Council finances ‘not out of the woods’ despite improving confidence

The authority managed to reign in a predicted £14million overspend to finish the last financial year around £8m over budget, against a backdrop of around £42m worth of ongoing savings achieved in the period.

However the council’s financial position remains “difficult”, despite some progress against savings targets, with concerns expressed over the levels of reserves held by the authority which dipped below the £10m mark towards the end of last year.

At a meeting of the council’s transformation scrutiny committee today, Councillor Roger Evans paid tribute to finance officers for coming out of the year with reserves intact, but said the council remained “at great risk” due to the low levels of the general reserve fund.

“£30m went into general reserves for the future, and the council has had to use most of those reserves in order to deliver the balanced budget,” he said.

“It says in the report that we should be somewhere between £15-£30m [in reserve].

“The council is at risk, great risk – later on today we’ve got an agenda item which is already predicting overspends this year that we’re not going to be able to make.

“That’s over and above the £62m that we need to save.”

However, council finance chief James Walton told the committee that while the general reserve fund was still “not as high as we would like it to be”, Shropshire Council had been able to top up reserves to around £38m in the budget at the beginning of the current financial year.

He added that the experience of the past year had given the authority greater confidence in both the accuracy of its financial forecasts, and that the level of change to service delivery required within the organisation could be delivered.

“We have been able to substantially contain expenditure within budget, but as was pointed out earlier there is still a significant overspend. £7.8m is a big overspend by any measure when you have a net budget in the order of £250m,” he said.

“Nevertheless given all of those pressures that we had in year which we’ve talked about in detail at scrutiny, given the savings we’ve had to deliver, the fact that we had at the start of the year a reasonable if not high level of general fund balance means that we could contain that.

“We’re not in any way out of the woods financially, but we have to remember this is a plan that is over two to three years to deliver.”

He said a decision to ring-fence reserve funds at the start of the budget year to deal with rising demand for adult social care had resulted in the position reported in the out-turn, and that predicted overspends in this year’s budget may not be as bad as feared.

“My level of confidence around the delivery of savings in the people directorate is significantly higher than it was last year because of the track record that we’ve seen over the last 12 months.

“That [forecast] overspend for 24/25 in the people directorate is suggesting that some of those savings wont be able to be delivered and some of the demand that we will see will outstrip what we’ve budgeted for.

“That may well be the case, I’m hoping we’re being overly prudent and actually we can pull back from that. It’s always a judgement call that’s taken at any given point in time.”