The Rape of Whitby Harbour
- – an “In My View” article by NIGEL WARD, offering an attempted ‘All You Need to Know’ guide to the action against SBC regarding what one Councillor has described as ‘an act of corporate plunder’.
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Background
I have been given to understand that my recent article “The Rise and Rise of Hypocrisy” has set alarm bells ringing amongst certain elected members and paid public servants at Scarborough Borough Council.
The article revolved around historical and present examples of local politicians abandoning the values they espouse in Opposition when they eventually achieve office. In simple terms, they conceal their mendacity.
In particular, the section of the article dealing with the Whitby Harbour dispute has, I am informed, shocked members – who had been hitherto largely unaware of the impending dire consequences.
I promised more detail; I can only apologise for length of this article.
The Whitby Harbour Dispute
In general terms, the Whitby Harbour dispute can be understood from the following overview:
1). It is public knowledge that Scarborough Borough Council’s formal accounts have not been signed off by the External Auditor (MAZARS) for over five years.
2). This is because MAZARS have been considering Formal Objections lodged by a group of Whitby residents. The grounds are that, under the terms of the Whitby Urban District Council Act 1905, parking revenues from Whitby Harbour lands MUST be ring-fenced solely for re-investment in Whitby Harbour (by whatever body functions as the so-called ‘Whitby Harbour Undertaking’.
3). However, this has not taken place, as evidenced by SBC’s accounts, which show that said revenues have been deployed elsewhere.
4). A Report to Cabinet in December 2009 by the Municipal Ports Review Project explicitly reveals the motivation behind the move to direct Whitby Harbour revenues into the General Fund:
5). So the only ‘wriggle-room’ for SBC would appear to reside in the matter of ascertaining the precise extent of the Whitby Harbour ‘land’. Are the car parks included? You betcha!
6). Audit Regulations required that the details of this argument remained strictly confidential until the Auditor’s deliberations were concluded.
7). But this took place on 26th March 2021, the formal recommendation being that SBC should apply to the Courts for a judicial ruling on the definitive extent of the Harbour ‘land’ and its proper and lawful accounting methodology.
8). The Auditor has stated that it may have been necessary to set aside “significant sums of money, looking retrospectively” for Harbour improvements. (To give a rough guide to just how “significant” these sums may be, Endeavour Wharf car park alone is reputed to draw in around £1,000,000 per annum). Readers may recall, for example, that SBC received a reputed (but never disclosed) £2 million pounds from Jeremy CLARKSON’s ‘The Grand Tour’, for the hire for five days of Endeavour Wharf car park (for filming purposes).
9). The Audit Regulations required SBC to convene a Full Council meeting no later than 26th April 2021, to vote on whether or not to accept the Auditor’s recommendation. It is also specified that the Council must publish all of the documentation in the case into the public domain at that time.
10). However, 26th April 2021 came and went without response from the Council. No meeting of Full Council was convened, no documents were made public, nor did Councillors receive any briefings. Subsequently, at the Council’s request, the deadline for convening the meeting of Full Council was deferred by three months to Monday 26th July 2021.
11). SBC has now scheduled an Extraordinary Meeting of Full Council on Friday 23 July 2021 – one working day ahead of the deadline. Interestingly, the Audit Committee is scheduled to meet on Thursday 22nd July, one day before the Extraordinary Meeting (though its Minutes will not be published until after the Extraordinary Meeting). And still Councillors have yet to be briefed on the sole Agenda Item – MAZARS recommendation that SBC applies to the Court for a ruling.
A more complete account of the Claim is set out in the following Report:
The suspicion is that SBC has been attempting to keep kicking the can down the road until the Local Government Reorganisation (LGR) is complete and Scarborough Borough Council has been abolished, thus bequeathing the problem to the replacement authority.
Despite the fact that there are potentially millions of pounds at stake here, SBC has yet to take action towards resolving the impasse, thus preventing the External Auditor from signing off the Council’s accounts for 2015/16. The accounts for 2016/17, 2017/18, 2018/19, etc., have yet to be addressed . . .
As to where the responsibility may lay for this almost unique set of circumstances, one can only imagine that such a dramatic departure from the legal requirements would fall squarely within the remit of the Council’s Financial and Legal Directors. Whether there has been an extraordinary degree of incompetence here, or some less wholesome explanation, it is too soon to know.
The MAZARS Position
Readers and Councillors have asked me to explain the significance of the information I disclosed in my earlier article – in particular, this MAZARS document:
Firstly, it suggests that the Council has sat on the fence on this issue until it was no longer possible to keep it off the radar.
Secondly, SBC is now reduced to the desperate strategy of quibbling about the precise extent of the ‘land’.
MAZARS point out that only the Court can rule upon this and recommends that the Council makes an Application to the Court. The Secretary of State has been made aware. Naïvely, MAZARS seem to be mystified as to why the Council has chosen not to respond . . .
