Category Archives: Bankruptcy

Councils are going bankrupt after the Tory government cut their funding

Council tax bill: but the levy on residents of council areas won’t save some authorities, because it is a massive cut in CENTRAL government grant that is bankrupting them.

There’s not a lot to add to this because the fault is self-evidently with the Conservative government in Westminster.

Oh – this is different from the situation in Birmingham that was brought about by a coalition Conservative/Liberal Democrat administration imposing a sexist bonus scheme, for which the now-Labour-run council is going bankrupt while trying to pay compensation.

The fault still lies with the Tories, either way.


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If Birmingham is ‘bankrupt’ it is not because of Labour but TORY mismanagement

A Labour-run council has effectively declared bankruptcy, leading to mockery from Conservative MPs who are equating it with the way a Labour government would run the UK – wrongly.

Yes, Birmingham City Council has issued a section 114 notice, confirming that all new spending, with the exception of protecting vulnerable people and statutory services, must stop immediately – after receiving a £760m bill to settle equal pay claims.

It comes after a Supreme Court ruling back in 2012 found in favour of mostly female employees of Birmingham City Council – and that a bonus scheme that was handed out to staff in certain roles favoured those which were mainly taken up by men.

The Tories caused the problem that led to Birmingham Council’s woes

But here’s the kicker: the court ruling relates to people who were working at the council from 2004 to 2010 – when it was not controlled by Labour. Indeed, records show that in 2004 – the year from which claims could be made, the council was run by the Conservative Party, in coalition with the Liberal Democrats.

For most of the period covered by the court ruling, the council was under no overall control.

The plot thickens

When the council originally lost its Supreme Court appeal, back in 2012, it had been ordered to save £600 million by 2017 – by the Conservative/Liberal Democrat Coalition government.

It could afford to borrow £429 million of the £757 million it was expecting to have to pay – but would have to get special dispensation from the government of the day to take out any more loans.

It seems likely that no such dispensation was forthcoming. This would indicate that it is not Labour, but the Conservatives, who are responsible for Birmingham Council’s precarious financial position.

So when MPs like Richard Holden, below, took to the social media to say things like

he was wrong. The council has been bankrupted by his own party (with help from the Liberal Democrats). Or so it seems to This Writer.

Some Tories, like Simon Clarke (below), have claimed that Birmingham is just one of many Labour-run councils that are now bankrupt. But this is to deny that Conservative-run councils are also out of money, as the context box indicates:

The vast majority of local authority funding comes from central government in the form of the Aggregate External Grant (AEG). It is this money that pays for the vast majority of council services.

The government of the day determines the amount to be given to each council.

This means that, if any council is struggling to provide services, it is likely to be because the Westminster government has not provided enough AEG funding.

So, again, it seems the Conservative government – not individual councils, no matter what the colour of their ruling political group – is responsible if any councils are in danger of financial collapse.


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We’ve been told lies about Thames Water’s profits – and the cost of cleaning the sewage

This is now proved true: in a bid to save privatised water firms’ profits, the Tory government is asking them to spend less money on cleaning our water than is needed to do the job. You will drink dirty water; it will make you sick.

Earlier today, This Site reported that Thames Water – the privatised water firm that is in danger of collapse – has not paid any dividends to shareholders in six years.

That was the best information available to This Writer at the time.

However, new information has come to light:

Economist Richard Murphy has examined the finances of all the privatised water companies, and has come back with several conclusions:

  • Their operating profit margin is a staggeringly-high 35 per cent. From this, we may conclude that there is no reason for Thames Water to be in danger of insolvency.
  • Every single penny they have made in profit has been paid out to shareholders in dividends. None was reinvested in infrastructure or equipment (borrowing paid for equipment and the infrastructure was ignored). So Tories like those on the BBC’s Politics Live on June 28 were wrong when they said money has been invested in improving infrastructure. We can’t say they were lying because they may have been misinformed, but someone definitely lied to them.

Mr Murphy’s conclusion on this is stark: “The public is being fleeced by these companies who are simply treating the fact that the English consumer has had no choice as to who to buy water from as a means to extract profit from them.

But that’s not all!

  • The industry has made investments – £77bn on equipment, the rest on other financial investments. This has been funded mostly by borrowing, with £13bn coming from shareholders. This means the claim (when water was privatised) that private capital would fund water after privatisation was nonsense gibberish; it is being funded by borrowing.
  • Mr Murphy’s figures show £13bn invested by shareholders, who have received £25bn in dividends, meaning that for every pound they have put into the industry, they have received nearly two pounds in return.

Finally:

  • It is clear that the water companies are environmentally insolvent. This means their business structures are not sustainable in terms of reducing pollution and if they are made to put in the necessary money to do so, they will go bankrupt.

What this means, of course is that the water firms have been polluting the UK’s waterways to a staggering extent. I’ll republish the part of Mr Murphy’s thread that covers this, so you have it straight from the horse’s mouth:

In simple language: because they decided to take their massively-overinflated profits for themselves rather than invest them in improving the sewage system, the water companies and their shareholders have created a problem that will cost £260 billion to solve – and if they are made to shell out that money now, they will all go out of business.

The government is therefore asking them to pay slightly more than one-fifth of that amount – but as a result, your water supply will be polluted by the sewage and other rubbish that the water companies have pumped into the ecosystem.

This means the Conservative government – and you need to bear it in mind if you have a Tory MP – has said that it is happy for you to be made ill by polluted or infected water, in order to allow privatised water firms to continue making a profit.

The answer to all this, of course, is re-nationalisation.

Ah, but the government says this is too expensive, because of the cost of buying out the shareholders!

Is it, though?

Mr Murphy says no compensation should be offered to shareholders at all, because they have behaved in an irresponsible way that means it will cost more money to fix the problems they have created than they originally paid to own their parts of these firms.

He adds that providers of loans to the water firms may have to take a hit as well, because they made bad decisions in lending to these companies.

The Tories in government are unlikely to accept this because, even though it is in line with a basic principle of business that if you invest in something unprofitable, you lose money, it diverges from their strategy in privatising water in the first place: that the profits would go to private shareholders and it is the losses that will be paid for by the public and customers.

Mr Murphy makes another excellent suggestion – which is that, because the water industry will need to be supported with borrowed funds, it should issue water bonds to the public via ISAs. You could save in a way that ensures we get clean water in the future.

I appreciate that this is a lot of information but it is very important information that could affect your health, and that of your family and children in the future.

So please share this article to ensure the information in it is seen by as many people as possible.


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