Nottingham City Council is once again having to draw up plans to find significant savings after revealing a gap of £26 million in this year's budget. Beyond that, the authority is then forecasting a gap of £58.7 million over the next four years, including £51 million next year.
The council has not yet definitively said how much of the budget gap will be filled through savings, or which services those savings might affect. It was announced last year that the city council was forecasting a gap of £29 million in the budget for this financial year, which runs from April 2023 until April 2024.
As a result, it announced it would be taking measures such as increasing council tax by 5%, cutting 110 jobs and increasing car parking charges. Despite that initial gap having been filled, the council says that a £26 million gap has now arisen in this year's budget and will have to be addressed by the end of next March.
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The council will now be working on updates to this year's budget and to its broader Medium-Term Financial Plan (MTFP), which covers the next four years. A report setting out a draft for an updated MTFP is due in November.
The budget gaps are due to be discussed by a meeting of the council's Executive Board next Tuesday (July 18). Ahead of that, here are the reasons why Nottingham City Council is once again having to plug a multi-million pound hole.
Increased demand for services
One of the biggest pressures on the council's budget is an increased demand for the services it offers. There is set to be a £5.9 million overspend on adult care services this year due to pressures caused partly by the volume of care placements the council is now having to deal with.
Similar pressures are also being faced in children's care services, with a £6.6 million overspend being predicted "due to a combination of caseload and costs." Away from care, a net overspend of £800,000 is also being predicted on housing because of the increased amount of temporary accommodation the council is having to offer to tackle rough sleeping.
This temporary accommodation includes the increased use of bed and breakfasts. The head of a major homelessness charity in Nottingham recently said Government support programmes to help local authorities and partners tackle the issue are being "gradually dismantled."
The broader economic climate
Factors including soaring inflation are affecting local authorities across the country. Driven by problems including the war in Ukraine and the legacy of the coronavirus pandemic, inflation is affecting many of Nottingham City Council's services given the impact it has on the cost of basics such as fuel.
In terms of the latter, the council says there is £1.1 million worth of pressure on its budget for the transport it provides to children with Special Education Needs and Disabilities (SEND). Other factors including high interest rates are affecting the way in which the council engages with outside companies.
The authority says an overspend of £400,000 is being predicted in terms of company procurement. This is because it had been trying to find savings in this area, but the economy means existing providers want to increase prices and many competitors are not bidding due to the financial uncertainty.
Rising inflation also means that employees demand better pay packets to reflect increasing prices. The council says there is a £9.7 million pressure on its corporate budget relating to pay awards for staff, a figure based on the current national offer to unions.
Government funding
Nottingham City Council says one of the biggest issues it is facing, along with local authorities across the country, is the way in which it is funded by the Government. Figures were published in February outlining the Government's financial settlement with local authorities this year, but there was little information on what the picture would be in future years.
The council says: "This lack of clarity regarding multi-year settlements makes budget planning, particularly in the current environment, unnecessarily complex and challenging." As well as that, Nottingham City Council says the grant funding it receives from Government has reduced by £97 million over the last 10 years.
As a result, it is having to rely to a greater extent on council tax to give it the adequate spending power. But this is also an issue, given that 80% of Nottingham properties are in the two lowest council tax bands, compared to a national average of 43.5%, meaning a higher rate of tax is needed to get the same result as other councils.
Internal financial issues
Despite several external factors putting pressure on Nottingham City Council's budget, there are also several internal financial difficulties affecting it. One of these problems relates to the historic issue of money which should have been spent on council housing being illegally spent elsewhere.
This money is now having to be paid back to the council's housing fund and earlier this year, it was said that rising inflation meant the cost of paying the money back could eventually reach £51 million. The council says £20 million was being borrowed from its reserves to pay some of the money back over the next four years.
But the authority says "in light of current financial challenges", it is exploring other options, such as paying back the value over eight years. Other internal finance issues include £1.8 million of previously identified savings on salaries not being allocated to particular budget areas, meaning these savings are at risk.
Reduced income
Perhaps partly down to the broader economic factors mentioned above, but also due to changing consumer habits, income is dropping at many council markets and car boots. The council is reporting a £600,000 income shortfall at the Victoria Indoor Market, though that situation has partly been brought about by the uncertainty faced by traders as the council remains in negotiations over the venue's future.
There are also income shortfalls at venues including the Colwick Car Boot, where the council says a lack of investment means alternative car boots are more attractive. Elsewhere, in terms of is traffic safety department, the council also reports £200,000 of reduced income from inspections because of staff shortages reducing its ability to do them.