The minutes of the most recent meeting of the Audit Committee on Thursday 22nd April 2021 (i.e. just two working days ahead of the first deadline) note, at Item 4, that:
- “the external audit progress report be received and noted.”
To be clear, “received and noted” means that no action is recommended. The can was allowed to bounce further down the road.
The MAZARS Report attached to the minutes of that Meeting includes:
- Audit progress Whitby Harbour Objection
We issued our conclusion to our work on the 2015/16 objection on the 26th March 2021. We will now consider the objections made relating to the same issue for 2016/17 and subsequent years to 2019/20.
The important point to note here is that the present Claim (relating to potentially millions of pounds at issue in the 2015/16 accounts) is just a ‘starter’ for Claims relating to four more years of disputed revenue, each potentially amounting to further millions of pounds.
My source suggests that the sum total of these five year scould be in the order of £60 to £100 million pounds.
I now recall a fascinating and deeply insightful Public Question raised at the Audit Committee meeting of 25th June 2020 by prominent Scarborough businessman Mr James CORRIGAN:
Audit of Council’s Statement of Accounts
QUESTION 5. At item 4 of this committee’s meeting on 30 January 2020 a report was presented by the external auditors Mazars. I have quoted a section of that report:
“A second provisional view was sent to the objector and Council on 29th October 2019. We received a response from the objector on 12th December 2019 which we are considering in detail. We will update the Committee on progress at the next meeting.”
The meeting on 19 March 2020 was postponed and the meeting on 23 April 2020 was cancelled. This is therefore the next meeting of the Audit Committee. Please confirm if Mazars have provided the Council with a further update and please confirm when the audit of all the 4 years open accounts from 2015-16 through to the present time will be signed off?
It is an obvious conclusion that there is a significant matter that has been objected to. Whilst not wishing to compromise the Council’s position will you please confirm what the financial consequence would be on the Council’s statement of accounts if the objectors’ position was upheld?
Surely Mazars must be forced to conclude the matter and remove this very serious uncertainty. It is the job of this committee to hold the Council’s officers to account. Why is this committee allowing this matter to roll on for almost 5 years now?
Reason
It is highly unusual for an entity to delay in having the audit of its accounts delayed. In exceptional circumstances an audit may be delayed for a few weeks, pending a special investigation. If the Council was a private entity it would be incurring substantial penalties for this delay. If the Council were a quoted Company its share price would have collapsed. If there is a significant issue with the Statement of Accounts this may have implications for future budgets, cost savings, employee redundancies and the level of Council Tax for residents.
The Answer, provided by one or more the Directors (Richard ‘Binman’ BRADLEY, Lisa DIXON and Nick EDWARDS) is an object lesson in “Openness and Transparency”
ANSWER 5. This is a Special Meeting of the Audit Committee to consider the DBID.
We await the outcome of the work being undertaken by our External Auditors, who should be and are usually in attendance at the normal Audit committee meetings – July.
[Apropos Mr EDWARDS and Mrs DIXON, I find it noteworthy that the former, on learning that the meeting would be held in public (in the Council Chamber – not a ‘virtual’ meeting), reneged on his commitment to attend Whitby Town Council last Tuesday 29th June 2021. The latter, I can confirm, is presently the subject of an inquiry being conducted by the Solicitors Regulation Authority (SRA) in response to a Formal Complaint by a former Officer.]
In accordance with Answer 5, the matter did indeed duly arise at the meeting of the Audit Committee held on Thursday 23rd July 2020. The External Auditor attended and delivered the following Report:
Whitby Harbour Objection
To comply with the requirements of the Local Audit and Accountability Act 2014 we are required to carefully and thoroughly consider challenges made by local government electors. In the matter of the multiple challenges raised in connection with Whitby Harbour, this has been a time consuming process, requiring analysis of a significant number of archived Council records and involves legal interpretation of a number of statutes. A second provisional view was sent to the objector and Council on 29th October 2019. We received a response from the objector’s QC and legal advisor which we are still considering. We have carried out additional procedures on the Council’s accounts for Whitby Harbour and considered our own detailed legal advice. Our work has included review of:
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- land registry records for the land close to the River Eskin Whitby;
- andarchived financial statements of the Council for each year back to 1974/75.
The objection has also required detailed consideration and analysis of the following legislation in the context of Whitby Harbour:
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- Whitby Urban District Council Act 1905.
- General Pier and Harbour Act 1861.
- Sea Fish Industry Act 1951 (Schedule 4).
- Harbours Act 1964.
- Road Traffic Regulation Act 1984.
- Local Government Act 1974.
- Local Audit and Accountability Act 2014.
