These bailouts are, in fact, government loans—loans with interest that the council must pay back. The £40m bailout from last year had an interest rate of 7%, which is £2.8m of interest payable per year.
This year, Labour is choosing to ask the government to fund this £2.8m interest payment as part of the latest bailout package. This is simply an economic disaster for the city.
Councils can tie bailouts (aka 'exceptional financial support' as Labour calls it) to assets. The loan is secured against an asset the council then disposes of, with the proceeds of the sale going to repay the loan and any interest.
However, Labour's two bailouts are not secured against any assets. They are loans with high interest rates that Labour says are intended to tie the council over until the next budget—a payday loan.
Labour will say that all the potential savings have been made. But that is a political choice. Whilst certain services, such as children's services, continue to increase the pressure on the council. Labour could reform other services to fund this £2.8m of interest payments, reducing the interest payment due on this year's bailout, stopping the mad economic plan of having a bailout to help fund the interest on last year’s bailout.
One area that needs reform is the generous terms and conditions on which council staff are employed. Stoke-on-Trent City Council is one of the very last councils in the country that failed to reform the terms and conditions agreed upon before 2010.
Such conditions include enhancements for staff to work their contracted hours. Refusing to reform terms and conditions is madness when no other local council or business employ the same generous terms as the city council. This refusal not only leads to unnecessary costs for the council but also hinders the efficient delivery of services to the local community.
Some examples of continued waste include paying consultants to do work that council teams could do. One London-based company paid over £50,000 to conduct planning-related consultations in the city and a company from Leeds commissioned to tell the council what the average residential rental price is in Cobridge.
Both bailouts total £56,800,000, more than the city council received in grants for Levelling-Up (approx. £35m is still unspent). The total interest due on Labour's bailouts is £3,976,000 a year.
Labour claims bailouts are needed to reduce the number of children in care, giving the council breathing space to get a handle on the council's most costly and overspent service area. Yet, their budget is clear. Even if they expect to bring the number of children in care down from 1,000 to 700, the weekly costs increase yearly. Therefore, children in care will continue to present a difficulty for the council, even if numbers decrease.
Labour is simply not being honest about its budget and refuses to make any difficult decisions for the second year in a row. No responsible party would saddle the city with a £56,800,000 debt without plans to pay it off. For decades, this debt will cost every council taxpayer in Stoke-on-Trent £3,976,000 every year. And that is before you realise that Labour's National Insurance increase is costing the council another £1.1m annually, which Labour has yet to fund. This additional burden further exacerbates the financial strain on the council, potentially leading to more bailouts in the future.
