Tuesday 29 September 2020

Dissolution of the Monasteries, 2020-style

What is going to happen when the wave of local authority bankruptcies hits? 

... as, in the coming months, must surely be highly likely.  We've raised this before, and I remain extremely interested in it.   As well as serious general political interest there's a local angle for me: after 6 years of Labour excesses, mismanagement and all-round failure, my borough (Croydon) is well up there with the most indebted, over-extended councils in the land.  Others said to be near the brink are Luton, Oxford, Birmingham (!), Woking and Peterborough: and that's by no means the end of the watch-list.

There are a couple of clues as to what happens next.  This month the government imposed a new Chief Executive  - a turnaround specialist - on Croydon as the price for being willing to continue in dialogue with the Labour leadership.  There must, though, surely be a very finite pool of genuinely competent *turnaround* merchants available at short notice.  (I'd offer myself but I don't think t'unions would relish my management style ...)

The other massive clue is what happened in Northants, where the fateful day of the Section 114 Notice has come and gone.  As well as the government dividing up the old responsibilities into newly-minted authorities with revised boundaries (which sounds like doing something radical just to make the point), rather than bailing them out the government gave them approval to sell capital assets until they'd filled the hole in the ordinary accounts.  Generally speaking, a council's ability to do that is very heavily circumscribed, for obvious reasons.

So here's the vision.  Council after council goes bust.  If they couldn't contemplate rescuing Northants (Tory-held) in 2018, there's no way on earth the government is going to bail them all out: so massive, nationwide asset sales are mandated.  There's been nothing like this since the Dissolution of the Monasteries, supervised by that outright genius of an administrator, Thomas Cromwell.  And before that, the shakeout of labour relations following the Black Death.

This might actually be a major component in the dynamics of a post-Brexit, ongoing-Covid UK.  Sadly, there's no obvious likelihood of a latter-day Cromwell to execute the same highly diligent job he made of the 16th Century version.  (Cummings?  Don't make us laugh.)  Mostly, Cromwell ensured Henry got top dollar for the assets seized.  Even under his distinctly hands-on guidance, however, there was plenty of dubious cronyism involved.  We may be sure all manner of *bargains* will fall into undeserving hands at ridiculous prices - less Henry VIII, more Boris Yeltsin, I'm guessing.  Which will be depressing.

If anyone truly relishes the idea of all the pieces being thrown up into the air ... I know what you mean, but be careful what you wish for.  If Brum goes under, that'll be quite a crash.

ND

16 comments:

Swiss Bob said...

Keep an eye on the local authorities who have ventured into the retail property market. Several rushed into the market from 2016 on and it was bad enough in normal times when they were seen as the "buyer of last resort" then but imagine the distress now with a pandemic today and a recession due.

Anonymous said...

As long as lots of councillors are taken to the guillotine I'll be happy enough.

dearieme said...

More seriously, councillors don't have sovereign immunity, do they? Can't they be bankrupted en masse to try to recover some of the dosh?

How about their senior bureaucrats? They shouldn't be immune. Bankrupt every council employee on more than £100k?

And then attention can turn to the unis.

DJK said...

I suspect there are no general solutions here. Birmingham has a list of property which can be downloaded, and a second list of community property (which includes the Aston Villa ground). Which is a start, but a list of pension liabilities would also be useful.

In Detroit, the big issues were how much of future pension liabilities to write off and who owned the artworks in the Detroit Institute of Art. The latter was eventually bought out by the likes of the Ford Foundation. No such easy solution here, I fear, for all those pre-Raphaelite works in the Birmingham art gallery.

Anonymous said...

Guillotine? Thomas Cromwell had other methods.

Nick Drew said...

Dearieme - @ How about their senior bureaucrats? They shouldn't be immune

the way it works is that when a council is on the brink of going bust, or councillors vote for a budget that's not balanced, the CFO (bureaucrat) becomes personally responsible for taking over the finances and enforcing book-balancing measures. (This remedy was in response to the 1980's antics of the Hattons and Knights of this world.)

The problem comes when a stretched but technically balanced state of affairs suddenly goes arse-over-tip because of an externality (e.g. downward revaluation of assets, or unforseen surge in legitimate claims under a statutory scheme) which takes it beyond what the Reserves can cover, and no amount of dictatorial intervention can fix it

not dissimilar to when a somewhat extended, but technically balanced [hedged to within limits] trading book suddenly flips outside limits because of a surge in market volatility and/or crash in liquidity and/or freak credit event, which takes it beyond its risk-capital cover

estwdjhn said...

How much of this is book values of things (e.g. half empty shopping centres) being re-adjusted and creating massive paper losses, and how much is this a downturn in income/upsurge in spending which is causing an actual cash crisis?

Matt said...

@ estwdjhn

Nothing a set of idiot councillors will have bought in terms of commercial property will have "paper" losses. They will be real because the prats overpaid for crap assets.

The idea of personal liability would certainly focus the minds of some of these local council "masters of the universe".

Anonymous said...

So here's the vision. Council after council goes bust. If they couldn't contemplate rescuing Northants (Tory-held) in 2018, there's no way on earth the government is going to bail them all out: so massive, nationwide asset sales are mandated.

It's not 2018, we now have a magic money tree now that sorts out all our problems.
Let's hope Boris doesn't read your post else he might see it as a challenge to demonstrate how many councils he can save from bankruptcy.

Devil's Kitchen said...

Oh, great — I live in Croydon (well, Purley) and work in Woking: I’m starting to think that my spending time in these council areas is leading to their impending doom...

DK

BlokeInBrum said...

Birmingham have already been there with the asset sales, selling off the NEC among other things to generate cash.
I will have to look into what else they can flog off, but have my doubts that there's much else of value. I do note that they have been constrained by the 5% limit on raising council tax otherwise it would probably have doubled in the last 5 years. What they have done is sneak in hefty rises in the Police and Fire precepts which is in addition to the tax. I somehow doubt that it is hypothecated.
Brums problem is that it is simply too big and run by idiots or criminals, perhaps both. Too many people being paid too much to do too little. All with very generous pensions and unionised to the hilt. On the bright side, they couldn't bugger things up worse than they already have....

Anonymous said...

Ah, Brum - the Bullringg, the NEC, the Airport, the Labour councillors, Stan Yapp ...

Happy days. Oi looked 'im oop onloine joost now, and couldn't foind a woord sid aginst 'im. But back in the day, theer were plenty.

-a boywoord for ... 'nooff said.

Anonymous said...

Talking about subsidies ... Northern Ireland costs the UK 11bn a year, the same amount as the net contribution to the EU.

Why not bankrupt NI and sell it off to the South. Solves 2 * 11bn problems in one by simplifying Brexit. No need for all this IMB legal nonsense.

Job Done.

Elby the Beserk said...

I went to Birmingham once.

dearieme said...

I went to Solihull: does that count?

Anonymous said...

Nawh it doosn't.