Report spells out Councils' £6m budget gap as inflation soars

Released: Wednesday, 06 July 2022

A perfect storm of high inflation, additional staff costs and lack of clarity over future government funding could see Adur & Worthing Councils having to close a budget gap of more than £6m over the next three years.

A report lays out the funding issues facing the Councils and says that in the financial year that ends in March 2023 alone, inflation will have added £1.2m of extra costs for the Councils.

Together with existing financial pressures, this will mean the Councils having to find another £2.7m of savings by the end of March, the rough equivalent of 10 per cent of the budget.

The Councils remain confident that their track record for innovation and adaptability, which has helped continue to retain crucial services to residents while maintaining the welfare of staff across the organisation, will stand them in good stead.

And they are committed to ensuring that decisions made over the next year in light of increasing pressure on their budgets do not unfairly impact those most in need, while continuing to support the Councils' staff as they work to improve services further.

However the finance report outlines worst case scenarios and challenges ahead so that councillors and officers can prepare.

The report considered by the Councils' Joint Strategic Committee this evening (Tuesday, 5th July 2022) says there are three key reasons for pressures on the budget:

  • Cost of Living crisis. Inflation is expected to hit 10 per cent which will feed into both wage negotiations and the soaring cost of fuel.
  • Waste dispute. This has added £250,000 of annual unbudgeted costs and also lost £78,000 of commercial revenue. An equal pay review across the Councils may also see increases in salaries elsewhere.
  • Central government funding doubt. The government has delayed announcing reform of local government finance and government funding is unlikely to be increased in line with inflationary pressures.

The report does say that an increase in business rates as major projects begin to come on stream can mitigate some of the financial pressure, but a review of others backed by the Councils to generate in-year savings may have to take place.

The report points out that in the last decade there has been a considerable reduction in Government funding to local government with further doubt about how it will help fund local services ongoing.

A service review by the new Chief Executive of the Councils, Dr Catherine Howe, aimed at making services more responsive to community needs has identified “a number of vital services which lack the resilience that is needed to support our communities.”

The Councils are determined to ensure that any discussions around how and where savings will be made consider the impact of proposals on both the community and staff, so that fairness is a focus of any changes.

An increased drive to create revenue from extra services together with a thorough review of spending is ongoing, says the report. The Councils are reviewing all aspects of work including major projects, economic development, housing, public spaces including parks, public health, climate change mitigation and planning, to identify improvements and savings.

The report says that in five years the budget's estimated shortfall will be £9.3m but savings targets might bring this down to around £3m. Council tax funds around 70 per cent of the Councils' services. Increases to Council Tax are limited by Government currently to two per cent a year unless a local referendum is held.

The report says:

“The Councils will be increasingly reliant on council tax income, business rate income, and our own income generating services. Our Councils have a good track record in innovation, working creatively in partnership, transforming our digital capabilities and putting the customer at the heart of our services, so that we have capacity to continue to deliver our aspirations for our Councils. Innovation in funding, investment and commercial income will be ever more important, aligned to key goals such as housing provision, tackling the climate crisis and supporting the local economy.”

The Executive Members of Adur District Council and Cabinet Members of Worthing Borough Council noted the report and agreed to begin preparations early for decision-making over the next budget, which must be in place by April next year.

(PR22-119)

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Page last updated: 11 August 2022

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