Uncategorized

Tory Cabinet staring into a £27m Budget “Black Hole”

At the Cabinet Meeting on the 6th October 2021 Cllr Shanker disclosed that Senior Officers were staring at a £27m “Black hole” in the Council’s finances – less than a year after apparently “balancing the budget”.

The first indications of the “Black Hole” emerging were reported in my previous article relating to this financial year:

Council already forecasting a £12m overspend – incompetent budgeting!

The largest single element contributing to this overspend is Children’s Services ( Children in Care, Fostering, Social care, child protection etc – Not Schools). The Council recognises that the numbers of “Childen in Care” rises by ~5-6% per year -this drives an annual growth of ~ £7-8m. This is a rationale basis for budget planning.

Chart from 8th September 2021 Cabinet report
Extract from Medium Term Financial Plan – Cabinet report 10 Feb 2021

The budget and forecast that was presented and agreed by the Council in February 2021 showed no escalation in the Children’s Services budget over 3 years. The plan is for a steady £70m each year. This was despite the actual costs for the year before (2020/21) showing a strong indication that it would exceed the budget of £62m by about £7m – also due to wildly over optimistic planning.

The Chief Finance Officer (Simon Riley), and Cabinet Member for Finance (Cllr Roulstone) told the Council that the 2021/22 budget included £8m growth when, in fact, it didn’t…hence the overspend.

For 2022/23, the Council had already recognised ( in Feb 2021) that there was a Budget Gap of £11.164m.

Extract from Medium Term Financial Plan – Cabinet report 10 Feb 2021

The projected growth in costs based on the increase in numbers of Children in Care, results in significant overspends.

This would suggest that, in 2022/23, there would be an additional overspend of £16m which, added to the planned £11.164m, would result in a “Black Hole” of around £27m!

Comment

It is fairly evident through, either deliberate manipulation, or incompetence, the Tories “balanced the budget” for 2021/22 by under-calling a realistic budget for Children’s Services. Using generous government Covid grants, and dwindling reserves can only last so long to cover budget deficits, and 2022/23 will be the year that the whole shambles will unravel.

The maximum 5% Council Tax increase (~£5m additional revenue) will probably just cover inflationary increases and growth in other parts of the Council. The only other option to close the gap, according to Cllr Shanker’s speculation, is the loss of ~ 300-500 jobs.

It is not going to be bridged by the annual “salami slicing” of budget cuts i.e. saving a few pounds in dozens of different places which is ultimately a cost-cutting mirage. It requires a transformational financial strategy that will restructure the Council for the future.

I first suggested that this approach was necessary 6 years ago “Derby City Council’s “Big Conversation” is a charade and limp party politicking” At that time the annual budget was ~ £220m, now it is £260m!

The Tory Cabinet have no notion of how to influence and manage the Council’s finances, or the ability to challenge discretionary spend, or the vision to recognise when they are heading, rudderless into a brick wall.

There is a complete void of financial leadership at Derby City Council!

Categories: Uncategorized

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