- The Accounts & Audit Regulations 2015
Before we issue the ‘Statement of Reasons’ (the document setting out our conclusions), the view will be subject to detailed internal challenge and external review by Public Sector Audit Appointments. Once issued, the objector and Council will have a period to respond to the statement before finalisation.
Since then, a year has passed and SBC is still kicking the can down the road.
At the Zoom meeting of Full Council on Monday 5th July 2021, Councillor Alf ABBOTT [Con.], having given prior notice, raised the following Formal Question to the Leader, Councillor Steve SIDDONS, the substance of which entirely confirmed the content of my “Rise and Rise of Hypocrisy” article (readers may wish to observe the body language of Councillor SIDDONS, in bottom-left frame, during Councillor ABBOTT’s delivery):
The Leader’s non-response ‘Answer’ is 100% waffle. It contains no information not already available in my article last Saturday – and, in fact, a great deal less – other than that Mrs Lisa DIXON will be conducting briefings. The Leader’s ‘Answer’ has since been characterised by a former member as “shifty as a Darwin dunny rat”, entirely typical of the style of Leadership evinced by Councillor Steve “Openness and Transparency” SIDDONS throughout his shambling tenure.
As to the Leader’s hope that Councillors will find a resolution on 23rd July, in my view there can be only one resolution – total capitulation by the Council. SBC has propped up its budget for years in flagrant breach of the 1905 Act. But at what cost will this resolution be to the Borough’s ratepayers?
If any Councillor or member of the public is willing to lodge a Formal Question for the Leader, allow me to offer a suggestion:
QUESTION.
Is the Leader, or his Portfolio Holder for Harbours, able to provide members with an estimate, in broad terms, of how approximately much (in a worst-case scenario) may need to be transferred from the Council’s General Fund into a ring-fenced ‘Whitby Harbour Undertaking’ account – and what impact would this have on the Council’s ability to maintain a balanced budget?
If the Council continues to disregard its duty to respond to MAZARS, I would expect MAZARS to approach the Court on the Council’s behalf, at ratepayers’ expense. Why would MAZARS allow its own reputation to be sullied on account of a Council that has practised the very opposite of Openness, Transparency, Accountability and Inclusivity?
It is important to understand that Councils are required by law to produce a balanced budget. If the Council is deemed “financially unsustainable”, it is possible (perhaps likely) that a Section 114 Notice (under the terms of the Local Government Finance Act 1988) may be issued. This would prohibit the Council from incurring any new expenditure or liabilities (with the exception of Safeguarding and the statutory services – Planning and Licensing).
Once a Section 114 Notice is in place, Councils are permitted a 21-day breathing-space, during which all current services should continue as normal. Within that period, however, the Council must propose an alternative budget. Depending on the problems the Council is facing – and there are many – this could entail redundancies, selling off valuable assets and/or real estate, renegotiating contracts, as well as a significant reduction in services.
If the Council is still unable to produce a balanced budget, MAZARS, as External Auditors, would be obliged to produce an at least viable budget.
It is at this point that one could expect Secretary of State Robert JENRICK to intervene. This explains why MAZARS have already informed the Secretary of State.
Is a Section 114 Order a real possibility?
Scarborough Borough Council is not the only local authority to have encountered financial imbalances in the order of tens of millions of pounds – as the following BBC article makes clear:
A council has imposed emergency controls on its spending, after revealing a £56m financial deficit.
Slough Borough Council has issued a Section 114 notice which restricts its spending to essential services.
The Labour-run local authority had previously invested heavily in property and land for development.
The council’s chief executive said its problems stemmed from “a range of challenging financial issues”.
A Section 114 notice is issued when what a council is receiving in revenue is insufficient to cover its spending.
A council report said the Berkshire local authority faced “a financial situation of an extremely serious nature”.
Spending on services was “significantly above the approved revenue budget,” with a £56m deficit estimated, it said.
The Labour-controlled council quadrupled its borrowing since 2016, to £760m, much of it channelled into property investment.
Purchases included the Odeon Cinema in Basingstoke, the site of a Wickes store in Wolverhampton and a Waitrose supermarket in Gosport.
The council also owns two hotels in Slough town centre, opened recently in a joint venture with Marriott.
As we see, Slough Borough Council is another Labour-led authority that has rushed headlong into property speculation (shades of Travelodge, Premier Inn, etc!) and other speculative enterprises on the back of improvident advice. The Binman is apparently not one of a kind.
I close by inviting the Leader, Councillor Steve SIDDONS [Lab.], his Portfolio Holder for Harbours Councillor Janet JEFFERSON [Ind.Grp.], Director of Finance Mr Nick EDWARDS (s.151 Officer) and Mrs Lisa DIXON, Director of Legal Services (Monitoring Officer), to provide statements for publication so that their masters – the residents of the Borough – may gain a clear understanding of how the Council arrived at such a catastrophe and how they propose to resolve it. Let us have a little “Openness and Transparency” at long, long last.
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