Review of Luton Borough Councils Auditors Report

The Auditor’s Report which accompanies Luton Borough Council’s Statement of Accounts Report for 2017/18 shines a light into how the Council feel they will get best value return for the town’s residents’ money. The unaudited accounts for 2018/19 are now available and we can see how LBC have fared in keeping to the budgets on their ongoing projects.

The Council report notes that since 2011/12 they have had to make savings of £113 million on budgets and services.  The reason they give is Central Government Austerity cuts, with the Revenue Support Grant fell again from £21.1 million to £15.9 million, which was another considerable cut.

However during this time Luton Borough Council have continued to invest airport concession income back into airport projects, rather than fill this budget shortfall. When decisions are made at Finance Committee about the amounts required for these projects, they are made in private under an archaic Local Government Law. The amounts are not revealed, even in Freedom of Information Requests, as not in the public interest.

The Auditor’s Report questions the risks involved in these investments and asks why the Council have not entered the projects with financial risk sharing partners.

For the Direct Consent Order which the Council is undertaking to apply to Central Government to enable the expansion of the airport to 32 million passengers, as of 31st March 2018 costs were £3.727 million. The estimated scheme cost for just the Consent Order, is £40 million.  There is no direct reference within the accounts, but other sources show that this DCO process has already cost circa £45 million, and a cap of £50 million would appear to now have been put in place. It became apparent that little if any work was done on the plan to meet the Paris Accord legal requirements on climate change, which is what derailed the Heathrow expansion plans, during the consultations. This extra work could very well exceed the circa £5 million left in the budget, or what it would mean for the project if it needs to exceed that £50 million threshold?

The costs for the Century Park Access Road, note this is just for the single carriageway access road, not the business park development which is where the long term job creation will supposedly be, are to 31st March 2018  £4.051 million.

The initial cost estimate was £120-£140 million; this has now been revised to an estimated £170 million. The scheme will be in two stages, the first for just a single full length carriageway, planned to be funded solely by the Council for £95 million, the second phase of dualling this road is estimated at £75 million, with money currently being requested from Eastern England Heartlands.

This is the project which for Phase 1, the single lane carriageway, has become a huge dilemma for LBC. The cost of this Phase 1 has now soared to £124 million, a 30% increase. If we take the same  30% increase for Phase 2, we have £97.5 million, so a total cost of £221.5 million for a road that could end up just going to a car park?

LBC decided to push this road through as a local business development, so as to keep it out of the DCO process for airport expansion. The rather large drawback on that is that it would have to be funded by LBC, and not as with the airport expansion plan, by whoever the next concessionaire is in 2031?  The Oversee and Scrutiny Committee at LBC have been excellent in looking after the resident’s interest by repeatedly refused this finance as the Business Case is so flimsy.

The original business case was for the New Century Park business estate, a job creation scheme, where in reality this park is now just a few relocated current airport units, yet another hotel and a huge car park. Its real purpose is the front door to Terminal 2, but as this can’t be put on the Business Case, we can see were the gaping hole in the argument is?

The Bartlett Square Development in Kimpton Road Luton has cost to 31st March 2018 £3.245 million.

The total scheme costs are estimated to be £30million, but the Council has set itself a limit of £6million, with the rest sold to a developer, or joint venture partner.

The Bartlett Square project is an ongoing project once the DART terminal is complete, so we don’t have any real update at present.

The DART Project itself has hit what is potentially for the residents of Luton a huge problem. The first capital investment was from a £100 million loan from the Government’s Public Works Loan Board. The second £125 million was to have been from the European Investment Bank last year. As the UK is now leaving the EU, that loan has not been secured, and other routes are being investigated. This means that somewhere the money has to be found to finish the project. Financial institutions now have the upper hand as to what interest terms the can attach to that loan, as LBC will be frankly desperate for it. When you add to that the potential global financial crisis being caused by Corvid-19, as residents we can be very concerned.

These three projects have therefore cost to 31st March 2018, £11.023 million, with total estimated costs of £216 million. With no auditor’s report to reference, we can’t tell you how much current spend has been, but we can say that estimated costs now stand at £277.5 million.

All these osts are sumarisd below, with the revised estimates for 2018/2019 in brackets

£ million
Direct Consent Order40 (45)
Century Park Access Road – initially single lane95 (124)
Century Park Access Road – to update to dual carriageway 75 (97.5)
Bartlett Square6
TOTAL 441 (497.5)

These projects have not stayed within the estimated budgets, but grown by 12.8%.

The Borrowing Requirement, i.e. debt, listed in the 2018/19 accounts stands at £414 million. That is without the New Century Park Road funding, and the rest of the DART capital.

We have seen recently the defeat of Heathrow expansion due Climate Change targets, and we are only at the beginning of the global financial implications of Corvid-19. The world will be a very different place after its full impact.

This money is being provided by Luton Borough Council as debenture loans at 8% interest, to London Luton Airport Ltd.  They repay the loans with money they take from the airport concession income. If that income falls to the levels some industry sources are quoting, we could see a halving of passenger throughput, then the “sustainable” industry LBC quotes as the reasoning behind their pursuit of growth, will have proven itself the exact opposite.

So we have the Council’s company paying off the Council with money which is already the Councils, which instead of being spent on filling the £113 million budget cuts hole, is being paid to International Bankers and the Public Works Board.

If like us you feel that the duty of a responsible Local Authority to use its only asset, to give full financial benefit to its residents, instead of the debts accrued in these developments, then question your local Councillor and at the next consultation – and say no to all development.

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