Town Hall hoards cash in expectation of no-deal Brexit

The Flag of Europe
The Flag of Europe

Islington Council has expanded its reserve cash by £2 million in expectation of the impact of a no-deal Brexit.

Town Hall now holds reserves of £10.9m, representing about five per cent of its net expenditure, money not allocated for any specific purpose apart from to cushion blows to its finances or as contingency, after years of the level falling.

Council officers at an audit committee meeting said that the expectation of how much ought to be kept back had been set at four per cent in previous years.

The news did not come as a surprise to committee chair Cllr Nick Wayne (Lab, Canonbury) who said that there had been a “clear steer” to council officers from his influential panel to set the level up to five per cent, “bearing in mind what could be coming down the road”.

Cllr Wayne said: “It’s pretty clear that the direction of travel at the moment is hurtling towards a no-deal Brexit. The obvious concern of the committee is that we as a council are on the front foot and are doing what we can to mitigate the impact of a no-deal Brexit, in terms of the services that we provide to our residents.

“What we have to be concerned about here is identification of risk, and being satisfied that across the council there is a focus on at least identifying what the issues are and what impact that might have financially to the council.

“If, let’s say, the ports are effectively shut down, we’re not getting the flow of goods in, have we got the resources to in the short term cope?”

Cllr Wayne added that he did not expect officers to “have a crystal ball”, but asked them to bring a couple of paragraphs on the resilience of the Town Hall to potential Brexit shocks by September in response to his questions.

Officers present at the meeting said that the recent elevation of Boris Johnson to Downing Street had caused the Town Hall to update its corporate risk and financial planning with regard to a no-deal outcome.

Islington’s chief accountant Mohammed Sajid said: “Nobody actually knows what no-deal Brexit will look like, which is part of the issue. There’s potentially impacts on interest rates, though some say they might go down.

“There’s impacts on our staff costs as well. Many of our staff are EU citizens and might be impacted. Will we able to recruit people, in some of these key services as well?

“There’s going to be a lot of work to be done over the summer.”

Sajid added that right-to-buy receipts were also in slowdown, which he attributed to the “Brexit effect”, pointing out that this would leave the council less money to do major works.

Council officers gave those present to understand that Brexit uncertainty is currently serving to combine with “not much clarity” over the government’s controversial Fair Funding Review.

Islington had been expecting a three-year plan over how funding would be allocated to local government, but now expect a one-year settlement, which officers admitted made medium-term financial planning difficult “as you just have another cliff edge”.