Reading facing £13m budget deficit
The council say they are not in danger of bankruptcy
INFLATIONARY pressures and a sharp increase in demand for essential Council services - including caring for vulnerable children and preventing homelessness - mean savings and efficiencies totalling £12.9 million are likely to be needed over the next three years.
Reading Council’s provisional budget shows the impact of high inflation on the cost of delivering local services and how the cost-of-living crisis means more residents are turning to the Council for support.
Particular pressures in Reading include:
An additional £7.5 million next year, consisting of £5.9m for increasing placement costs for looked after children and £1.6m of net inflationary increases, being reported by Brighter Futures for Children
£5.8 million extra next year for essential adult social care services, such as caring for older and vulnerable residents, of which £4.5m relates to inflation
£1.0 million more across the next three-year period for homeless prevention services as a result of the rise in private sector evictions due to the cost-of-living crisis, and an increase in the cost of providing emergency accommodation.
A Medium-Term Financial Strategy (MTFS) update to the Council’s Policy Committee on 13 December is currently forecasting an overall funding gap of £4.1 million for 2024/25. This will need to be closed before a final budget can be set in February. There is an additional £8.8 million funding gap across the following two years with future savings, efficiencies and income required to close the gap.
These are provisional figures ahead of the Provisional Local Government Finance Settlement, expected to be announced by the Government in mid-December. A public consultation on the draft budget will take place after the Policy Committee meeting. The Council’s MTFS will be debated on 27 February 2024 as part of the budget setting process, which is also when the proposed Council Tax rise in Reading will be finalised.
Despite the financial challenges, Reading Council intends to continue with its programme of investing in modern new facilities for local residents through its capital programme.
Councillor Jason Brock, Reading Borough Council Leader, said:
“The link between high inflation – precipitating the on-going cost-of-living crisis – and pressures on council budgets everywhere is undeniable and now clear to see.
“Locally in Reading, we are seeing a significant spike in demand for the essential local services the Council provides. The cost of placements to protect children in care is rising fast, as is the cost of caring for older and vulnerable residents. Social care is a sector largely ignored by this Government for many years, and the consequences nationally are stark. And as residents continue to struggle financially, we are seeing a rise in private sector evictions, with the Council left to pick up the increasing cost of providing emergency accommodation.
“Twelve Section 114 notices have been issued by local councils since 2018 – declaring themselves effectively bankrupt – compared to just two over the previous 18 years. Nottingham was the latest example only last week. Some of those will be the result of poor financial decisions, but what we are now seeing is councils struggling due to high inflation, the knock-on effect of rising demand for essential council services, and 13 years of real-terms Government cuts to local authority budgets. Ultimately, those Section 114 notices mean that residents in those areas will suffer, with vital services cut back.
“By contrast, this Council has successfully delivered nearly £30 million of savings over the past three years. Many years of prudent financial planning means we remain in a relatively strong position in Reading to absorb the pressures, in comparison to other councils, while at the same time continuing to invest in modern new facilities for residents through our capital programme. The latest forecasts mean we will need to continue to look for new savings, efficiencies, and income, however, in order to set a balanced budget in February, which every council must do by law."