The annual cost of Essex County Council’s (ECC) borrowing is set to increase by £37 million between now and 2025 – with a budget gap forecast to climb to more than £90 million.
Total borrowing is set to increase from just over £1 billion to £1.45 billion by 2024/25 as ECC looks to deliver a range of capital schemes including Chelmsford’s proposed new Beaulieu Park Train Station and the North Eastern Bypass as well as highways maintenance and providing new school places.
The increasingly tight finances of ECC has meant that identifying and delivering savings is more important than ever. The budget assumes £46 million of savings to balance the 2021/22 budget.
But ECC says the ongoing pandemic may result in non-delivery of savings in 2021/22 with a knock on impact in 2022/23.
At this stage, £28.7 million – worth have a high level of confidence, £13 million -worth medium risk and £4 million a have a high level of delivery risk.
Councillor Mike Mackrory, leader of the Lib Dem group at ECC, said: “I guess in current circumstances interest rates are so low but it is a worryingly high figure.
“My main concern is savings as yet to be identified. Some will be relatively easy to achieve, some a bit more difficult and some have a high risk attached to them.
“When you are producing a balanced budget and you don’t know where the savings are going to come from in some areas it is rather worrying.”
But it is the projected budget gap that Cllr Mackrory says needs to be urgently addressed.
ECC is forecasting a budget gap of £25 million in 2022/23 rising to £91 million in 2024/25. The most significant driver of the gap is inflation which accounts for £80 million, followed by new burdens and other cost pressures including financing of the capital programme, then demographic growth of £16 million.
Cllr Mackrory continued: “There is an awful lot of unknowns and that is a huge budget gap to bridge. How they think they are going to keep doing this year on year with all the increasing demands is unclear.”
ECC says some progress has been made towards balancing the budget over the medium term.
ECC, in a statement to the finance paper to be discussed next week, said:“The remaining 1.5 per cent of social care precept in 2022/23 will increase funding through council tax.
“We have identified further new savings of £23 million in 2022/23 – although these only benefit the position by £7 million after allowing for the impact in 2022/23 of one-off savings in 2021/22 – and a further £9 million and £7 million in 2023/24 and 2024/25 respectively, and these initiatives are included in the forecast gap.
“However, we need to identify options for addressing the budget gap.
“Work will continue during 2021/22 to identify proposals to close the funding gap beyond the next year. We are fully cognisant of the challenges faced, including the funding uncertainty, and we are determined to continue to transform how we operate to tackle this enormous task.
“We are committed to delivery of savings and generating the income required to reach a balanced budget position but also to deliver better services for residents.”
ECC’s budget proposals for the coming year will define its path beyond the coronavirus crisis. It proposes to keep the impact on council tax bills to an absolute minimum.
Papers for a meeting of the cabinet in January reveal that the council will propose a 0 per cent council tax increase, with a 1.5 per cent increase this year from the Government’s Adult Social Care precept, half of that available.
This means that for an average Band D property household, the ECC element of Council Tax will increase by £19.80 next year, or 38p per week.
Leader of ECC, Councillor David Finch, said: “This budget has been produced under the most testing circumstances that the council and our communities have ever faced.
“We have had to make some incredibly tough decisions in the short term to reflect the need to protect our communities and economy in the long term.
“Our proposals set us on the road to recovery – Essex’s Path out of the pandemic toward a brighter future.
“We have a strategy and an investment plan to improve the lives of our residents and begin to mitigate some of the impacts we have all felt in the last year.
“Over the last 12 months we have worked primarily on addressing the challenges of Covid-19.
“We will continue to do that over the next twelve months. There is no more fundamental responsibility for the Government than to save lives; and working with our partners and with central Government we will do whatever it takes to protect you and your families from this dreadful virus.
“Family, economy, and environment will provide our focus – from increasing the number of apprentices in the county and helping the recently unemployed start their own businesses, to creating an additional 1,500 school places and increasing support for older people so that more than ever can continue to live in their own homes.
“We will improve mental health services and support for people with learning disabilities. We will build on our reputation as one of the best children’s services authorities in the country.
“We will continue to invest in our infrastructure and environment – prioritising action to address climate change by planting a further 50,000 trees this year to aid carbon capture and investing over £2.5 million in flood defences, as well as receiving the first full report of the Essex Climate Commission.”
Budget proposals also include a spending commitment of £1.34 billion over the next four years on major infrastructure projects, such as new schools and major road improvements, a major scaling up on previous years. The spend in 2021 is set to be £290 million – 50 per cent up on the last two years capital budget.
Cllr Finch added: “The challenge of Covid has been layered on top of the already existing financial stress that public services have been under for a decade. But because we have focused on reducing bureaucracy and improving productivity – we have been consistently identified as one of the ten most efficient Councils in the country – we have been able to keep Council Tax increases to a minimum while providing excellent services.
“This year is no exception – the council is proposing a zero council tax increase, while taking half of the Government’s precept for adult social care. This means an increase of just 38p per week for an average Band D household.”