Knowsley Council is set to raise council tax for the borough’s residents by the maximum possible amount.
According to documents released ahead of a Knowsley Council cabinet meeting later today, February 22, the council has “no option” but to apply the full council tax rise of 5%.
The council claimed this is due to the way government funding calculations are made, according to one report.
The documents also revealed Knowsley is projecting a “small” deficit in its budgets over the next few years – with an expected £1.26m funding gap in 2023/4, nearly £1.8m the following year and over £3.7m in 2025/26 – much less than other councils across Merseyside.
In order to ensure a balanced budget, the council will need to plug that funding gap – although the report states there are adequate one-off funds available to cover this year’s shortfall without needing to make cuts to services.
The report added that next year’s forecast deficit “arises to a large extent from inflationary pressures which are not necessarily permanent” meaning long-term budget savings should not be required.
Overall, the documents note that the council is in “a relatively stable financial position and a much more favourable budget position than that being faced by many other comparable local authorities.”
A “major concern” however relates to the future of social care costs within the borough, with the report noting that the government’s recently-announced financial settlement for councils falls “far short” of what is needed.
It states the government funding it receives falls nearly £10m short in respect of children’s social care, adult social care and home-to-school transport, money which has to be found locally.
The report said “increased reliance on council tax to fund adult social care is fundamentally flawed” and if the council does not increase Council Tax by the 5% maximum amount, it will be “forgoing funding which the government assumes is available when it makes its grant allocations.”
This could “leave the council facing greater deficits in future years and would necessitate greater cuts to the essential services upon which residents rely,” the report added.
According to the report for every 1% council tax is raised by, an additional £650k is generated for the council to use on paying for services.
While no service cuts are planned, a range of fees and charges are expected to go up, including controversial planned taxi license fee increases, which attracted some consternation last month by drivers fed up with issues when renewing licensing applications.
In terms of Knowsley’s spending strategy, the council has revealed it intends to use £42m next year – with over £8m of that to be funded from loans, nearly £24m from government grants and contributions and £10m from the council’s own resources.
The council also plans to sell £16m of its assets next financial year, a huge increase on the previous year, where less than a million pounds of assets were sold.
Knowsley Council’s total outstanding debt, currently standing at over £220m is set to reduce over the coming years, with predictions for 2023/24 showing debt from borrowing, private finance initiatives and leases coming in at £214m.
The report also notes how the council’s borrowing is significantly above its ‘liability benchmark.’ This is a risk-calculating tool which was introduced recently into council capital strategy documents, with those councils holding loans above the benchmark having an “overborrowed” position according to guidance issued by local authority treasury advisor Arlingclose.
According to the council report, this situation has arisen due to historic loans taken out “when borrowing was the best way to finance capital expenditure..”
With the figures for 2022/23 nearly three times above the benchmark, Knowsley”s position is a stark contrast to neighbouring Sefton Council, which tracks slightly below its liability benchmark, and stands above Liverpool and Wirral Councils, which are also above their benchmarks but by a much lesser margin.
The report states that the council is unable to repay loans early due to interest rates and terms and conditions, and also has chosen to keep hold of cash from the loans as a way of avoiding short-term lending, which could be more costly for the council.
It also adds that while the council’s lending is way above its liability benchmark, it still lies within its affordability limit. In following years the council is set to track closer to its benchmark, because that figure will nearly double from £37.6m to £62.4m.
The report also details how the council’s commercial investments have increased in value in recent years – notably Kirkby town centre, shopping parades and industrial properties – adding nearly £14m to the total value, which has been put down to recovery since the covid pandemic.
The reports are set to be discussed tonight at a meeting of Knowsley Council’s cabinet before going to full council on March 2, where councillors will set and agree next year’s budget.
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