Smoke and mirrors

Facing an £18.7 million shortfall in its accounts, Cheshire East council has been forced to seek support from the government.

Having now received approval from the government, it’s being widely reported that Cheshire East has received a £17.6m financial support package.

However, the ‘support package’ isn’t a cash bailout, but comes in the form of agreement to a ‘capitalisation direction’ – an accountancy device which allows Cheshire East to describe the £18.7 million ‘loss’ as a ‘negative reserve’ in its accounts. Smoke and mirrors?

Capitalisation is how the Government permits local authorities to treat revenue costs as capital costs. It is a relaxation of the accounting convention that ensures that revenue costs should be met from revenue resources only and that councils should not “borrow” to fund revenue expenditure.

Under the terms of the directive local authorities cannot internally borrow or even borrow short-term from other local councils to fund expenditure.

Make no mistake, it is the same as a loss and the result of poor fiscal management.

Unsurprisingly, Cheshire East continues to blame the cancellation of HS2 for their problems, but in truth it has everything to do with financial mismanagement – particularly the distribution of funds to the towns that make up the unitary authority of Cheshire East. 

A Freedom of Information Act request shows that between 2014 – 2023, Macclesfield received just £26m in support – whilst Crewe received an astronomical £141m – nearly seven times more!

And if you need confirmation, head off down to Crewe and you’ll see new council-funded building works everywhere. Trouble is much of the work is unfinished and the town centre looks like a building site. Oh, and there’s no money in the pot to finish it!

Couple this with the disastrous decision to build a multi-million pound shopping centre – when shopping centres across the country are struggling – gives an idea of the council’s sharp thinking.

A Cheshire East spokesperson said: “The additional financial support announced today is a capitalisation directive. It provides the council with the facility to spread the cost of any additional emerging pressures, up to £17.6m, to future years, effectively providing an alternative to reserves should the need arise. This reduces the risk of a Section 114 notice.”

As a result Cheshire East will be commencing a set of punitive cost-saving exercises – apparently all because they viewed Crewe and Congleton as being much more important than any of its other towns and parishes.

The council is now faced with some very tough decisions – under current consideration is the scrapping of school meals, the closure of some leisure centres and even retaining a proportion of the precept currently doled out to town and parish councils!

Back in the day, Macclesfield Borough Council’s books always returned a healthy surplus – as expenditure was kept well under control.

Sadly, the Macclesfield residents who are calling for devolution from Cheshire East and a return to ‘self government’ for Macclesfield haven’t a hope in hell.

Historical note: Macclesfield Borough Council ran from 1974 until 2009.

In 1997 the Tony Blair government swept to power in the UK and for the next several years virtually the whole of the NW of England became a solid red wall.

Despite this Macclesfield Borough Council, comprising Macclesfied, Alderley Edge, Bollington, Wilmslow and Knutsford remained blue, much to the consternation of the Labour government.

The word was that this was proving to be a real thorn in the side of the government and The Office of the Deputy Prime Minister, i.e. Deputy Prime Minister John Prescott, determined a plan to reverse this. The solution they came up with was by incorporating blue Macclesfield Borough with an overwhelmingly ‘red’ Crewe – Macclesfield would effectively turn ‘red’.

In 2007 the proposal to create a unitary authority was in truth roundly rejected by those concerned, but despite this, in 2009, the unitary authority of Cheshire East came into being.

And, I’m afraid, we’re stuck with it.