Savings

The new council will have to find £38million in additional savings

The new Somerset unitary authority will need to find more than £38million in additional savings in the first year of its existence.

There are less than five months until Somerset County Council and the four district councils – Mendip, Sedgemoor, Somerset West & Taunton and South Somerset – are officially replaced in the unitary council of Somerset on April 1, 2023.

Faced with inflation, growing demand for services and the long-term impact of the coronavirus pandemic, the new council faces a mountain to climb as it tries to close a projected gap of 38.2 million pounds in its first-ever budget.

It comes after four of the current five councils predicted a spending overrun in their final year, potentially reducing the amount of reserves that will be available for the new authority.

Why is the new unit in such poor condition?

The austere financial picture of the county’s finances was revealed ahead of a county council executive committee meeting in Taunton on Wednesday morning (November 16).

When the five existing councils set their final annual budgets in February, the projected budget gap for the new unitary authority was £28.6 million.

This was later revised upwards to £44.5million in July in light of rising inflation, which on Thursday November 17 rose above 11% – its highest level since 1982.

When all savings proposals are removed, the overall gap between the money the new council will receive (in municipal taxes, grants, business revenue, etc.) and the amount it can expect to spend on services amounted to £74.2 million.

Of this, £27.8 million will be covered by implementing “savings and income generation proposals” contained in the unit business case – for example, by reducing duplication and harmonizing the systems that run key services like scheduling.

Further details on these programs and how they will be implemented are expected to be presented to the Executive Committee in January 2023.

An additional £8m is expected to come from central government to cover the cost of welfare reform, leaving a gap of £38.2m that will need to be filled by tax hikes and new discounts.

Jason Vaughan, director of finance and governance for the board, said in his written report, “It’s a huge challenge as the new board brings its services together, and it’s clear that the savings achieved through the analysis of unit profitability will not be enough to close the gap, which means that new savings will have to be put in place.

“The focus will remain on removing inefficiencies, but it is clear from the scale of the financial challenge that cuts to services will be needed.”

How will this be resolved? Are we considering even more reductions?

In an effort to protect frontline services and avoid depleting its reserves, the council is exploring different ways to close this budget gap, including (but not limited to):

  • Reduce capital spending on existing five councils (including those on projects taking place in the next fiscal year)
  • Increase revenue from fees and charges
  • Minimize severance pay as part of the unitary transition
  • Create a new “asset strategy” to see if existing assets (including existing council offices) can be sold for capital receipts
  • Review commercial investments made by existing municipalities

Speaking ahead of the meeting on Wednesday, November 16, Deputy Chief Liz Leyshon said the challenges facing Somerset were mirrored by other local authorities across the UK.

She said: “Council budgets across the country are being impacted by three key national challenges.

“Inflation increases many of our costs, we find it difficult to hire the qualified staff we need, which means we have to use contractors or external companies to provide statutory services, and we are seeing a dramatic increase in the complexity of the care needed for people presenting to social care for adults and children.

“Both services deal with far more complex cases than we expected before the pandemic, and we have seen a particular increase in the need to support young people’s mental health since the lockdown.

“Although the number of people with the virus is lower than last year, it looks like covid-19 will have a lasting effect on public services.

“Central government Covid grants are coming to an end just as the long-term impact of the pandemic is becoming clear.”

What about the current exercise?

As well as providing a balanced budget for the unit’s first year, Somerset County Council is facing a huge budget shortfall due to growing demand for child and adult services.

Of the five local authorities in Somerset, four are currently expected to run a spending overrun by the end of the current financial year

The total forecast overrun for 2022/23 is £23.6m – but £21.2m comes from the County Council, with Mendip balancing its books and the other three districts running deficits of less than 1.6m pounds sterling each.

If steps are not taken over the next few months to significantly reduce this amount, the county council will be forced to dip deep into its reserves to fill the void before it is officially removed.

How much will my housing tax increase?

Under current law, councils are not allowed to increase council tax by more than 1.99% a year (plus an additional 1% for adult welfare) without a referendum.

However, the Chancellor of the Exchequer, MP Jeremy Hunt, revealed in his autumn statement on Thursday (17 November) that he would allow councils to raise council tax by up to 5% without a referendum – the increase including a maximum of 3% for general expenses and up to 2% for adult social assistance.

The council gave no initial indication of its planned council tax increase, with more detailed proposals due before the budget is set in mid-February 2023.

Jonathan Carr-West, chief executive of the Local Government Information Unit (LGIU), said Mr Hunt’s policies were unlikely to be of much help to Somerset and other similar local authorities .

He said: “Today’s budget offers limited relief to beleaguered councils. In a week when two of England’s biggest local authorities have said they face a financial cliff, the message from the sector is clear. Well-managed boards will fail unless something changes.

“Additional funds for social care would be welcome, but the vast majority of what has been announced today stems from delayed reforms and increased council tax flexibility. These two measures only postpone the problem.

“We have been doing this with social protection for over a decade now and a regressive tax will hit the poorest hardest and shift political responsibility from central government to local government.

“Councils across the country are struggling to make ends meet today. The government has the choice to intervene before or after the bankruptcy of local authorities. This budget hardly encourages optimism.