23/11/2022 - Permalink

Inflation, cost of living and more demand pressures on council budget

Related topics: Cost of living / Finance and budget

The rising cost of living, inflation and energy costs mean Shropshire Council is now working to reduce an overspend of around £11 million, equivalent to 5% of the council’s day-to-day budget, by next March.

Other pressures, particularly growing demand for services and children’s social care and safeguarding, are among the main reasons for the overspend.

This is a position that more and more councils are seeing with warnings from the Local Government Association and County Councils Network about the risks to council budgets in the last week.

The latest quarterly monitoring report shows the council’s position halfway through the financial year and it is now working very hard to reduce this figure.

Inflation now running at 11% is adding further costs to council services while extra demand for many services is increasing, for example as more people need help from the council with the cost of living. Key areas of pressure are growing costs in children’s social care in particular.

The council is working hard to reduce the in-year overspend figure. For example, it is reducing the number of homeless people housed in costly temporary B&B accommodation by finding permanent housing  and will bring this to zero by the end of March 2023.

It is also reducing the number of looked after children in expensive residential care and finding them placements with families. In both these examples, the outcome is better for those involved.

A report to the council’s Cabinet on 30 November says that if the overspend does not reduce, this would have to be met from its dwindling General Fund which is used to meet costs of any unexpected events such as flooding or changes in national policy.

The council has a longer-term financial plan to ensure that it can close a £27.5m funding gap it is expected to face by 2028.

The administration will be looking at whether to apply the extra 1% in council tax announced in the Chancellor’s Autumn Statement on 18 November, that councils can now raise without the need for a referendum. This will form part of its budget proposals due to be published next month. An additional 1% increase would add around an extra £1.8 million to the council’s budget next year.

Councillor Gwilym Butler, Shropshire Council’s Cabinet member for finance and corporate resources, said:

“In the last few days we are seeing many more councils reporting very similar challenges to the ones we face, particularly around social care costs. The Local Government Association has said that councils would need to raise council tax by 20% the next two years just to meet current cost pressures.

“The Autumn budget statement may bring some limited support for social care and we wait for the detail of what this means for us when we receive our settlement in late December and any proposals on council tax will come forward in early December.

“However, overall the picture is of a very tough financial outlook for the council with a significant longer term funding gap.

“We are working very hard to reduce any in-year overspend further and we have a clear medium term  plan to be financially sustainable, set by the priorities in the Shropshire Plan, but this will involve very difficult decisions.

“Strip out the impact of inflation and we would now be looking at a largely balanced budget this year.”