Financial Crisis
Honiton Town Council (HTC) is at risk of a financial crisis, maybe even bankruptcy, due to ongoing overspending and low reserves.
The National Association of Local Councils (NALC) advises that parish and town councils should hold reserves equivalent to between three and twelve months of net expenditure to cover unforeseen costs, cash flow issues, and emergency expenditure.
Despite a significant 33% increase in the council tax precept last year, the council’s budget remains tight, with total expenditure around £630,000 and reserves of only about £145,000. This reserve level is worryingly low, hardly enough to cover about three months of expenses.
Balancing the budget
One major factor behind this strain is of course the council’s ongoing financial underwriting of the Beehive. Since 2022, the council has been underwriting the venue’s costs, contributing nearly £60,000 annually to keep it afloat.
On top of that, HTC is taking on new responsibilities, such as managing the King Street public toilets, which will cost around £40,000 a year.
There are also expensive repairs looming, like the retaining wall at Dowell Street corner that could cost £168,000.
These commitments, combined with other operational costs, have pushed the council’s finances to breaking point. By failing to build adequate reserves, the council could be just one unexpected event away from insolvency.
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Independent Thinking
The response of the HTC Finance Committee to this looming financial disaster was to transfer a mere £1,000 to reserves whilst approving increases in expenditure which added up to a 12% rise in the Council Tax demand.
Whilst it is nice to propose spending on new events, such as £3,500 on an Armed Services Day, I think it is irresponsible to do so when not making any increase to reserves.
I have also regularly voted against underwriting for the Beehive and against HTC taking on the additional expense of the King St public toilets as HTC simply cannot maintain these irresponsible levels of expenditure whilst not providing for adequate reserves.
In Jan 2025, I proposed that £50k be added to the budget to top up reserves and this was seconded by Cllr Andrew Pearsall. Unfortunately, this proposal was voted down.