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5 Reasons why Councillors should reject this “travelling hopefully”Budget

On 28th February 2022, at the Full Council meeting, all 51 Derby City Councillors will vote on the Budget/Financial Plan for the next 3 years.

Do they understand what they’re voting on? How many have actually read it? Could they all explain the plan to their residents and why it’s in their best interests?

At the Cabinet Meeting last week, Simon Riley, the Chief Finance Officer described the Budget as “legally balanced”. That means that a whole set of numbers happen to equal each other. It doesn’t mean that the Budget plan is practical, deliverable or of value to the people of Derby – it just means that is passes the lowest threshold of legality.

Accepting that the Budget is “legal” – there are 5 good reasons why it is a poor financial plan and should be rejected.

  1. There is no planned growth in the cost of Children’s Services

In a previous article “Council understates Children’s Services budget by £6m…again!” I reported on the fact that, despite a compelling historical trend in the growth of Children’s Services, and an annual failure to budget correctly for this service, the plan, again, is for zero growth

The “argument” is that in the last few months, some changes have been made, that will immediately curtail any future cost escalation. The changes have not been well-articulated and have not demonstrated any evidence of a sustained reverse trend.

“The best predictor of future behaviour is past behaviour”,

In his supporting speech, Riley was clearly urging caution that it could still get considerably worse.

If Riley had planned on the basis of expected need, and the historical trend, then there would be a £6m gap in the 2022/23 budgetand it would not be “legally balanced”. It is more convenient to explain away an overspend…and it is not “illegal” to overspend a “legally balanced budget”

2. Unearmarked reserves are planned to be at dangerously low levels

Since the Tories came into office the Budget reserves have plummeted – these result from in-year overspends. (NB The A52 project was the subject of a loan and not a depletion of reserves, and in 2020-22 the Council position was improved by generous central Government Covid grants.)

Riley talks about contributing to reserves in 2023/24 and 2024/25. He’s achieving this by overspending / “hoping” for more unidentified savings). This follows the same perverse logic as borrowing money to put into a savings account.

It is clear that the Council will continue to run at a deficit and that the unearmarked (free) reserves will hit zero in the next few years. Riley re-assures the Council that there are £100m’s in earmarked reserves which could be used. That is a worrying statement for the Chief Finance Officer to make.

3. Most of the savings make little sense and are not SMART

The budget plan requires £13m savings in 2022/23. The plan quotes 60 individual initiatives to deliver this. 60% of the saving is delivered by just 13 of these ideas. These ideas are not SMART ( Specific, Measurable, Achievable, Realistic and Time bound) and consequently, unlikely to be realised.

For example:

4. Budget Pressures don’t bear close examination.

The budget document includes “pressures” which create the headwind, against which savings are required, to balance the budget, however questions should be asked.

In last years Budget document submitted in February 2021 the expected pressures for 22/23 and 23/24 were a total of £3.2m. The comparison, 12 months later is £19.9m – an increase of £16.7m in just 12 months.

Is this bad planning or an unpredicted change in circumstances?

Around £16m of the £19.9m “new pressures” result from increased demand in the Adult/Children’s Services – these were predictable ( see 1. above). A good proportion of these pressures have been neutralised by “Savings” ( see 3. above).

£5.5m of the “new pressures” result from financing costs associated with the revised capital programme. This does not reconcile with the fact that the Council plans to underspend the capital programme in 2021/22 by £100m and that for the subsequent 2 years the budget remains largely unchanged.

5. The plan gives no indication of the risks

The plan assumes that all Savings are “certain” – that they are well-planned and involve no risk. It also assumes that all “pressures” are “certain” and that there is no opportunity for mitigation. In making a decision the Councillors should be advised on where the risks and opportunities lie in the published document – or has all this been discounted out?

Comment

The Council has created a mirage of better planning by creating cross-departmental buzz words – “Working Smarter” , “Resilient”, “Vibrant and Growth” and “Green”. There is no evidence that this has changed thinking; it has simply changed the presentation.

A 3 year plan should be just that. The best forecast of the medium term – not a plan for the next year and some loose “hand waving” for the following 2 years which fails to recognise the inevitable.

A huge amount of effort will have gone into compiling this document to pass the “legal test”. However as a “business plan” for decision making it is totally unsatisfactory. It bears little examination and is flawed.

When the Councillors vote on this document are they basing their decision on a full understanding of the implications of the proposed measures or are they “hoping” that reading the first page is sufficient and “hoping” that they can trust in the words and numbers of the Chief Finance Officer.

This budget is not a “plan”.

Officers seem to be expecting that Councillors will vote this through and accept that the future will arrive by “travelling hopefully”. Elected representatives should reject this document and demand a more rigorous plan for the future of Derby – one that can withstand objective scrutiny.

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1 reply »

  1. The biggest problem at the council are the number of square pags trying to fit into round holes. How many of the cabinet have run a business and have knowledge of financial matters.
    I served on most committees and having run to very successfull busineses, was applaled at the lack of knoweledge of Councillors at meetings.
    Some having not even read their papers prior to the meeting.

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