Council predicts budget shortfall of almost £29 million

A budget monitoring report for the first quarter of 2024-25 will be presented to Cabinet at its town hall meeting on Monday.

It highlights that in February 2024 the Council approved a 2024-25 budget of £194.292 million – which includes savings targets of £15.9 million.

It also says the council has made savings of over £205 million since 2010-11 due to “reduced funding levels” from the government – and in the current four-year budget cycle, which will be approved by the full council in February 2024, the council will need to raise a further £64 million.

According to the report, the budget planning process for the years 2025-26 to 2028-29 is currently underway.

It also states that at the end of the first quarter, the financial expenditure forecast for 2024-25 would be overrun by £28.985 million.

“The forecast for the same period last year, 2023-24, was an additional spend of £12.6 million,” it continues.

“It should be noted that this overspend arose following the use of additional reserves of £5.385 million approved by the Section 151 Commissioner in the first quarter to offset one-off overspend in the budget for the transport of children with special educational needs and expected temporary shortfalls in commercial property income forecast in the business plan.

“This is due to planned refurbishment works and new tenants/leases. The council’s overspend also reflects the national situation of overspend in adult and childcare and homelessness, caused by persistent underfunding and rising demand and inflationary pressures.

“The Council’s commercial programme and borrowing are mitigated by the PWLB’s long-term fixed borrowings and do not contribute to this overspending.

“The projected overspending in service departments is a major concern at this early stage of the year and department heads must take action to contain it.

‘However, the forecasts represent a preliminary estimate of the Council’s year-end position based on current developments and evidence and the actual overspending has not yet materialised.

“The projected additional spending is an early warning of emerging problems that need to be addressed.”

The report states that the Council is “clearly in a difficult budgetary situation with a spending overrun of this magnitude” – and that a series of financial measures are to be introduced to alleviate this situation.

These include monthly budget monitoring for Cabinet and the Senior Leadership Team (SLT), weekly review of the budget position by the SLT, the introduction of cash-restricted budgets for 2025-26 and beyond, a new council-wide voluntary redundancy process to be developed with unions and implemented expeditiously, and exploring options for securing additional external funding.

However, it states that the recommended measures are all “relatively short-term measures” that could be implemented quickly, but that a “longer-term solution” is needed.

If these measures are not taken and followed and the budgetary situation “persistently or even worsens”, the report says, “the Council must consider” issuing a Section 114 notice or requesting extraordinary financial support from the Government.

“In addition, a comprehensive transformation programme is being considered that will fundamentally transform the Authority to continue to deliver effective services in an increasingly challenging financial environment,” it said.

“By taking decisive and early action, the Council aims to avoid the greater risk to local services that would result from inaction.

“Through this transparent and clear approach, we aim to identify and take the further difficult decisions that will be required in a planned and effective manner to minimise the potential for disruption.”

Cabinet is recommended to note the £28.985 million overspend forecast for the first quarter, note the progress made towards the savings targets for the first quarter, agree to the further measures proposed to address the current financial challenge and note that all directors will need to reduce their spending over the remainder of the financial year to significantly reduce the overspend currently forecast.

The council confirmed that it could face overspending of almost £29 million by the end of the financial year, according to its forecast for the first quarter. It says the overspending is due to a number of pressures and areas of “unavoidable expenditure”.

What is behind the additional spending?

The municipality’s budget problems are mainly due to the fact that more and more people need help and support, but the provision of these services is becoming more expensive for the municipality.

For example, the Council stressed that it was faced with the following problems:

• A projected £7.6 million Increased spending on adult social care as more adults need help due to Warrington’s ageing population. £5.8 million of this is due to the council having to provide more care packages and care support for people
• An additional expenditure of around £11.7 million in all childcare settings. The vast majority of this additional spending is due to children in care, as there are more young people and children who need the Council’s help and protection, but it is more expensive than ever to provide the right support
• A £1.8 million Budgetary pressure due to excessive spending on providing housing for people at risk of homelessness
• A £4 million Budget pressures on supporting people with special educational needs and disabilities (SEND)

Coping with budget pressure

Denis Matthews, council cabinet member for corporate finance, said: “Unfortunately, across the local government sector, councils are currently publishing forecasts of significant spending overruns on an almost daily basis.

“This is the result of growing demand for local authority services, which is putting additional costs and pressure on local authority budgets. The £29 million in additional spending currently forecast in Warrington puts us in a very stressful position, but this is not inevitable. It is an estimate at this stage and we have time to reduce this through targeted action.

“Although we are masters of our own destiny and the cost overrun at Warrington is within our control, we are far from alone in facing a difficult challenge this financial year.

“Total funding for councils is expected to be around £13 billion lower in real terms in 2024-25 compared with 2010-11, but local authorities will still be required to deliver more.

“We are under enormous pressure, but I must stress that we are well managed, we know the extent of the problem and we are implementing plans to help us deal with the budgetary challenges that lie ahead.”

The council has pointed out that an independent study by Grant Thornton in January 2024 suggested that 40 per cent of councils could face “financial failure” over the next five years. The Local Government Association also expressed its belief that a £6.2 billion funding gap would mean one in five councils would have to issue a Section 114 notice this financial year or next due to a lack of funds, effectively declaring themselves “bankrupt”.

Similarly, of the 20 councils in the region, Warrington is the place with the second worst funding per dwelling, with the council receiving £360 per dwelling compared to the regional average of £829 per dwelling.

Councillor Matthews said: “Unfortunately, Warrington is fundamentally not as well funded as other councils in the region and indeed across the country.

“However, we currently have good reserves that will provide us with a cushion in this financial year.

“We must also recognise that our commercial approach continues to help us manage our budget pressures. To date, we have been able to benefit from fixed, low interest rates on borrowings. This means we are locked into low interest rates for the long term. Our commercial approach therefore does not contribute to our overspending – in fact, our forecast overspending is there despite the £23 million a year our commercial activity generates.

“There is a fundamental mismatch between the tasks that local authorities are expected to perform and the resources they have to do them. This is pushing local authorities ever closer to Section 114 and seeing significant cuts to local services. Only through multi-year agreements, fairer funding and long-term reform of the funding system across local government can local authorities build the financial resilience we need. We will continue to do everything we can to manage the pressures on our budget and work with government to solve the national local government funding problem.”