and the turfing out of numerous voluntary sector services that were housed within them. (To be replaced, as far as Paddenswick House is concerned in Hammersmith, with the West London Free School)

So it comes as no surprise that the Council wish to re-draw our attention to why all of this is happening - debt. And rather than be on the back foot about that, defensively justifying things, they quite understandably want to proclaim their war on debt as the good thing it is. hence the "debtometer"!

Launching the 'ometer, Council Leader Stephen Greenhalgh says this:
"Nationally and locally we have seen the dangers of excessive debt and we are the only council in the country that is consistently cutting council tax and lowering the council's debt!

“Spending millions of pounds on costly interest repayments to the banks just to stand still is economic madness and is a ticking time bomb if interest rates rise – as they must do at some stage.

“Therefore our strategy for the past five years has been to reduce the council’s historic debt so that taxpayers’ cash, which had been spent servicing interest costs, can be redirected to protect frontline services like caring for the vulnerable, child protection, street cleaning, more Police, schools and parks. Only by cutting debt can we secure the strong financial future that the borough deserves and this year’s progress means we are on track.”
But local Labour Opposition Leader Stephen Cowan sees it rather differently, he has this to say:
"The Conservative Council’s financial plan fails to offer value to local people and demonstrates their economic illiteracy. They are cutting these borrowings by selling off important buildings such as people’s homes, child care centers, voluntary groups' buildings and libraries - as reported on this blog. Putting aside the right and wrongs of that for one moment, they’re doing this in the middle of an economic slump. That means these buildings are being sold off to property speculators at knock down prices during a period when the Council has record low interest rates to service their borrowings. That’s like a family buying a house at the top of the market, selling at the bottom of the market and having nowhere to live afterwards.

I was Deputy Leader of the Council in 2005/6. Back then, I reduced borrowings by more than the Conservatives have ever managed in any year since. But that was because the buoyant economic conditions, the council’s asset base and relative record property prices made it right for that policy then.

Because of the peculiarities of local government finance, the Conservatives actually only gain just over £30,000 into the revenue account for every £1 million building they sell off. Meanwhile, they are wasting £35 million on new unnecessary Town Hall of offices; wasted £5 million each year on propaganda; have recently admitted they’ve lost up to £4 million a year on unmanaged consultancy contracts and spend millions of pounds more than they need employing some of the highest paid bureaucrats in the country. In short, if they really want to find money for front line services they should get their own house in order before selling off our community assets to their friends in the property speculator sector."
 Harsh words - from both sides. And expect the controversies to rumble on.

14 comments:

  1. Woaaahhhhhh, thiss blog is on fiirrreeee.

    Good work, Chris!

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  2. A debt-o-meter? LOL. Another stupid gimmick from a bunch of economically illiterate politicians are simply too dim to cut it at Westminster.

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  3. If debt is so bad, perhaps our Tory councillors would like to consider cutting up their credit cards?

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  4. buddyhell - If interest re-payments become more than we're spending on other essentials then yes, debt is bad.

    We're all paying the price for personal, institutional and national debt getting out of hand.

    True economic illiteracy is thinking you can spend your way out of a debt crisis.

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  5. buddyhell - credit cards?

    They don't have them.

    Next!

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  6. @ Anonymous

    Are you sure about that?

    @T

    Proposing cuts over invertment is economic illiteracy. Like it or not, neoliberalism is a busted flush.

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  7. Throwing voluntary groups out of their offices to be replaced by 'free' schools. Big society my arse!

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  8. buddyhell - I hope you're never in charge of a budget that affects me!

    Balancing the books has nothing whatsoever to do with neoliberalism. It is, and parties of all political persuasions used to understand this, the primary responsibility of government. Nothing can be done if you don't have the moola to pay for it.

    You seem to be happy for the next generation to clear up our mess. If we don't get our debt in order now all that happens is we increase our interest payments and we lose the ability to spend in the future. All the things you like about council spending will disappear anyhow.

    There is a very sensible argument to be had about what is cut. But there is no argument about whether to cut at all.

    Or have you never met anybody who has overspent on credit cards?

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  9. @T

    The fact is that neoliberalism is still in the driving seat. Your take on debt is a reductive one. Comparing national and local authority finance to that of the domestic sphere is like comparing apples to oranges.

