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Revealed: how £115m of asset receipts funds redundancies

Northamptonshire
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Councils have spent £115m of the proceeds from asset sales on staff redundancies, research shared with LGC reveals.

The Bureau of Investigative Journalism analysed the revenue gained from more than 12,000 assets such as libraries, community centres and land which have been sold since 2014-15, raising a total of at least £9.1bn for the sector.

The research offers insight into the impact of then chancellor George Osborne’s April 2016 relaxation of the rules on asset sales which had previously meant proceeds could be invested only in new assets. Councils are now permitted to spend proceeds on transformation projects, including shared back offices or new technology.

According to the bureau’s freedom of information request to which over 300 councils replied, 64 authorities had taken advantage of this new flexibility, spending a total of £381m on transformation projects. Almost a third of this – £115m – was spent on redundancies.

The research could spark claims of a link between asset sale and redundancies. In the past three years, the average number of redundancies was 75% higher at councils which made use of the power than at those which did not.

At Bristol City Council for instance, redundancies jumped from 39 the year before the new rules were introduced to 401 the year after following its sale of assets including a library.

The new rules were initially introduced for a three-year period but were later extended until 2021.

County Councils Network director Simon Edwards said: “Local politicians do not go into public service to slash and burn or make valued staff redundant, let alone sell assets to do this. But this is the financial reality of years of funding reductions and rising demand.”

Richard Watts (Lab), chair of the Local Government Association resources board, said: “Having been given the flexibility, it has made sense for some councils to use capital receipts while they can to manage this substantial transformational change. This has allowed them to avoid running down the reserves which helps them try and manage the growing financial risks to local services.”

He said that in the “vast majority of cases” the assets sold were “no longer operational, so it would be wrong to suggest that councils have been selling off assets in order to pay for redundancies”.

Cllr Watts added: “This is not a sustainable, long-term way to support councils’ budgets.”

Labour deputy leader Tom Watson insisted blame could not be laid at the door of local government decision makers but was instead the result of “almost a decade of Tory austerity”.

“Selling public buildings and spaces was a false economy that leaves our communities poorer,” he said. “Responsibility for these cuts lies firmly at this government’s feet. They should take urgent action.”

Meg Hillier (Lab), chair of the Commons public accounts committee, said more scrutiny was needed in terms of how the relaxed rules on spending were playing out on the ground.

“Government needs clear oversight… councils might like the freedom it gives them but it’s difficult to resist when they have no other options and there could be perverse outcomes as a result,” she said.

The three biggest single assets sold since 2014-15 

Northamptonshire CC: One Angel Square £64m

Camden LBC: Town Hall Extension £59.8m

City of London Corporation: Bernard Morgan House £30.4m

“What happens when councils need to build more housing or open more schools but they don’t have the space to build in? They are stacking up problems for the future.”

Councils selling public land and buildings to fund cost-cutting measures must in the government’s words, “demonstrate the highest standards of accountability and transparency”. This means producing annual reports detailing the amount of money being spent, the projects funded and the savings targets set.

The investigation found those standards were not always being met. Two thirds of councils are not fully adhering to the rules around the data they should publish about the land and buildings they own, the bureau said. Additionally, about 30 councils refused to answer all or most of the bureau’s FOI request which asked for details about what assets they had sold. Another 36 councils responded to the request but withheld how much the properties were sold for and to whom they were sold.

There is also a lack of information about how the funds are being channelled into redundancy pay-outs. Of the 39 local authorities which said they had used proceeds from asset sales to pay for redundancies, a third had not included that information in the financial data submitted to the government at the start and end of each year.

And while most councils are publishing the transparency reports required under government guidelines, those reports do not have to include details of which assets were sold.

Additional reporting from Hazel Sheffield and Charles Boutaud

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