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Financial context

The story so far

At a national level, the Local Government Association has calculated that since central Government's austerity measures began in 2010 councils have lost 60p out of every £1 the Government had previously provided to spend on local services. Since 2010 we have received less funding every year and in cash terms have seen reductions of more than £330million. This has meant that we have had to make significant changes to the way we deliver services. We start from a challenging position and continue to face a significant financial challenge over the next four years.

With a limited budget it is essential that we are financially prudent and that all of our ideas are costed and affordable so that we can continue to provide a wide range of services to people across the borough. The Council works within strict rules that require us to set a balanced budget every year. We monitor our expenditure constantly to ensure that it is focused on what we are trying to achieve. Resources for each of the six challenges are set out in the plan.

Locally raised funding from Council Tax and Business Rates is not enough to meet all the Council's current responsibilities. Our services therefore depend critically on announcements made by the Chancellor of the Exchequer's Spending Reviews. We had hoped that the government would announce a long term financial settlement, allowing us to plan services over several years with more certainty. Unfortunately the Chancellor has only announced funding for one financial year (2020-21) at the time of developing this document.

Schools aside, the Council's biggest area of expenditure is the £168 million that we spend on supporting vulnerable adults who need social care, and a further £69 million that goes towards supporting children and young people. The average cost of the services that this expenditure funds is increasing significantly. Since 2013-14 the annual cost of a child being in care has increased from £26,000 to £40,000 a year; the weekly cost of an adult care at home package has increased from £110 to £202.

Our financial challenge

The financial gap that we need to deal with, driven by demand pressures and national funding assumptions over the next four years is approximately £91 million. This is made up of anticipated reductions in funding from central government and investment required to meet cost pressures across the Council. With Council Tax increases of 2 per cent assumed each year over the next four years in line with national forecasts, a 2 per cent charge for Adult Social Care in 2020-21, Business Rates income and savings proposals, this gap will reduce to £31 million. This position may improve further if temporary government funding is made permanent, but this would still leave a gap of £22 million. We have developed proposals within our budget plan to address this challenge in part but will develop our plans further as more information is made available by central Government.

Capital expenditure

Despite the pressures on our day-to-day spending, we have the opportunity to invest in assets that deliver an economic or social return into the future – capital expenditure. We can fund one-off projects to build and develop assets like leisure centres and roads, for regeneration programmes or technology and equipment. Capital investment is raised:

  • through selling assets such as buildings or land we no longer require
  • from dedicated Government grants
  • from private sector investment
  • from other borrowing which is repaid over a period of years
  • from the Housing Revenue Account which is financed by, and allocated towards, council housing
  • through setting aside some of our revenue budget to fund future finance costs.

Our programme of capital investment is likely to cost over £400 million between 2020 and 2024 requiring approximately £90 million of Council borrowing, with the remainder financed through other sources. Whilst capital funding sums may appear significant, spending has to be affordable and has to be done within the national prudential code which all councils need to abide by.

In such a tight financial environment we need to make difficult choices about which projects we fund in line with our priorities. As well as helping secure improvements to our communities and services capital investment can help the Council improve its sustainability, both financially and environmentally; for example by generating savings through more efficient buildings and reductions in high costs of maintenance. It can also increase income to the Council through commercial opportunities such as further investment in property. The Council will invest in projects with a direct benefit to our residents rather than purely commercial projects outside our borough.

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