Following on from Part 1, we now will look at pages 96 and 97 Of the Revenue Budget Report. These pages contain the following paragraphs:-
“On 30 November 2021 the Government issued a consultation on proposed regulatory changes on how Councils are required to make their minimum revenue provision. If it is implemented in its current form, it will have a multi-million-pound negative impact on the Council’s Budget, and savings requirements annually from 2023/24 onwards. The Government proposes to require Councils to make an annual minimum revenue provision (MRP) on all Capital Loans. It is seeking to do this because in recent years a number of Councils have taken out loans to buy Investment Assets, and those Councils are not making an MRP charge to their revenue account for those loans.
Luton currently has approved loans of up to £508m (£463m to be disbursed by 31 March 2022) to Luton Rising and does not make a charge to revenue for those loans on the basis that they are repayable in full when the concession is re-let. The potential value of the upfront payment is reviewed each year to ensure that it remains sufficient to enable full repayment.
This is in accordance with standard private sector accounting practice and current guidance. MRP rules however are entirely dependent on Government Regulation. The Section 151 Officer has been in touch directly with the officers who have produced the consultation to explain the implications for Luton. An annual MRP charge on the current loans would be expected to have a significant impact on the Revenue Budget effective form 2023/24 if the Government proposals are enacted.
The consultation is open until 8 February 2022 and the Council will make its representation.”
Minimum Revenue Provision is the minimum amount which a Council must charge to its Revenue Budget each year. This has to be listed as an Annual Revenue Expense.
This link gives detail of what the new Government proposals are for MRP:-
We think that the following two paragraphs speak volumes about LBC’s obsessive spend on LR/LLAL projects: –
Local authorities have flexibility in how they calculate MRP, providing it is ‘prudent’. Further guidance on how to calculate a prudent amount is given in the Government’s Statutory guidance on Minimum Revenue Provision, which authorities must have regard to. Notwithstanding these flexibilities, authorities must meet the statutory requirement that the charge is prudent and is made to revenue. Where the duty is not adequately met, this can result in authorities borrowing more than they could otherwise afford and pushing liabilities and risk into the future.
The Government is aware that some authorities employ practices that are not fully compliant with the duty to make a prudent revenue provision, resulting in underpayment of MRP. This was reported in the National Audit Office’s report Local Authority investment in commercial property (February 2020) and the subsequent report by the Public Accounts Committee in July 2020, which recommended the government take steps to address the issue
The current framework of MRP seeks to ensure that loans are prudent, affordable and sustainable, but as Local Authorities across England have been liberal with those goals, actions need to be taken.
Let us look at what the £508 Million, plus interest, of loans LBC have taken out for LR/LLAL and see how they fit those categories.
Prudent? Building a DART link which will have no effect on increasing passenger numbers at the airport and will draw Dividend income to pay off the construction and operating costs. Undertaking the Development Consent Order process, for unrealistic airport expansion, and then expecting all these costs to be met by the next Concessionaire for the airport in 2031.
Prudent? We think not.
Affordable? DART was originally part of development talks by the airport operator, but not taken on as part of that development, due to the returns not being viable on the project, as it would not bring in any substantial income. DART replaces a system that is free to LR/LBC; what could be more affordable than paying nothing?
Sustainable? As of 2019 the airport was at its maximum passenger capacity, and at that level LR could have continued to pay LBC a very handsome Dividend each year. Because LBC/LR changed tack to become an Airport Developer, these huge debts they have accrued over DART and the Development Consent Order expansion plans, have actually made those projects unsustainable.
So will 2022 continue to see Luton Rising, or sink further to the bottom?
Has the tipping point gone past the point of recovery?
Time for LBC/LR to not take any more chances on the subject and Stop Luton Airport Expansion Now.