Political row breaks out over critical auditors report on council finances

By Robert Firth, Local Democracy Report

A political row has broken out after auditors warned a council that it was in an ‘extremely challenging financial situation’ and advised it to make further savings.

Opposition Green and Liberal Democrat councillors have accused Lambeth council’s Labour leadership of financial mismanagement following the publication of recommendations by auditors Forvis Mazars.

The council’s Labour group accused the opposition of ‘political opportunism of the worst kind’ and blamed the council’s financial position on previous Conservative and Liberal Democrat governments’ austerity policies.

In a letter addressed to Lambeth from February, the auditors told the council it needed to take ‘immediate action’ to identify additional savings to cover forecasted overspends in 2024/25.

The letter added that Lambeth must ‘ensure planned savings and efficiencies for 2025/26 are achievable’. The auditors noted that in 2023/24 the council had failed to make £3.8million of targeted savings, which then had to be carried over to the following year. 

The same letter recommended that Lambeth replenish the amount of unallocated money in the general fund (the account which covers day to day income and service costs) to  ‘prudent’ levels.

Forvis Mazars said the council’s own forecasts showed it would have no unallocated cash in the general fund in 2024/25 and over the next four years. 

The auditors also recommended the council replenish its Housing Revenue Account (HRA) reserves. The HRA records the costs and income associated with running a council’s housing stock.

In January the council asked the government for a £40million bailout in order to balance the HRA, which was forecasting an illegal £25million overspend in 2025/26. 

The government approved the rescue package in February. On the same day the bailout was announced, the council’s corporate director of finance admitted that council houses may have to be sold off to repay the £40million. 

Auditors added that the council had made ‘insufficient progress’ in bringing Homes for Lambeth (HfL)—a housing firm set-up by the council in 2018—back under direct control of the council.

The council announced it was shutting down HfL in 2022 after an independent report branded the firm’s attempts to build homes in the borough ‘very poor’. The company started work on just 65 homes in five years.

Cllr Scott Ainslie, leader of Lambeth’s Green Party opposition, said: “We have been warning of Labour’s recklessness, particularly over their terrible business plan for Homes for Lambeth, for as long as the current leader of the council has been a councillor.

“Lambeth Labour alone are responsible for the expensive and failed HfL. They are responsible for selling off council homes and decades of neglect maintaining estates. They are responsible for millions of pounds in legal disrepair compensation payouts. They are responsible for unrealistic budget setting, poor contract management and weak governance.”

Cllr Donna Harris, leader of the council’s Liberal Democrat opposition, echoed calls to bring HfL back in house, saying the delays were “putting services at risk”.

She said: “This damning auditor’s report is yet further evidence that Lambeth’s Labour leadership is out of its depth and running out of time to avoid the same kind of financial problems neighbouring Croydon has had to endure.”

A Lambeth Labour spokesman said the opposition was “ignoring fundamental facts” in an act of “extreme financial negligence” and “political opportunism of the worst kind”.

He said: “Lambeth Labour continues to protect and maintain frontline services, despite the consequences of over 14 years of austerity imposed by previous Conservative and Liberal Democrat governments which has left councils of all political stripes in crisis.

“Lambeth’s spending power has been cut by over 20 percent since 2010, and this year, the cost of housing homeless families is expected to reach £100million.

“Lambeth Labour’s balanced budget invests in our services and communities, supporting over 45,000 people with cost-of-living support, expanding free school meals, protecting our libraries and parks, building more affordable homes for the future and supporting our most vulnerable residents.”

Pictured top: Lambeth council’s town hall in Brixton (Picture: Robert Firth)