'Very difficult' decisions ahead to close East Riding 10m budget deficit

East Riding Council has been allocated more than £1m in new government coronavirus funding but its finance lead warned “very difficult” decisions lie ahead to close a looming £10m gap.

East Riding Council is set to use its £1,063,690 share of around £1bn allocated to local authorities to help cover lost income and ease pressure on budgets from coronavirus.

The latest round of funding comes as the council has already received £21m in emergency funding from the government since the start of the pandemic.

A council spokesperson said of the latest grant:

“The funds will be used to help manage the on-going pressures on our budget arising from the pandemic, which will include additional spending particularly in supporting adult social care providers as well as losses in customer receipts such as in leisure and car parking.”

But the council’s Chief Finance Officer Julian Neilson said cuts and council tax rises could be looked at to plug a growing £10m gap next year.

It comes as Hull City Council’s Finance and Value For Money Overview and Scrutiny Committee heard today (Friday, October 23) their coronavirus bill was forecast at £71m for a year.

The city received £8.7m, with council finance portfolio holder Phil Webster saying officials were at the start of the process of finding ways to plug the gap.

Mr Neilson told East Riding’s Overview and Management Committee yesterday (Thursday, October 22) the overall financial hit to the council was £30m so far, adding the £1m from government was a “disappointing” amount.

The officer said while £9.6m cuts made earlier this year and government aid meant the council was on track for a balanced budget, it could face “significant” financial troubles later.

Mr Neilson said:

“Reductions in travel costs and savings have also helped us to project a balanced budget for this year.

“That’s a tremendous achievement, but the budget position going forward is very uncertain and volatile at the moment and there may be further restrictions that impact us, it’s massively challenging.

“It’s disappointing that we only received £1m this time, but it appears areas in higher tier lockdowns have been prioritised and we should be thankful we’re currently in the lowest tier.

“We’re expecting to receive further compensation in the region of £10m for losses and expenditure.

“But we’re facing pressures in future financial years when the biggest challenges will come.

“In February before the pandemic we were projecting a £1.6m budget deficit, rising to £3.8m by 2024.

“That would have been manageable, it’s the smallest gap I’ve seen in my time at the council.

“But now we’ve had the pandemic and will have to deal with financial impact of that and the wider impact on the economy, and that’s very hard to predict at the moment.

“We’ve seen a 20 per cent increase in council tax support case loads, claims for discounts are rising.

“And we don’t know what our council tax base will look like or how much we’re going to get from business rates in the future.

“We were originally looking to raise council tax by 3.99 per cent, but now we’d be looking at a maximum increase.

“Every 1 per cent increase in council tax equates to an extra £1.7m in income year after year, that’s significant.

“We’ve also got all retail, hospitality and leisure businesses exempt from rates, they’re in receipt of rate relief worth £36m.

“But this and other schemes like furlough won’t go on indefinitely, and we don’t know what the economic situation will be like when those wind down.

“This also comes on the back of 10 years of austerity, and we’re still facing issues like funding adult social care.

“There will be opportunities for us to make savings with the use of technology and spending less on travel, printing and other costs due to the pandemic.

“But there’s only so far we can go in managing our way out of this and we will also have to look at cutting some services to remain financially sustainable.”