Some £4.8million intended to be used to fund capital projects will instead be used to make up a shortfall in Chelmsford City Council’s finances caused by the knock-on from COVID-19.
The net budget shortfall for 2020/21 is expected to be some £3million, due to several of the council’s income streams such as Chelmsford leisure centres, theatres and importantly car parking being severely impacted by restrictions and lockdowns.
To give some idea of how damaging restrictions have been to council finances, Chelmsford City Council has admitted that the four-week lockdown due to end in December will have reduced its income by another £400,000.
The shortfall can be funded by not making the budgeted contributions to revenue of £4.8million.
This would provide around £1.8million to be used to increase the unearmarked reserves to help manage COVID-19 and other risks in 2021/22.
But it means that any future purchasing plans, such as new refuse vehicles, will have to be funded through borrowing, if they are made at all.
Councillor Chris Davidson, Cabinet Member for Fairer Chelmsford, who has responsibility for finance, said: “This is year is like no other.
“The forecast will be wrong.
“So we need to boost our reserves to give us the room to respond if our finances turn out even worse.
“Boosting reserves involves cancelling the payments of £4.8million that we were intending to contribute to fund capital expenditure.
“That enables us to maintain a balanced budget this year and means we are well placed to set a budget for next year and that is a strength and something that many other councils have been unable to do and we have this room for manoeuvre because of the robust finances we had in place.
“But it is not a free lunch.
“We still need the capital expenditure and we will have to pay for it over time so we are borrowing and we will have extra debt.
“Put another way like any other prudent organisation we have set money aside to enable us to buy things such as refuse vehicles.
“We now have to spend that money instead to cover the cost of COVID-19 and we are adding debt to buy these vehicles instead of buying them outright.”