Havring Council ‘confident’ of bridging budget gap

Havering Council is “confident” it can balance its books, despite having limited funds to cover a £13million budget gap .

According to chief financial officer Dave McNamara, the council now has only £11m in its general reserves and is facing “short, sharp” budget pressures this year.

However, he feels the council still has “sufficient ability” to balance its budget by the end of the financial year in April, as the council has £32m in “earmarked reserves”.

Earmarked reserves are funds that are set aside for specific purposes and should only be used to pay for council services in “exceptional circumstances”, according to the council’s financial strategy.

These earmarked reserves – allocated for NHS health services, staff pay awards and business rates – have halved from about £60m since this year’s budget was approved in March last year.

In the event the council is unable to balance its budget, it would be legally required to issue a Section 114 notice, often referred to as a council’s version of declaring bankruptcy.

This would halt any spending on non-essential services and would likely force the council to pass a new, balanced budget within weeks.

Speaking at an audit committee this week, Mr McNamara said the demand on the council’s services, particularly social care for the elderly and children, is “outstripping” any funding raised through council tax or from the government.

He added: “The total value of local government reserves has increased over the last few years, but that’s not happening for Havering.

“The financial situation for Havering is acute and that is a short, sharp pressure, but we are confident we can balance that over the next ten years.

“The downside is that there’s no probability of financial change before the next general election as it destabilises too many local authorities in the long term.”

For months, the council’s Havering Residents Association (HRA) leadership has been internally debating tough budget choices with senior council officers as it faces a budget gap of £70m over the next four years.

Since taking power in May, leader Ray Morgon has been lobbying the government for an increase in funding to avoid declaring a Section 114 notice or widespread cuts to staff and services.

However, the government’s funding for this year is only likely to have increased slightly.

The council’s overall spending power, including income from council tax and business rates, is only expected to increase from £200m in 2022/23 to £218m in 2023/24.

More than half of this – £121m this year – is likely to be needed to fund adult and children’s services, which the council is legally obliged to provide.

McNamara said that government funding for councils is distributed to councils based on population figures from “ten years ago”, which fails to reflect the needs of outer London boroughs such as Havering.

He added: “This is the issue with Levelling Up and is the issue with Levelling Up in London.”

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Josh Mellor

Local Democracy Reporter