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Pembrokeshire on course to overspend budget by nearly £5m this year

Pembrokeshire County Hall

A MORATORIUM on non-essential council expenditure is now in place as cash-strapped Pembrokeshire is on course to overspend its budget by nearly £5m this year.

Members of Pembrokeshire County Council’s Cabinet, meeting on September 4, will hear a report on the quarter one figures for the 2023-24 budget, highlighting an expected overspend of £4.8m.

A budget of £287.6m was approved by council on March 2, but he projected outturn – based on the latest figures – is £292.4m.

Pressures include a projected £8.7m overspend in School ALN provision, Children’s Services, Adult Services and Homelessness, partly offset by a projected underspend of £3.5m in Capital Financing Costs and Investment Income.

The report also highlights a bleak longer-term picture for council finances.

The 2023-24 budget identified a potential funding gap of £33.1m over the period 2024-25 to 2026-27; with £15.9m in respect of 2024-25, to be funded from a 7.5 per cent council tax increase, and £10m of budget savings.

That is expected to increase to £37.3m 2024-25 to 2026-27, and £ 46.9m up to ’28, with £20m in respect of 2024-25.

In the report, the council’s Interim Director of Resources Paul Ashley-Jones states: “The projected overspend of £4.8m for 2023-24 is very concerning.

“There is still a high degree of uncertainty around pay awards, inflation, interest rates, service demand and Welsh Government funding which could have a further detrimental impact on this position as the year progresses.

“The majority of schools continue to set budgets that exceed the funding received in year, with school balances projected to reduce by a further £4.877m during 2023-24 to £1.005m.  This is not a sustainable position and will require continual review of school staffing structures and organisation over the medium term.

“Current levels of increased demand, complexity and cost of packages within School ALN, Children’s Services, Adult Services and Homelessness have resulted in material projected overspends in each of these areas for 2023-24 which are likely to continue into future years.

“It is critical that packages are continually reviewed to identify more cost-effective provision to pull back these overspends for 2023-24, and reduce the pressure on 2024-25 and the medium term financial plan.

“The overspends outlined have been partially offset by higher levels of investment income and delayed borrowing costs resulting from slippage of the 2022-23 Capital Programme.

“However, if interest rates remain at current levels, or increase, this will put further pressure on Capital Financing costs in 2024-25 and future years.  For those schemes that have not commenced, potential delay to the start on site will need to be actively considered.

“In line with the approved Budget Strategy for 2023-24 and beyond, a moratorium on all nonessential expenditure is now in place.  The aim of this is to try to bring the budget back into balance by the year-end, with any use of reserves only being a last resort.”

The interim director added: “Financial pressures experienced during the first quarter of 2023-24 are going to continue into 2024-25 and the medium term, so there are going to be some significant financial challenges to be addressed, and difficult decisions to be made.”

Members are recommended to note the report and cost-saving works.

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