A GWENT council has warned of a “severe risk” to its future as a predicted overspend this year has increased to more than a quarter of a million pounds.
Monmouthshire County Council’s head of finance has issued the warning to its financial sustainability as it it also facing a likely £14.4 million shortfall in the amount of funding it expects to receive for the new financial year against its predicted costs.
Jonathan Davies has stated in a report to the cabinet current cost pressures and the need to achieve a revised £12.3 million savings target this financial year represent “tangible ongoing budget risks for the year”.
His report adds: “When this is considered alongside a significant budget gap to be resolved for 2024/25, and a challenging funding outlook in the medium term, there remains a severe risk to the financial sustainability of the council in the near term.”
As a result council services have been ordered to “bear down on avoidable cost” and identify income opportunities this year “to limit the call on severely limited useable revenue reserves”.
A targeted vacancy freeze is to continue while senior managers are meeting regularly with the Labour-led cabinet being updated monthly on the financial position.
It was braced for finishing the financial year, at the end of March, with a £124,000 deficit but a report to be presented to the cabinet on Wednesday, December 13 shows that from August to the end of September that figure has grown by £160,000. It is now headed for a £284,000 shortfall that would have to be met from its “severely limited reserve cover”.
Since July the council has been responding to spiralling costs and increased demand on its agreed budget by using additional reserves of £2.5 million on top of the £3 million it had already agreed to take, and has had to find a further £2 million in savings beyond the £10 million worth approved as part of the budget in March.
However council services are £1.6 million short of meeting the revised £12.3 million savings target.
The county’s 35 schools, including four comprehensives, are also feeling the financial squeeze as they have used up £3.76 million of the £4.2 million that made up the collective balance of school budgets at the start of the financial year.
As a result while there had been five schools in a deficit position at the start of the year there are now 15 anticipating they will have overspent by the end of March.
The report states that additional Covid funding had inflated the school balance positions but also “somewhat masked structural budget deficits across some schools”.
It states: “The projected return of fifteen schools into deficit balance by the end of the year is disappointing and points to inherent structural budget deficits remaining in some cases.”
Mr Davies said though his report only covers spending to the end of September it contains the latest up to date information and hopes the UK Chancellor’s Autumn Statement could deliver extra cash for local government have been dashed.
He stated: “The initial independent analysis of the Statement indicates that there was very little by way of additional funding of a revenue nature that will be of direct or indirect benefit to Local Government in Wales.”
High costs associated with adult and children’s care, homelessness, a risk the £12.3 million savings figure won’t be achieved, its own limited reserves, continued pressure on UK and Welsh Government budgets and the potential the council won’t be fully funded, from Cardiff, for services it delivers are all identified as budget risks.
The council had been hoping for an additional £1 million in funding, this year, from the Welsh Government for services, including universal free school meals for primary pupils, it says haven’t been recognised in initial funding awards. However it has now received an extra £263,000 in housing support costs meaning that figure is reduced to £737,000.
Core councils services have revised their total deficits downwards but all favourable projections and savings have been outweighed by a deterioration in other service costs of £615,000.
The current projected overspend of £284,000 is based on propping up the current budget with the additional use of reserves agreed earlier this year.