Schools in Liverpool will be hit by additional bills of more than £2.3m after a city council energy blunder but don't yet know if they will be reimbursed by the local authority.
Last year the ECHO revealed a series of calamitous mistakes made by council staff related to the renewal of a central electricity contract which saw estimated costs soar from £10m to £26m.
Amongst the wide range of errors noted in a damning cabinet report was the revelation that council officers failed to inform the mayor or cabinet members that Scottish Power - the energy supplier it was agreeing to extend its contract with - had actually closed its trade desk. As a result, no contingency plans were made and the council was automatically placed onto a far more expensive deal.
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While the extra costs of these mistakes will fall mainly on the cash-strapped council itself, it also has major ramifications for 132 schools in the city and the local fire service who were part of the energy deal organised by the council.
The energy contract mistakes, which were picked up by government commissioners, came shortly before both the former finance chief Mel Creighton and ex Chief Executive Tony Reeves quit the city council.
Now a new report has offered more details of how the mistakes could cost schools in the city that are already hugely struggling with budgets while failing to confirm whether the council will reimburse those schools for its costly mistakes.
A report to the city’s joint mayoral and finance and resources select committee tomorrow has revealed that it could need millions more to fully resolve the issue. The document, drafted by Ian Duncan, interim director of finance, said the Chartered Institute of Public Finance and Accountancy (CIPFA) had calculated the total costs to schools was £2.3m - up from the council’s own assessment last year which stood at £2.2m.
Mr Duncan’s report said before deciding whether to offer financial aid to schools, officers had exploring the “practical implications” around it. Mr Duncan said the rules and regulations surrounding school finances are “complex” and finding a compliant legal route to providing money to schools has so far proved elusive.
Common practice would be to allocate funds to schools via the agreed formula, meaning all would benefit. The report said this would cost the council £4.5m to ensure all 132 schools were compensated.
However, Mr Duncan wrote, “even then some schools would consider themselves out of pocket and it would cost £7.7M to ensure each school received at least the amount calculated by CIPFA.” This option has been ruled out on cost grounds and there is no legal obligation on the council to pay.
Council officers remain in discussions with the government to agree a legally compliant route to compensate schools impacted should the authority decide to provide support. Mr Duncan said: “These discussions have been protracted but we are now hopeful that a solution has been found.” It is anticipated that a report will be brought to Cabinet at its meeting on 17 February. Mr Duncan’s report also said the impact on the Merseyside Fire and Rescue Service (MFRS) budget “was not quantified” by Liverpool Council.
Opposition politicians have slammed the council for continued the position it has put city schools in.
Liberal Democrat and opposition leader Cllr Kemp said: “After almost a year since the council’s major blunder on the purchase of electricity was uncovered the council still has to decide whether it can legally reimburse schools for the £2.3 million they have lost because of the failure of the council to seal in a fixed rate contract at a time of sharply rising prices.
"All this comes at a time when the council is already having to come up with £73 million of savings and increased charges. All the council’s payments have already been met from the Council’s reserves but this amount will ned to be replaced in the budget setting. No allowance appears to have been made for a pay out to schools. Incredibly, despite the passage of a year the council has still been unable to establish what it legally can give back to schools."
Cllr Alan Gibbons of the Liverpool Community Independents group added: "This latest news is a serious blow for schools. It was last May when the news of the catastrophic energy bill fiasco broke.
"I demanded at the time that schools must be protected from officers' failures. It is totally wrong that children, families and teachers pick up the tab for the negligence of the Labour-run administration.
"That protection was never forthcoming and still isn't. This so-called dialogue has dragged on for nine long months and schools are faced with severe budget difficulties. There is only one solution to this saga and that is that schools must not be expected to lose a penny because of failures which were not down to them.'"
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