Financial pressures from the start - the budgets of Northamptonshire’s two new councils
We take a look at the figures
By Sarah ward
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Almost all local councils in England are facing budget problems. After years of cuts to government funding, escalating costs of services and growing numbers of people in need, councils are more than feeling the pinch. Many had turned to investing in property to try and generate income, but there are now limits on taking out borrowing to do so.
Northamptonshire residents will know better than any other people in the country what can happen when an authority cannot balance its books. It was the financial mismanagement of the county council that has led to the reorganisation of the local government structure in Northants, which means all existing councils will be replaced by two large unitaries in April.
The shadow councils (made up of councillors from the existing authorities) have put together a budget for each of the new unitary authorities and although they are predicting a balanced budget at the end of the first financial year, they will face a number of hurdles to get there.
Both councils will be bringing in a 4.99 per cent increase on council tax levels, which breaks down to a 1.99 per cent increase for the core services and a 3 per cent increase for adult social care costs. Both have harmonised council tax levels so that all residents living in the North will pay the same annual charge of £1,533 and all residents living in the West will pay £1,566.
The budgets (tabled above without the ring fenced schools grant included) have been put together in extraordinary circumstances against the backdrop of a world pandemic, with many elements still unknown. The final financials of the existing councils will not be known until later on this year - meaning the budgets could be subject to change at a later date. The financial accounts of Northamptonshire county council from 2018/19 and 2019/20 have still not been audited which will lead to delays of the other council audits. The auditors Ernst & Young have also been very delayed in their work from when they were first appointed in 2019, due to not having enough staff to do the work.
Both unitary budgets have been finalised by chief finance officers who are new to their roles and work to split the budgets did not begin in earnest until the autumn.
And behind the scenes discussions are still ongoing about dividing up the final debts of the county council and what assets the two new authorities will have.
It’s an unprecedented situation and how the councils will fare over the first couple of years is uncertain.
What the budget reports say
The report to be discussed by the North shadow executive tomorrow (February 10) says:
“The new Council will continue to face financial pressures . . . it is recognised nationally that there are significant budget pressures for local government, not only from the longer-term impact of COVID-19 on costs and income, but also Social Care demand and other cost pressures which pre-date the pandemic.
“Whilst the creation of the new Unitary Council creates a number of opportunities to benefit the region, it is also recognised that there are some risks and costs, both upfront and legacy, associated with the implementation of local government reform.
“Specific risks for the 2021-22 budget include the disaggregation of the County Council’s service delivery budgets and balance sheet between North and West Northamptonshire, which could give rise to significant budget pressures and the Council’s transformation programme. Whilst the Council has prepared a balanced financial position for 2021/22 it faces forecast funding shortfalls over the period of the medium term which must be addressed.”
The West’s budget which will go to the shadow executive committee on Friday (February 12). It says:
“The creation of a new Council does present a number of opportunities, such as the financial benefits of economies of scale both from amalgamating four councils into one and from the consolidation of contracts, assets and the redesign of processes. However, there remains a significant amount of financial risk, such as the nationally recognised budget pressures for local government, not only from the longer-term impact of COVID-19 on costs and income, but also from demand led and other cost pressures which pre-date the pandemic.”
The impact of Covid-19
The pandemic will have an effect on the councils budgets in a number of ways.
Firstly it could have an immediate impact on the amount of people who are in need of help, therefore putting a pressure on the budgets of individual departments.
When schools return there is expected to be a rise in the number of children who are referred for safeguarding. This is because neglect may have been hidden while children were being homeschooled. Both councils now pay for services from the new independent children’s trust - there has been a budget set for £66m from the North and £73m from the West - but there is some flexibility in the arrangement for the trust to come back to the two unitary councils for more funds if it needs it.
There could also be extra demand on adult social services. The population of the county is ageing and more people are requiring help each year. There are also expectations that demand for mental health services could rise significantly.
Another concern is about council tax collection rates. The pandemic had impacted on the finances of many households and there are concerns it may mean many are unable to pay their bills - which will result in less money coming into the councils.
Concerns of opposition councillors
Cllr Adam Henley, who is a Labour councillor on Wellingborough council, has been part of the group of cross party shadow councillors scrutinising North Northamptonshire Council’s first budget. He has concerns.
“The officers themselves have recognised we have got significant risks,” he says. “We have got demand led services that don’t have the money. We don’t have a lot of money coming in from central government and we are asking people to pay more, with a five per cent increase on council tax. Many people who are in receipt of council tax benefit will have to pay more at a time when people are struggling. It is all becoming a pretty grim situation.
“And we have the added concern of Covid-19. They reckon at least one million people across the country could be made unemployed. That will have an effect on the local economy in terms of council tax collection and business rates. Every time a business closes that is bad news for the council.”
He says the long term budget projections for the North outline £90m of required savings over the next three years (from the 2022-23 financial year) which equates to an average of £30m a year - approximately ten percent of the annual budget. There will be tough times ahead.
Independent Cllr Julie Davenport*, who is both a Northampton borough and county councillor, has been on the scrutiny panel looking at the West budget and does not think she will be able to vote for it.
“I don’t see how I can back anything that does not have any meat on the bones. I have not seen the budget broken down,’ she says.
She has concerns that not enough financial lessons have been learnt from the failure of the county council - there will not be a public interest report - and says local Conservative politicians are too keen to say it is all going to be great.
“With a local election coming up they have to say it is going to be wonderful. But I would say we have to manage expectations - I think that is key here.”
What those in power say
Each executive of the North and West shadow councils has been led by a government appointed conservative leader (who has been an existing leader in one of the current councils.)
Cllr Russell Roberts has been leading the executive in the North and Cllr Ian McCord has been in charge in the West.
Cllr Roberts says of the North’s first budget:
“This is a fresh start for North Northamptonshire Council and I’m confident that we can build on the great work that has already been started to transform and improve services.
“Local government reorganisation is absolutely right for Northamptonshire and the benefits of creating two new councils in the county are huge and will benefit everyone in the long term.”
Cllr McCord says of the West budget:
“We have ambitious plans for West Northamptonshire to make this area a great place in which to live and work and where businesses can prosper.
“Bringing the local authorities together creates many advantages and we can unite our strengths to ensure that we deliver for our residents.”
The West budget will go to the full shadow council for approval at a virtual meeting on February 23 with the north budget up for approval two days later.
Which political parties run the new councils will be decided after the May elections. However face to face canvassing is currently on hold on the order of government minister Chloe Smith who has written to all local authorities to say door to door canvassing is not considered essential or necessary so should not happen during lockdown.
Northants chief constable Nick Adderley has said he backs the minister:
“Police officers will continue to respond proportionality to any alleged breach of the legislation, as we have done throughout the pandemic and we will continue to ask the public to comply with the spirit of the guidance, working with them as we have continued to do over the last few months.
My position as Chief Constable is clear, it is essential that we work together to do all that we can to bring the infection rate down, support the NHS and save lives.”
*Cllr Davenport was quoted rather than Cllr Brookfield as stated in the version sent via email