A DAMNING report has predicted a financial crisis in Liverpool unless city councillors improve the way they handle taxpayers’ money. Liverpool’s council tax collection fund is £25m in the red, the worst deficit in the country. It has now been told to make a string of changes as it tackles cash flow problems, including trying to find £20m to pay for Capital of Culture. Senior councillors today insisted they faced “historic” problems and had successfully brought council tax bills down from being the highest in the country. But district auditor Tim Watkinson warns Liverpool’s “weak” financial position may continue to deteriorate in 2008. In his critical report, he said officials were likely to face more problems paying for unpredictable social services, which cost £8m more than expected this year. He said the council tax collection fund had fallen dramatically from £1.6m in credit in 2004 to £25.4m in the red this year. Mr Watkinson blamed this on “overly optimistic” estimates of how much tax Liverpool people would pay. His report also claimed: * The council does not have enough emergency funds tucked away in case of a crisis. * Officials have not started dealing with a potentially expensive equal pay review, which could see employees claiming huge amounts of backdated wages. * Councillors and officers are not working closely enough, and “underlying tensions” have contributed to the failure to improve the financial position. Mr Watkinson recommends the council should set a “prudent” budget this year, ideally with support from all political parties. He also says the tax collection fund should be brought back into the black. Cllr Keith Turner, executive member for resources, said: “The problems we face are historic and largely caused by previous administrations. We have increased the amount in our reserves, while keeping council tax as low as possible, because when we had the highest bills in the country. “It was a noose around the city’s neck and drove investment away. “Our current financial position is largely due to the appalling grant we received from the government, when compared with the average increase for councils nationally.” But opposition Labour leader Cllr Joe Anderson said the report confirmed his concerns about how finances were being handled. He said: “The council continues to fail to perform, which is a worry for us all. There was clearly no financial planning for Capital of Culture, putting us in a grave predicament. “Political decisions are coming back to haunt us, and we will have to pay the price for years to come.” nick.coligan@liverpool.com | 
