Derby City Council

Council forecast £21m hit to finances this year (2018/19) – what happened to the ‘balanced budget’?

In January 2018, the previous Labour administration presented to Full Council a “balanced budget” for 2018/19, and 2019/20. This meant that in-year expenditure on all services, would be covered by available Government/Council Tax funding, and that there would be no drain on reserves. Shortly after the May elections Cllr Baggy Shanker confirmed:

“But the fact they ( the Conservative administration) are inheriting a balanced budget is not something to be taken lightly. It has been achieved in the face of the most harsh cuts to council budgets”

Despite the specific cuts to Government grants ( albeit that the total funding has remained constant since 2010), the Council has been able to increase usable, budget risk reserves by £40m in the same period – saving in-year surpluses for future use. A good position!

In the Chief Finance Officer’s report this week to the Cabinet it transpires that the budget is far from “balanced” – a “hit” of £21m was presented!

The “hit” consists of:

  • £6.3m – Forecast overspend against the in-year (2018/19) budget – principally in Children’s Services (£6m)
  • £12.4m – Forecast overspend on the A52 improvement programme ( reported previously) – taken from reserves.
  • £2.1m – Forecast overspend on Adult Social Care – taken from reserves.

Of this, the £6.3m in-year gap will have to be closed by new savings, or by draining reserves, further, beyond the position on the chart below.

Total usable, budget risk reserves, at 31 March, each year.

All of this is on top of the previous reporting of the £12m “hole” in the 2019/20 budget.

The £12m gap in next year’s Council budget is more concerning than the A52 overspend. The financial planning system is “out of control”.

Comment

Depending on which side of the political fence one sits on,  will influence how this is interpreted.

Labour would argue that the pressures that have precipitated these forecast overspends were not known about in January 2018, at the time of budget setting. Also, they would have the view that a new administration would wish to make the current forecast position look poor, in order to “blame ” the previous Council, and win plaudits for future successes. Any new administration would be inclined to take the same approach.

Conservative would argue the opposite – that Labour set an unrealistic budget in January so they could demonstrate financial probity prior to the election but with no realistic expectation of success with delivery.

There is probably an element of truth in all of these but, it is important to recognise there is a limit to how much of the budget can be subject to political influence.

Of the £220m discretionary budget:

65% pays for Adult Social Care and Children’s Service. This has to be delivered.

18% pays for Corporate Resources / Loan repayments etc. This contains very limited scope.

Which leaves 17%, around £40m, on “Communities and Place” which covers a broad range of services, including – bin collections, street cleaning, leisure, culture, tourism, neighbourhood teams/streetpride etc. This is the area where political decisions are made which have limited consequence on the overall position but are most visible to the public.

Apart from the A52, the “hit” is in the highly sensitive Adult/Children’s social care sector. Budgetting for this is not an exact science, as it is highly demand led.  When the budget is set, one can assume that there will be a growth in demand ( a position which is always widely reported), or one can assume that there will be no growth/limited growth, and that it can be contained financially.

The January 2018 budget assumed the latter.

The Councillors rely heavily on the Officers ( Council’s full-time paid staff) for any decision making. The Chief Finance Officer who was responsible for the latest forecast is not the same person who compiled the budget in January 2018.

As I reported in my previous article

“Executive Scrutiny Board examines the £12m budget gap: a different way of planning, or a total surprise?”

Don McLure, the current Chief Finance Officer said,

“I would suggest, me coming in, afresh, looking at what we’ve got in front of us….I’m presenting the numbers in a different way – my way, rather than a “previous way” “

The budget was balanced, based on assumptions made about limited growth in Adult/Children’s Social Care.  Different assumptions could have been legitimately drawn which would have shown a severely unbalanced position…..perhaps a “different way” would have been a more “realistic way” but a more “politically unacceptable way”?

As the Council, legally, has to set a balanced budget, then “different way” assumptions would have driven the need for savings elsewhere.

How much were the budget assumptions influenced by political pressure? Who knows?

Now it is all coming to the surface!

1 reply »

  1. Why not get rid of high paid staff in council jobs
    Replace them with a public volunteer committee to access spending and saving?
    These people could be elected from different parts of the community
    Major decisions could be put to a public vote

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