Cash-strapped Liverpool Council has been warned of further budget pressures if it cannot deliver savings on time as increased deficits loom.
Auditors Grant Thorton delivered its interim value for money report on the local authority for 2020/21 in which it said Liverpool Council cannot afford to allow savings to continue to mount up year-on-year. The report, which will go before the council’s audit committee next week, has provided an interim set of findings as the auditors await the outcome of an external investigation of the council they themselves requested.
Law firm TLT LLP has been tasked with leading a scope into the local authority’s records to establish whether there is any evidence of “improper influence in the council’s decision making arising from the actions of the former Mayor and former senior officers.” Grant Thornton said they cannot sign off on Liverpool Council’s books for 2019/20 until the work is completed.
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The report has warned the council that changes need to be made if it is to become financially sustainable. It said the local authority has had “challenges in delivering savings targets in recent years” which have been “significantly hampered” by working conditions during the covid-19 pandemic.
For its 2020/21 budget, the council was able to deliver 63% of its £29.3m earmarked savings, totalling £18.4m, meaning £12.8m of uncompleted savings were carried forward into plans for 21/22 after adjustment. For its budget for this financial year, £12.4m remained undelivered from previous years.
The report said: “The council will need to make sure that the level of slippage on recurrent savings schemes is improved as they work towards financial sustainability in the medium to long term and the operational challenges of the covid-19 pandemic fall away.” It was noted that despite the challenges, Liverpool Council was able to set a balanced budget for this year but changes were still needed.
Grant Thornton analysts said there is a “high challenging savings target for 2022/23 based on current assumptions and there will be significant reliance on the council’s ability to deliver savings in year, which, at the time of our review, have yet to be fully developed.” The council’s levels of reserves was said to be “comparatively low” against other core cities “and therefore there is limited scope for non-delivery of saving in future.”
This is despite the council agreeing to increase its reserves by £10m earlier this year as part of the budget setting process. The move caused a rift in the ruling Labour group and the creation of an independent group of councillors.
With potential deficits rising to £86m in 2024/25, Grant Thornton said the council faced a “large scale transformation” to achieve sustainability. It added: “In our view, without the introduction of a robust financial transformation plan the council will not be able to close the medium term financial strategy (MTFS) funding gap or manage slippage on planned savings and this represents a significant weakness in arrangements.”
As a result, the auditors have recommended Liverpool Council “needs to expedite the development and implementation of a multi-year transformation plan to reduce the projected MTFS funding gap while also ensuring that underperformance on existing savings is managed and addressed.”
Audit committee members will assess the interim report when they meet at Liverpool Town Hall on Wednesday.
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