    You said,
    "You seem to be happy for the next generation to clear up our mess"

    You make this stuff up in your head. Don't you? If you were so concerned about the next generation, you'd support continued investment in education and youth centres.

    You said,
    "There is a very sensible argument to be had about what is cut. But there is no argument about whether to cut at all.

    Or have you never met anybody who has overspent on credit cards"

    More reductive nonsense. The pro-cuts argument is not a sensible one...in spite of your protests to the contrary.

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  10. Oh, one more thing. You see those banknotes (maybe you don't use them)? They're IOU's. Money is debt. If you want an end to debt then you're ostensibly arguing in favour of the abolition of money. Which, presumably, you aren't. In which case, you're confused and quite probably proposing cuts on an ideological basis.

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  11. I'd also like to add, that start-up businesses have to apply for bank loans to begin trading. That's debt. Is that a bad thing or a good thing? Over to you, T.

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  12. Hi buddyhell,

    Presumably Chris never intended this post to turn into this sort of debate but never mind!

    I disagree - comparing national / council debt to domestic debt is a useful analogy. The mistake governments and institutions around the world have made is to presume that deficits / debts can continue to grow ad infinitum. Recent events have shown this to be a myth, when an economy wobbles, creditors will demand repayment. The concepts of income vs expenditure, debt, interest repayments etc are essentially the same no matter what the scale. So, while it is simplistic to compare domestic budgets with national ones, the comparison is nevertheless valid.

    You want education and youth centre budgets to be strong - good, so do I. If we don't get a handle on our deficit then interest payments will grow. The result? We'll have less money to spend on education and youth centres. So, yes, if we want to hand on a healthy budget / education system etc to the next generation we need to sort out our finances. The choice you and I seem to be arguing is either we continue to spend beyond our means now, increase interest payments and hand over an even worse financial mess, with even lower education budgets, to our children. Or we sort out our finances now and hand over a healthy budget with low debts and interest and a healthy education budget.

    The comparison with cash is facile. Debt in and of itself is not a bad thing. I never argued that all debt should be eliminated, it is essential to the running of our economy, and indeed, every thriving economy in history. However, excessive and unsustainable debt is a problem.

    I know the left like to think that all right-wingers are evil b******s who want the rich to get richer and the poor to get poorer but I'm afraid it simply isn't true. The accusation that any argument for cuts is some sort of cover for ideological extremity ignores the validity of the argument. I'm definitely not an ideologue, just a bit of git (and lapsed Tory) who sees the benefits of a well-managed budget, and the horrors of unsustainable debt.

    But I'm sure I'm not going to convince you!

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  13. @T
    You seem to be labouring under the assumption that economics is an ideologically neutral 'science'. It isn't.

    You said,
    "I disagree - comparing national / council debt to domestic debt is a useful analogy"

    No, it's reductive and unhelpful. It's also misleading. But I don't expect you to fully understand that.

    You said,
    "The choice you and I seem to be arguing is either we continue to spend beyond our means now, increase interest payments and hand over an even worse financial mess, with even lower education budgets, to our children. Or we sort out our finances now and hand over a healthy budget with low debts and interest and a healthy education budget"

    No, I'm arguing for investment. What you seem to be in favour of is ruining the economy and ergo, the future prosperity of the country. Nation-states are not households.

    You said,
    "I know the left like to think that all right-wingers are evil b******s who want the rich to get richer and the poor to get poorer but I'm afraid it simply isn't true"

    When all else fails and holes start to appear in your argument, you play the victim card. Weak.

    You said,
    "The accusation that any argument for cuts is some sort of cover for ideological extremity ignores the validity of the argument. I'm definitely not an ideologue, just a bit of git (and lapsed Tory) who sees the benefits of a well-managed budget, and the horrors of unsustainable debt"

    The more you protest, the less convinced I am by your narrative. I hate to have to tell you this but your erstwhile brethren have always looked for an excuse to cut public spending. You're in denial.

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  14. @T
    "The comparison with cash is facile. Debt in and of itself is not a bad thing"

    If debt isn't a "bad thing", then why do you a) fall for gimmicks like the debt-o-meter and b) why do you contradict yourself?

    The comparison to cash is not facile. It's very real. Money is debt.

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