Glasgow City Council facing multimillion pound budget blackhole
A report into Glasgow City Council’s finances is predicting a multimillion pound black hole in next year’s budget.
Last updated 3rd Nov 2022
A report into Glasgow City Council’s finances is predicting a multimillion pound black hole in next year’s budget.
The independent financial forecast estimates the local authority will need to claw back nearly £119.4million when it sets out its spending plans next March. Most of the shortfall is made up of inflation related to pay.
The forecast, prepared by Executive Director of Finance Martin Booth, predicts a budget shortfall of £119.4 million. This forecast will allow political groups in the council to prepare budgets to be considered in February or March next year.
Options will be presented to councillors
In the coming weeks council officers will present options to the council’s cross party budget working group and no decisions on options will be taken before the council’s budget meeting.
The largest impact on the budget is inflation at £87.2 million. The largest part of that is pay inflation. The budget assumes that next year’s pay settlement will be no lower than this year’s. Adding the future implications of this year’s higher than expected settlement and deducting additional Scottish Government funding means that pay inflation is expected to be £80.1 million.
Rise in energy costs are contributing to budget shortfall
The next largest impact, £26.7 million, is made up of budget pressures including increases in utility costs and the revenue consequences of capital investment. Part of that figure is the rental cost of operational properties included in the most recent sale and leaseback arrangements which will fund our equal pay liabilities. This rental payment is £11.7 million.
The financial forecast assumes no increase in council tax, as that is a decision to be taken at the council’s budget meeting, and assumes no increases in spending.
Cost of Living Crisis
Interest rates and inflation go up
Inflation rose by 8.8% in the 12 months to January 2023, down from 9.2% in December 2022. With interest rates also rising to 4%, those saving money will earn more interest on their finances, whilst those paying mortgages would pay more interest to the bank.
Energy bills
The price of energy went up incredibly as the cost of living crisis hit, with the gas price spike caused largely by the war in Ukraine. The price cap - which is set by an independent regulator to help offset costs onto customers - was set to rise to £3,549 for an average home in October but a price freeze from the government restricted the typical bill to £2,500. That's still an increase of 27% from the previous energy cap and as it's a cap on unit cost, the more energy you use the higher your bill will be.
Food prices
The cost of a weekly shop also has gone up as a result of the cost of living crisis. As a result of the war in Ukraine, a number of products including cooking oils and wheat have been disrupted. This means that several products are now considerably more expensive, driving bills up for customers.
Prices at the pumps
The average cost of petrol has also rose to unprecedented levels. Supply lines for petrol have been thrown into doubt as a result of the war in Ukraine, as Russia is a large export partner for gas, oil and fuel. In April 2022, the average price for a litre of petrol on the forecourt was 160.2p, whilst a litre of diesel would cost 170.5p. By late June 2022 the price had risen to an average of 190.9p for a litre of unleaded and 198.9p for a litre of diesel. In March 2023 the price wass on average of 147.03 in petrol and 167.04 in diesel.
Average cost of filling up a car with petrol hits £100
On 9th June 2022, the average cost of filling up a car with petrol hit £100 for the first time ever. Diesel had already hit that milestone. It comes as the cost of fuel hit a record high of one pound eighty a litre. The 2p rise was the biggest daily jump in 17 years. Prices have dropped by at least 20p per litre since the high point.
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