Action needed on Shropshire Council £36 million black hole

Shropshire Council's latest financial strategy has seen officers reveal that the council needs to make an extra £12 million of savings for the 2018/19 – on top of the £24 million it was already tasked with finding.

A report from the council's chief finance officer, James Walton, warns that "decisive action in the short term is critical to bring this worsening situation under control".

The report will be reviewed by the authority's performance management scrutiny committee next week, after it was agreed by cabinet members last month.

The paper outlines a number of reasons for the increase in the amount of money the authority needs to save.

These include growing demand in children’s services, growth in adult services, and the "cumulative impact of changes and loss in funding that are, nevertheless, tied to the statutory delivery of services".

Mr Walton's report says the council is also facing increased inflation on major contracts and that previous savings plans have not been met.

The report states: "As a result the funding gap has grown. Furthermore a significant proportion of this growth has been felt most keenly in the 2018/19 financial year. The estimated funding gap for 2018/19 had previously been estimated at £24m, but is now expected to be in the order of £36m. This gap is then expected to grow by approximately £6m per year."

Part of the plan uses £19 million of one-off funding and council reserves to bridge the gap.

Mr Walton's report says that the current cost of adult social care, and other services the council has a legal duty to provide, are not affordable with current funding.

He said: "To produce a balanced budget, the gap between this estimated level of spend and our estimated level of resources has been bridged as far as possible by the use of one-off funds. Previously the gap could be bridged for the years 2017/18 and 2018/19, and partially bridged in 2019/20. An initial review now suggests that the 2018/19 gap can no longer be completely bridged. It is currently estimated that following application of all known one-off resources, and with no further action, a gap of approximately £2.4m would remain in the next financial year, 2018/19.

"The outcome (regardless of how it is described within the budget process) is that the growth in adult social care and the costs of other statutory responsibilities of this council are not affordable under the current funding and expenditure model.

"The use of one-off funding is masking, and not solving, the underlying financial position where expenditure will continue to outstrip resources. Decisive action in the short term is critical to bring this worsening situation under control."

Mr Walton's report outlines several ways the council intends to solve its financial problems, including use of greater investment and commercial activity, use of a new IT system, and cutting services.

The report states: "An approach is being developed by officers and cabinet in response. This approach requires council priorities to be set by cabinet, followed by an alignment of service delivery to those priorities. In simple terms, this means understanding what we want to do and then putting our efforts into doing those things as efficiently as we can."

The report says the four key pillars of the approach are to "innovate" by "focussing on the highest priority areas and those most likely to provide greatest reward including children’s services, digital transformation and health and adult services", to raise income by focusing on "investment and commercial activity", to cut services, and use reserves in a "strategic manner".