Barnet Council’s in-year budget gap has climbed to almost £26million as the cost of delivering key services continues to rise.
The worsening financial position – driven largely by higher inflation and growing demand for services against a backdrop of government funding cuts – means the council may have to raid its cash reserves to balance its books.
Two months ago, town hall finance chiefs were predicting the overspend on the budget for the current financial year would be £23.2m. But reports presented to a meeting of the council’s overview and scrutiny committee on Tuesday reveal the figure has now risen to £25.8m.
The reports state that Barnet’s latest pressures are largely driven by £2.97m of extra spending on adult social care, with an increasing number of care placements and growing complexity of need.
It is also spending an extra £968,000 on children’s family services because of a higher number of placements. These increases have been partly offset by lower-than-expected spending on other departments.
Speaking during the scrutiny meeting, Conservative opposition leader Dan Thomas accused the Labour administration of “crashing the council’s finances” and having no plan to fix them.
He said: “When this massive overspend was first discussed two months ago, we were told by the [council] leader that the amount would come down and he would publish an action plan in the next quarter.
“None of those commitments have been upheld so far. The overspend has got even worse. I couldn’t find any mention of an action plan in this report.”
Labour council leader Barry Rawlings hit back at the comments, saying “the only crashing that affected us was Liz Truss” – referring to the former Conservative prime minister who was in office when the ‘mini-budget’ in September last year sparked economic turmoil.
He added: “That affected the bond market, it meant that we had higher inflation than similar countries, and we are still paying for that.”
Cllr Rawlings said Barnet was in “a similar position to every local authority”, explaining the pressures were nearly all from “demand-led services” and the administration would not turn its back on children that need protection and people with disabilities.
Councils are required by law to set balanced budgets. But several local authorities, including Birmingham, Croydon, Thurrock and Woking, have recently issued section 114 notices – effectively declaring bankruptcy.
There are predictions more could soon follow, with analysis by the Local Government Association estimating councils in England face a £4billion funding gap over the next two years.
Cllr Rawlings said Barnet was “likely to look at perhaps reserves at the end of year” but added that work was going on to close the gap before then.
A further report reveals the council plans to increase its debt limit from £920m to more than £1.25bn as it is forecast to borrow a further £228m over the rest of the financial year.
Under questioning from the Conservatives, Cllr Rawlings admitted the trend was “worrying” but said Barnet was in a better position than other local authorities.
The council leader said he would be happy to provide the action plan designed to tackle the budget overspend by the end of the month. More detail will also be provided on the insourcing of services from Capita, as the report revealed the council was facing “income challenges” from returning services.