“Any sense of optimism on the financial horizon is rapidly diminishing,” a Ceredigion County Council report has warned, as five per cent annual tax rises and further service cuts are likely to be required to even get close to balancing the books over the next three years.
Setting the budget for 2023/24 was the “most difficult in living memory”, councillors heard at the beginning of this year, but fresh reports set to go before cabinet members tomorrow (Tuesday) warns that the situation is very unlikely to ease.
“Even at this relatively early stage in the financial year a challenging in year financial position is already been seen,” a report outlines.
“This is despite a 2023/24 budget setting process that recognised an unprecedented £22 million of cost pressures and a 7.3 per cent increase in council tax.”
Despite the budget cuts, the council still forecasting an overspend of £2.9m this year, with the report warning that “any sense of optimism on the financial horizon is rapidly diminishing.”
Presenting a Medium Term Financial Strategy for the council, a report suggests that next year the council could need to find potential savings of at least £15m, with £10m a year to follow until 2027.
The current budget shortfall based on funding and tax increases is indicated to be £6.4m next year and a total of £11.9m over the next three years.
Plans to mitigate the shortfall include selling off buildings or repurposing them, finding savings within “lower priority” services, a review of council tax premiums, and exploring pushing non statutory services onto town and community councils.
“As a last resort if all other options have been exhausted, consideration of targeted budget cuts, which would mean a reduction in council services being delivered rather than continuing to try to deliver the same but with less resources,” the report adds.
In the past 10 years, figures show, Ceredigion County Council has had to find more than £60m in budget savings, as austerity kicked off a “considerable period of real term decreases in funding”.
Where the pressure is coming from
Five ‘main areas of significant cost pressures’ on this year’s budget have been identified by Ceredigion County Council, with “taking no action not an option”.
Despite a large council tax increase and savings of £22m, the council still predicts an overspend of £2.9m stemming from uncontrollable budget changes in a number of areas.
The latest pay offer for general staff – which has been rejected by unions who are looking for more – would cost £960,000 – so any agreed rise is likely to be higher.
A £520,000 overspend is expected due to the “use of agency staff in residential homes increasing significantly compared to 2022/23 due to continued recruitment challenges for care and support worker roles.”
Older persons and out of county children’s placements have also risen since the budget was set, with warnings of a combined £3m overspend against the budget.
Home to school learner transport will also increase by 43 per cent in September following a tender process, adding an unaccounted for £543,000 to the budget.
“In order to mitigate the overall position a number of measures have already been employed, including planning to use one-off funds in certain earmarked reserves and asking certain services to achieve in year savings,” a report said.
“This demonstrates how challenging the underlying in year financial position is.
“Without these mitigation measures being employed the projected overspend position would be significantly higher. Taking no action in light of a significant projected overspend is unfortunately not an option.”
The report adds that “notwithstanding the more significant areas of concern that have already been highlighted, there are a number of services that are also facing other challenges, albeit smaller in scale.”
“Nevertheless these can still compound up when several smaller items are going in an adverse direction”, the report concludes.
“Some of these other challenges include the cost of unaccompanied asylum seeking children, planning fees income, trade waste income, waste collection frontline operational costs, car parking income, property-related income, supported living new tender prices and learning/physical disability placement volumes.”
The council report says that future reviews of services will be subject to consultation “as appropriate”.
While the council currently has £6.7m in the bank, along with £48.8m in reserves earmarked for funded projects, that figure represents 3.7 per cent of the budget, and is likely to fall over the next three years.
“The council’s approved target is for general balances to be maintained at between three and five per cent of net expenditure, which is currently being achieved, “ the report says.
“There is a risk with an increasing net budget total, that the percentage becomes diluted over time. Therefore there may come a point where an additional contribution would need to be made at year end in order to not fall below three per cent.”
The report adds that the council has dipped into earmarked reserves to avoid borrowing, with estimates the strategy has saved around £800,000 a year.
While “the council has a financially resilient balance sheet” and “there is more than adequate scope to be able to mitigate this in year position”, later years cost savings will need “proactive action”.
“For at least the fourth consecutive year, the council is facing yet another set of unprecedented financial challenges,” the report concludes.
“Looking ahead to the 2024/25 budget process, which will be starting shortly, the latest iteration of the Medium Term Financial Plan is already showing an indicative budget gap of £8.5m and an indicative savings requirement of £6.4m (using assumptions of a 3.1 per cent Welsh Government funding increase and a five per cent modelled council tax scenario).
“If the in-year position of both the council and Welsh Government does not start to show signs of improving, then there is a very real prospect of those projections being the absolute minimum position needing to be achieved.
“It is also becoming quite clear that to sustain quality services in the current financial environment it is going to require a higher core ongoing level of funding.”