Nottingham City Council's finance chief says "difficult decisions" are needed this year after a new budget gap of £26 million was revealed. The authority says it is operating in a period of "unprecedented financial uncertainty", with an increased demand on its services and the rising cost of energy being among the factors blamed for the deficit.
The £26 million gap has opened up in the budget for this ongoing financial year, which ends next April. But alongside that, the council is also predicting a budget gap of £51 million next year, with an overall gap of £58.7 million over the next four years. The £58.7 million figure includes the £51 million predicted for next year.
There was also an overspend last year of £10 million, which the council says it will meet from its financial resilience reserve. In terms of how the budget gap this year will be filled, Nottingham City Council says plans will be drawn up over the coming months.
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The authority says these plans, which need to be approved before the end of next March, will be "heavily dependent" on achieving savings. Areas the council will focus on to fill the budget gap will include redesigning services, conducting 'best value' reviews and looking at efficiencies.
Councillor Audra Wynter, the Deputy Leader of Nottingham City Council and its Portfolio Holder for Finance & HR, said: "The identification of a £26m in-year budget gap is significant and serious, and some difficult decisions about transforming the way we deliver services and doing some things differently will be needed, along with strong financial discipline. We are determined to do so, set a balanced and realistic budget over the medium term, and keep the council on a sustainable financial footing."
Some of the biggest overspends this year relate to the council's care services for adults and children. For adults, there is a net overspend of £5.9 million on 'external care purchasing'.
For children's care, there is an overall net overspend of £6.6 million. As well as increased demand on services, the council says reduced Government funding and an increased reliance on council tax for income are among the issues it is facing.
But the authority also acknowledges that its past financial errors are continuing to have an impact on its "resilience." These issues included the collapse of Robin Hood Energy and money which should have spent on its housing stock being illegally spent elsewhere.
These problems led to the Government appointing an Improvement and Assurance Board (IAB) to oversee improvements at Nottingham City Council. In its most recent report on progress, the IAB said there was a "lack of urgency" at the council in terms of making change.
All of the budget gaps and overspends identified will be discussed at a meeting of the council's Executive Board on Tuesday (July 18). Papers being presented at that meeting say the potential calls on the council's financial resilience reserves, plus the forecast overspend this year, exceed the amount of money in those reserves.
The council therefore says that if the overspend is not fully met from "mitigating actions" such as savings, it will have to undertake a "further review of reserves" to see if any other money can be released. But the council says using reserves for another year to balance its budget would signal a "lack of financial sustainability and a lack of financial grip."
In terms of the overall budget gap of £58.7 million over the next four years, this relates to the council's Medium-Term Financial Plan (MTFP), which runs until the financial year starting in 2027. The setting of a four-year financial plan is one of the duties the council has whilst under the scrutiny of the IAB.
But in terms of that longer-term forecast, the council says: "The MTFP and budget strategy are being compiled in a period of unprecedented financial uncertainty and any estimate beyond one-year is very much speculative." The council cites factors including postponed reforms of local government funding and a "widely anticipated economic recession" in explaining why longer-term forecasting is difficult.
Councillor Wynter added: "Like all councils, we are operating in a very volatile economic climate, with inflation, rising energy and fuel costs and an increased demand on our services driven in part by the cost-of-living crisis, all combining to make budget setting extremely difficult... As part of our drive to improve financial management, we have prudently taken an early look at our budget situation so we can identify any problems and take action to address them."
