Millions needed to balance councils’ books as inflation and energy crisis takes toll on budgets

Surging inflation, rising gas and electricity costs and increasing staff pay means councils in Nottinghamshire need tens of millions of pounds to balance their books next year.

Council tax increases, the use of reserves and potential cuts or changes to services are on the horizon for some authorities as they try to claw back cash.

The current 10.1 per cent inflation rate is causing budgets to soar above levels previously forecast in February and March this year – when financial papers were first approved.

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Some district and borough authorities need to find gaps exceeding £2m, while the two larger councils face shortfalls in the tens of millions.

The has caused concerns among some authorities that services will need to be reduced or removed altogether if councils are to even out their balance sheets in 2023/24.

Budgets for gas and electricity bills are increasing by hundreds of thousands of pounds as councils join households in facing the cost of living crisis.

Nottinghamshire County Council is also expecting a council tax rise and the need to find savings as it faces a £24m black hole in 2023.

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Over the next three years, the Conservative-led authority expects a funding gap of at least £59m – slightly more than 10 per cent of a single-year budget.

In Nottingham, the cash-strapped Labour-run city council does not yet know the overall situation for next year, but revealed inflation will add about £15m to its financial planning in 2023/24.

It comes amid wider concerns for its overall financial position as the authority remains under monitoring by a Government-appointed Improvement and Assurance Board.

The council is trying to put forward a four-year balanced budget to fend off potential further intervention but rising inflation is now the “biggest challenge” in ensuring commissioners are not sent in.

Councilor Adele Williams (Lab), portfolio holder for finance, warned the council faces “impossible choices” when balancing the books while a spokesperson says the authority will leave “no stone unturned”.

Other councils are also facing gaps from April, fueled by the ongoing cash crisis.

Labour-led Broxtowe Borough Council faces a £2.2m shortfall in 2023/24 and has identified potential measures totaling about £675,000 to bridge the gap.

This includes a growth in business rates, a council tax increase, inflationary rises in fees and charges and “staffing efficiencies”.

The remaining gap, the council says, will be met from reserves.

It has called for the Government to issue a financial settlement reflecting inflationary rises and to outline the threshold councils will be allowed to raise council tax by in 2023/24.

A spokesperson said: “The council would welcome a financial settlement that properly reflects the current inflation pressures on pay awards and energy prices to help mitigate the impact of the cost of living crisis.

“The Government could also consider lifting the referendum limits on council tax setting.”

In the previous financial year, district and borough councils could raise bills by either £5 on a Band D property or 1.99 per cent – ​​whichever was higher – without holding a referendum.

The threshold has not been confirmed for next year but could be outlined in Chancellor Jeremy Hunt’s autumn statement on November 17.

However, councils may not find longer-term answers in this statement after Mr Hunt warned of “difficult decisions” and possible public spending cuts to bridge Whitehall gaps.

Councils are currently budgeting on the basis of Government grant support remaining the same in the coming financial year as it was in 2022/23.

At the time, this was put forward as a two-year settlement to give councils medium-term clarity about their financial positions.

But this only reflected a 3.3 per cent inflationary rate and did not take into account the current 40-year high.

Bassetlaw District Council, which faces a £1.36m gap spread across its general fund and housing account, has called on Whitehall to address this in next month’s statement.

A spokesperson said: “Government should recognize the 3.3 per cent inflation provided in last year’s settlement is not enough.

“It should uplift current inflation in a multi-year settlement to provide councils with the ability to plan in the medium term.”

The Labour-run authority plans a council tax rise, increased income from business rates, a review of services and “possibly reducing or discontinuing discretionary services” to balance its books.

Neighboring Tory-led Newark and Sherwood District Council, which needs to find £3.6m in 2023/24, says it plans to find cash through “dividends, savings and increased income”.

The budget gap is slightly lower in Ashfield, where the Independent-run council says it is facing a £3m shortfall fueled by the energy and inflation crisis.

Cllr Jason Zadrozny (Ash Ind), the authority’s leader, previously said “easy options” to make quick savings were made during the period of austerity and warned service reductions could be needed without Whitehall’s help.

Labour-led Gedling and Tory-run Rushcliffe did not confirm how much they need to find and said they are waiting for the Chancellor’s announcement.

The wider budgeting issues come as councils also manage rising staff wages amid an expected local government pay award of £1,925 per employee.

The national rise, put forward to help staff cope with the cost of living crisis, is costing Nottinghamshire councils millions in total for extra wage costs.

It has already added £6.9m onto the current-year budget at Nottingham City Council, with an added £1m predicted at Ashfield District Council.

There is a further £875,000 needed in Broxtowe, £700,000 in Newark and Sherwood, £617,000 in Bassetlaw and £532,000 in Gedling.

Mansfield, Nottingham and Rushcliffe did not outline this figure.

All authorities await clarity from the Treasury about what support they will receive from 2023/24.

The Government did not respond to a request for comment about the financial position of Nottinghamshire authorities.

But a Treasury spokesperson previously said: “While driving economic growth and tackling high inflation, we will continue to take a responsible and disciplined approach to spending.

“It’s more important than ever that departments work efficiently to manage within existing budgets, focusing on unlocking growth and delivering high-quality public services.”

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