Following weeks of speculation, the Government will outline their actual spending plans for the first time next week in the Autumn budget statement. Councils across the country, including Derby City Council, will be watching with interest to see what, if any, action will be taken to address the severe financial challenges faced by local government sector.
In Derby, the Council’s current budget is its most challenging yet, with the Council reporting a predicted £9.6 million overspend on its revenue budget – which funds most of its services outside housing, education, and capital projects – at the end of the first quarter of 2024/25.
Demand and costs have continued to rise at a much higher rate than forecast, mainly for services affecting the city’s most vulnerable citizens such as social care and homelessness. This is not unique to Derby and is affecting councils across the country. The Council has been lobbying the Government for changes to the way it is funded, together with local government colleagues nationally.
Derby City Council’s Quarter 2 financial update will be presented to Cabinet in November, but over the medium term the Council faces the challenge of closing a significant budget gap which was estimated to be £13.9 million for 2025/26 before any of the new pressures on services emerged this year. The Council’s Medium Term Financial Strategy, which is also being considered by Council Cabinet in November, will provide further details on this position.
As a result, the Council is already in the process of planning a balanced budget for 2025/26, which is a legal requirement, ready to present it to Councillors in December before it goes out to consultation. Although the Council won’t know for certain how much money it will receive from the Government until around the same time, it is hoped the Autumn statement on 30 October will provide some additional financial support.
In simple terms, the Government currently funds Councils through one-year grant settlements, supplemented by additional grants which can only be used for specific purposes. Shortfalls therefore have to be met from Council Tax and Business Rates, and as Government funding has significantly declined the Council has become more reliant on these local taxes.
While the new Government has indicated that it will move towards multi-year settlements that make it easier to plan for the mid-term, it is not known when this will happen.
Councillor Kathy Kozlowski, Cabinet Member for Governance and Finance, said:
We have to be realistic. We are not expecting the Government to announce multi-year grant funding settlements next week. However there are some small changes they could announce which we’ve lobbied for, and would be ‘quick wins’ for local government. They would certainly make a difference to us in Derby.
A shortage of affordable accommodation means that homeless families are having to stay in temporary accommodation for longer. The amount of Housing Benefit we can claim back from the Government for this is capped, and if this cap was lifted we would be £4 million better off. A review of the right to buy legislation would allow Councils to maintain their levels of social housing.
Costs in the social care market are spiralling, and introducing caps on fees that Councils pay for care would help ease the pressure on social care.
A commitment to the much-awaited funding reforms for local government would also see a redistribution of funding to those areas that need it the most. Continuation of a lot of temporary funding, including funding that supports social care services and support to struggling families through the Household Support Fund, would mean that we could continue to support our most vulnerable residents.
We would welcome any additional funding that the new Government can provide, however we are aware that there is no easy solution to the financial challenges that lie ahead, especially when we have no control over rising costs and demand. Any new burdens on local government need to be adequately funded.
Let me be clear, we will have to make some very difficult decisions over the next few months if we are to fulfil our legal obligation of setting a balanced budget. Many councils have already had to make a Section 114 declaration or ask for additional Government support. This is not a route we want to take, as it would limit what we could do for Derby, but we accept that we may have to do less but in a safe and managed way.
It is usually councils that are left to pick up the pieces when people find themselves in crisis. Yet demand continues to rise and we don’t have the funds to meet it. However we are acutely aware that we are not the only public service lobbying for more help.