Cornwall Council’s financial position further downgraded, from “stable” to “negative”.

Cornwall Council’s credit rating has taken another hit, after the agency Moody’s included it as one of five local authorities to be downgraded from “stable” to “negative.”
The timing of the downgrade is a particular concern as Cornwall Council embarks on its latest budget consultation. A “negative” score on financial strength has the potential to increase borrowing costs.

The news is a far from ideal start to her new career for the most-recently-appointed chief operating officer, Tracie Langley, who began work last week. Cornwall Council insiders believe the council’s financial position would be even weaker had it not been for the robust and straightforward advice of her predecessor, Andy Brown, who resigned suddenly “for personal reasons” the previous week.

Cornwall currently has a total debt of more than £800 million, of which £374 million is owed to the Public Works Loans Board (PWLB.)
With financial policies unchanged for 10 years, whether led by Conservatives or Liberal Democrats, Cornwall Council has traditionally sought to keep council tax revenues as low as possible while stuffing cash into reserves – while at the same time slashing services.
The steady decline in the council’s credit rating suggests that in an era of austerity, with rising demand on children’s and adult social services, such policies do not work. Some are now regretting that in previous years, the authority did not do more to raise council tax.
The minutes of Moody’s most recent rating committee show a meeting was called “to discuss the rating of the Cornwall Council, Guildford Borough Council, Lancashire County Council, Aberdeen City Council, and Warrington Borough Council.
“The main points raised during the discussion were: The issuer's fiscal or financial strength, including its debt profile, has materially decreased. The systemic risk in which the issuer operates has materially increased.”
Moody’s first expressed concern about Cornwall Council’s financial position after the Brexit referendum in 2016. The council was – and still is – engaged in a number of high-profile ventures which had historically been underwritten by European Union support. One of these was the proposed spaceport at Newquay. Another was the Wave Hub at Hayle.

In October this year a sharp increase in the baseline PWLB put more pressure on the council’s borrowing, and saw a further downgrade to “stable.” Now Cornwall is seen as “negative.”
Moody’s says: “This reflects the following factors: (1) higher systemic risk as expressed in a potentially weaker sovereign rating; (2) higher spending pressures for local authorities within a lower growth environment, in line with the UK sovereign, particularly for social care and housing, combined with the risk of weaker business rate growth and lower returns on commercial projects; and (3) weaker sovereign institutional strength leading to the potential for further policy and legislative delays on key issues for the sector including business rates devolution and reform of the adult social care system.
“The Baseline Credit Assessments (BCAs) were also affirmed. Final ratings incorporate uplifts provided by Moody's assessment of a high likelihood of support from the UK government, as per the application of Moody's Joint Default Analysis (JDA).”

At least Ms Langley has previous experience of working for a council which might struggle for cash. She is a previous director of economic growth at Surrey County Council, during the period that authority teetered on the brink of bankruptcy. Conservative-controlled Surrey had also, for decades, pursued a policy of low council tax.