County Council finance chief Steven Pilsworth has warned that the council is in ‘an extremely serious financial position’. He says that, without additional funding, in future years the council may not be able to balance future budgets without ‘significant reductions in services’.
His warning comes as councillors begin to consider proposals for the council’s 24/25 budget, known as the ‘integrated plan’. Overall that plan would see the council’s spending increase, from £98million this year (23/24) to £1.1billion.
To ensure the budget is balanced, it also includes £46m of savings, the use of an additional £13m of council reserves and an increase in council tax of 4.99 per cent. In his report to councillors, Director of Finance Mr Pilsworth warns that ‘extremely volatile’ costs could actually ‘outstrip’ the planned increase in spending in 24/25.
And he says that – despite making savings of £3.5bn since 2010 – the council will still need to deliver the ‘biggest savings programme for a decade’, which he says will be ‘very challenging to deliver’.
The planned use of county council reserves to balance the proposed budget come on top of the estimated £24.5m the council expect to use by the end of 23/24 – totalling £38m in just two years.
In his report, Mr Pilsworth warns councillors that this is ‘unsustainable’, suggesting that county council ‘reserves are being rapidly eroded – and are now at dangerously low levels’.
He added that, ‘given that the alternative is further service reductions, then this is a budget strategy that needs to be followed’.
In the nine-page report to councillors, Mr Pilsworth outlines the council’s current financial position, the local and national context and future budget risks. Earlier this year the council brought in a ‘recruitment prioritisation’ policy – freezing recruitment to all but essential roles – as part of a package of measures designed to reduce costs.
That followed a decision by the council for the vast majority of staff to move away from its landmark headquarters at County Hall, in Hertford.
But despite extensive actions, Mr PIlsworth’s report says the council is still forecasting a £15.7m overspend this year (23/24). He says the position for future years is ‘extremely challenging’ – with demand for services increasing and efficiencies harder to achieve.
“The Council faces significant financial pressures from inflation and increases in demand for services, in particular, but not exclusively, for social care,” he says.
“Also, it is apparent that further efficiencies have become harder to achieve, and will require more resource and investment to achieve through complex transformation programmes and service re-design.”
In his report Mr Pilsworth points to the impact of inflation and the increases in demand for statutory services, as well as the impact of the cost of living.
He also highlights the impact of significant increases in eligibility for SEND support, as more children receive Education, Health and Care Plans (EHCPs). He says the financial position of the council has ‘never been more challenging’. And he warns that in future years – without additional funding – there could be ‘significant’ reductions in services.
“Unless there is further funding available (either through grant or flexibility in council tax), or national solutions to social care pressures, then it is difficult to see how the council will balance future budgets without significant reductions in services,” he says.
As finance officer Mr Pilsworth is legally required to report to councillors on the adequacy of proposed reserves and the robustness of estimates under section 25 of the Local Government Act 2003, as part of the budget setting process.
Reserves are funds held by the council that can be earmarked for known risks, ring-fenced for a specific purpose or held for unknown events or emergencies.
According to the report, the council has £62m in a ‘general fund reserve’, which is said to be considered as ‘the last resort when all other options have failed’.
Other available reserves include £17.5m earmarked to ‘cushion’ the impact of the public sector funding squeeze over several years and £20m to cover against the increasing High Needs Block deficit.
The council’s budget-setting process will continue until February 13, when a meeting of the county council will meet to debate and vote on the proposals.