Tackling our financial challenge amid rising inflation and energy costs

The council is taking action to tackle the financial challenges it faces amid the cost-of-living crisis, increased demand for services, and what is being called the ‘disastrous’ national impact of inflation and spiralling energy and fuel costs (Cabinet, 13th September, item 5).

Civic Centre in Southend

Along with impacting on local people and businesses, these factors are also affecting the council as an organisation, with a forecasted overspend of around £14.6m (4.4% of gross expenditure budget) needing to be tackled in this financial year, along with rising budget gaps in future years. The council is also calling for more Government support for local authorities.

Over £5.8m is down to inflation and the increased cost of goods, fuel, and energy. To address some of these rising costs, the council is set to close the top five floors of the Civic Centre to staff, and they will be mothballed or used for storage. The council is also reviewing other administrative buildings to reduce usage and energy costs accordingly. Overall, within this sum, rising energy, water and fuel costs have added £2.3m to the council’s budget this year alone, well above the £1m that was put into earmarked reserves last year to mitigate some of the impact on services.

Around £2.2m is directly down to the very high cost of residential care placements and particularly those for children with complex needs. Increased demand nationally has seen it overtake supply which has dramatically driven up the cost of residential placements. Inflation is also impacting in these areas.

A reduction in recycling and more of our waste going to landfill has also added £1.2m in costs to the council.

Other actions by the Council have seen a panel set up to review and sign-off essential only recruitment and to seek a reduction in interim and agency staffing. Directors have been asked to consider the impact of reducing budgets by 15% in 2023/24 as well as ensuring essential only spend within 2022/23, and contracts are being reviewed alongside an in-depth review of the capital investment programme.

Councillors are also set to agree a core list of priorities where spending will be protected as much as possible within available resources:

  • Supporting vulnerable adults and children
  • Supporting isolated individuals
  • Supporting families in the cost-of-living crisis
  • Tackling climate change
  • Highways pavement works
  • Tourism
  • Maintaining prioritised subsidies to services as best we can

Cllr Stephen George, leader of the council, says: “We are a financially well managed council, but we cannot just absorb the additional inflation costs and other pressures we are facing. These are seriously challenging times for local people, businesses and for local councils. Across the country, councils are grappling with balancing budgets and keeping frontline services going. Kent County Council are anticipating up to £50m of unbudgeted inflationary costs this year alone, and Devon County Council has recently predicted a potential overspend in this financial year of up to £40m.

“The cost-of-living crisis is clearly and rightly at the forefront of people’s minds, and this and rises to inflation, energy and fuel costs are also affecting the council and it is very much at the forefront of our minds too.

“The council is acting now to address a forecasted overspend this year and we will have some difficult financial decisions to make in the coming months, as we try and help our residents tackle the issues they’re facing and set a balanced budget for 2023/24 and beyond. As leader of the Council, I promise we will do what we can to support our residents, businesses and ensure we are financially sustainable into the future.

“But with reduced funding and income, increased demand and costs, this is going to be tough, but we will clearly need to prioritise and ensure that our work and services are targeted and supporting those who need our help the most. However, tough choices in the coming months and years will need to be made.”

“We have financial resilience and strength built up from our excellent financial management over the last decade, but we cannot do this alone and all Local Authorities will require the Government to step in and provide support in the interim and treat us like businesses because as a Council we are not immune from the shock waves hitting the country’s economy.”

Cllr Paul Collins, cabinet member for asset management and inward investment, says: “This challenge we face is being added to by rising inflation, but also the increased cost of key services such as children’s and adult services, which have increased nationally by 3.2% and 1.8%. This winter is almost certainly going to be the most challenging for social care in recent times and councils are facing their greatest challenge yet in continuing to provide essential services to meet the needs of local people within the level of resources available.

“We are now facing the perfect storm of huge increases in service demand post COVID, combined with unavoidable and rapid increases in operating costs across almost every part of our organisation.  This is having a huge financial impact on the Council’s financial plans for 2022/23 and the general economic climate is creating serious cost of living challenges for residents.

“Even at this very early stage of the year action is needed to try to reduce all non-essential expenditure and/or generate extra income. This priority must be achieved whilst ensuring that our most vulnerable residents are looked after appropriately, and our statutory responsibilities are effectively carried out.”

The report for Cabinet, 13th September, item 5 can be found online.

Published: 6th September 2022

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