Tough decisions will need to be made as Perth and Kinross Council faces an “unprecedented” estimated funding gap of £24 million to achieve a balanced 2023/24 budget.
Councillors will be asked to make “significant” budget cuts and transform the way services are delivered.
A report on PKC’s financial strategy was put before a meeting of the full council on June 22.
The report - described by PKC’s longest-serving councillor Willie Robertson as “very worrying” - set out the council’s financial position in stark terms.
Over the next six years PKC has approved capital investment of £730 million.
This spending includes multi million pound projects such as Perth High School, PH2O (Perth’s new swimming pool and ice rink), the Cross Tay Link Road and Blairgowrie Recreation Centre. But costs are spiralling.
Inflation is at a 40-year high. Energy costs are expected to double for PKC. Pay increases for 2022/23 - currently being demanded by trade unions - are “significantly more than the amounts budgeted”.
PKC is also facing an increasing demand for services. Perth and Kinross has an ageing population. There are new social, economic, health and wellbeing and climate change budget pressures. Councillors were told PKC needs to find a “new way” to deliver and organise services.
Asked by SNP councillor Grant Stewart about the impact of rising fuel costs. PKC’s head of finance Stewart Mackenzie said: “In costs, we’re quoting a figure roughly of £5 million for the impact of inflation. That’s part of the estimate for 2023/24. Around £300,000 of that is school transport alone - largely driven by increases in fuel costs.”
Finance and Resources manager Fraser Crofts told councillors PKC’s operations team spent around £1 million on fuel costs but this could “run into tens of thousands if not hundreds of thousands more” should fuel price increases continue.
As part of the financial strategy, PKC will look at demand and at what level of service is no longer affordable. It will look at the standard of service being provided and explore options as to how best to maximise income either from national funds or creating new charges.
Moving the report council leader Grant Laing said: “Just like our citizens who are dealing with the cost of living crisis, the council is facing huge pressures too.
“The costs of providing the everyday services that the public rely on is increasing amidst unprecedented levels of inflation. Our energy costs are projected to almost double in the next year. And we don’t yet know the impact of pay awards on both the current year and future years.
“When these external pressures are added to our structural deficit, we face huge financial challenges over the short and medium term.
“In order to deliver a balanced, sustainable budget, we are going to have to make tough decisions - tough decisions that will involve changing the way we do things or indeed radically curtailing services.
“We also need to make sure that our remaining scarce resources are diverted to where they are most needed.”
He added: “It is important to recognise that we are not the only public sector organisation facing these challenges. Many other organisations are facing similar tough choices.
“However, the approval of this financial strategy puts us in a better position to meet these challenges head on.”
Seconding SNP Stewart Donaldson said the council needed a “balanced” and “sustainable” budget.
Two amendments were agreed to the motion. One was from Labour councillor Alasdair Bailey to revert to setting three-year budgets rather than one-year budget.
The other was from the council’s deputy leader Eric Drysdale to pledge to “prudently manage reserves” rather than “maintain and build up reserves”.
His amendment - seconded by Cllr Tom McEwan - brought strong opposition.
Liberal Democrat councillor Peter Barrett called it “absolute folly” and said there was no need to create “wriggle room”.
He said: “We really need to face up to the financial challenges that face us.”
Conservative councillor David Illingworth said the report made “grim reading” and it was “unrealistic to hope the Scottish Government would be able to bail local governments out”.
He said: “This council will have to make many hard and unpopular decisions over the coming years.”
He added: “To adopt any other reserve strategy other than prudence would be like a sea captain setting sail into a storm having first sold the lifeboats on eBay.”
Cllr Drysdale’s amendment went to a vote. It was opposed by the Liberal Democrat and Conservative groups but was voted through by the SNP, Independents and Labour by 22 votes to 18.
