The Council is now consulting about our budget. All local authorities are required by law to produce a balanced budget each year. It’s a complex business which has to take many different factors into account.
In 2017/18, the Council will have around £220m to spend on services and running costs. The money for this comes from three sources: central government, business rates and council tax bills.
Government funding has declined sharply and will continue to do so. By 2019/20, it will have dropped to £74m – less than half of the equivalent level in 2010 (£152m).
This means that an ever bigger share of the Council’s shrinking budget is funded by business rates and council tax. But at the same time, costs are going up (as they are for everyone). Here are just a few examples of this in Derby:
- Another £6.6m is needed to meet the rising demand for adult social care in 2017/18, and an extra £13.8m over the next three years
- Pension costs are expected to rise by £1m a year
- Insurance costs will increase by more than half a million pounds a year by 2018/19
- The new national levy on employers to fund apprenticeships will cost the Council £455,000 next year and a further £325,000 in 2018/19.
The double pressure of lower income and higher costs is the same dilemma which many households face in their own finances. Three courses of action are available to avoid falling into debt – spend less, find another source of income, or use savings.
Over the next three years we are forecasting:
- price inflation pressures of £7.7m
- volume pressures through increasing demand for our services, along with the impact of legislative changes totalling £15.5m
- government grant reductions of £18.2m, and
- the need to deliver savings we have met from reserves in the current year of £4.2m.
This will be balanced by:
- raising £17.2m through local funding, such as an increase to council tax and the number of households we have in Derby, along with further funding raised through business rates.
- the balance coming from service savings, forecast to be £28.4m.
The Council’s ability to raise more income is limited. The plan is to increase council tax by 4% in each of the next three years. Half of this rise is specifically to address the growing costs of social care.
Council spending is increasingly focused on the many services which the Council has a legal duty to provide – such as social care, children in care, road safety and refuse collection. This is why the future of other ‘discretionary’ services, such as leisure needs to be funded in other ways, at no cost to the Council.
Year-on-year spending on services and running costs is known as revenue. There is also separate capital spending for larger projects, such as repairs to council housing, repairing roads, buying new vehicles and investing in flood defences.
The Council is planning to spend £100m on capital projects in 2017/18. Some of this is funded differently, such as from government grants, selling assets, and income from council housing. It is not possible to switch money from capital funds to use for revenue spending.
The Council does have some reserves, but these are earmarked for specific uses, or held to manage risks in our budgets. Because reserves are already committed in this way and can only be spent once, the Council’s ability to use them to ease financial pressures is severely limited. However, reserves are always carefully assessed when budgets are set – with £10m specifically set aside to ease the pressure on services between 2016 and 2019.
The Council is keen to hear views about the budget from as many people as possible. To give yours, visit www.derby.gov.uk/yourcityyoursay.
Published: Tuesday 13th December 2016