Council taking action as demand pushes forecast overspend higher

Published: 13 November 2023

Derby City Council is now forecasting an overspend of £6.5million at the end of this financial year without further mitigation. This is an increase of £0.5million on the position at the end of June.

Rising demand on services, especially in adult and children’s social care and housing demands for temporary accommodation, is placing continued pressure on Council budgets. High inflation continues to impact on all services, but especially on energy costs and the annual pay award, which is set nationally.

The current financial position is outlined in the Quarter 2 Financial Monitoring report, which records the first six months to October and will be considered by Cabinet Members at their next meeting on 21 November.

It does not include the costs incurred as the result of recent flooding due to Storm Babet. These are still being calculated and the Council will be looking to claim through the Government’s Bellwin Scheme.

Without further mitigation the Council could consider using its reserves to meet the overspend, however these would have to be replenished over the medium term.

The Council is already taking action to drive down costs having mitigated £2.6m of the costs of the annual pay award through controls on job vacancies. To avoid drawing so much on its reserves, it will need to cut its in-year spending, and limit recruitment, even more than it is already doing.

Like councils across the country, Derby is facing unprecedented financial challenges.  Some councils including Birmingham, Thurrock and Slough have declared a Section 114 notice, meaning they can no longer deliver a balanced budget. In these cases they have faced specific, local issues but this has happened against a backdrop of deep cuts to local government funding since 2010.

Paul Simpson, Chief Executive of Derby City Council, said:

Taking our usuable reserves down to the levels outlined in this report is our absolute last resort and we will be doing everything we can to mitigate against this, in the face of continued economic uncertainty and rising demand.

The long-awaited reforms of local government funding need to be bought forward to ensure that local authorities can be financially sustainable. Councils have to be there to provide and care for the most vulnerable people in our society.

We won’t have confirmation of how much Government funding we’ll get for 2024/25 until late December, by which time we will be presenting our budget proposals, which look set to be very challenging indeed.

Above all, we’re a strong Council and remain ambitious for our city. We will do everything we can to keep us on a stable financial footing.

You can watch the Cabinet meeting live on the Derby City Council YouTube channel from 2pm on Tuesday 21 November. Read more about the funding crisis facing local Government.

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