£20 million business rates slump from pandemic blows hole in Shropshire Council finances
Shropshire Council has lost £20 million in business rates during the pandemic, finance chiefs have revealed.
The council is proposing a 4.99 per cent increase in council tax for its ratepayers from April, the maximum it is allowed to increase the bills by to try to balance the budget.
It says this would bring in £8.2 million to help it continue to provide vital services.
But officers are warning that the council is looking to make savings of £9.9 million in the next financial year.
It is the first time in its history that the unitary authority has seen a significant shortfall in its Collection Fund - money collected in the form of business rates and council tax every year.
Council leader Peter Nutting warned today that the 20/21 budget would be a challenge.
The council’s Cabinet will meet on Monday to discuss the council’s financial plans for 2021/22 through to 2025/26, with a particular focus on setting the budget for 2021/22.
For 2021/22, the council is proposing a 4.99 per cent increase to council tax, which includes a 1.99 per general increase and a three per cent "social care precept" increase that is used specifically to fund the growing costs in social care.
A report to councillors says that, as a result of the coronavirus pandemic, a shortfall in business rates collection in the region of £20 million is expected to impact the council in 2021/22.
"The Government will compensate councils for such shortfalls by allowing these to be spread across three years and by providing grant funding," the report says.
Impact
"Grant funding for this is expected to be received in 2020/21 and carried forward in a reserve to be used in 2021/22 when the shortfall will impact the finances. Because of this, it may appear that the council is in a better position financially as it will have more money in its reserves, but this money will be needed to be used to keep essential services going."
The Medium Term Financial Strategy 2021/22 – 2025/26 outlines the changes the council needs to make in the short term to respond to the continuing challenges in local government finance. These include the increasing cost of providing services such as adult social care and children’s social care.
Next financial year the council expects to spend £556 million on delivering essential services to local communities – most of which, it says, is spent on protecting the county’s most vulnerable residents.
The report says: "There is a legal requirement for the council to deliver a balanced budget every year and, to enable this to happen, it is planning to deliver savings of £9.9 million in 2021/22.
"To do this, the council is planning to continue to innovate and change how it delivers some of its 150 services, review contracts and increase income to provide investment in key local services, rather than cut them."
Councillor Nutting said: “The 2021/22 budget will be a challenge, made even more so by the ongoing pandemic, increasing costs of social care in particular, and the uncertainty about future Government funding.
“Despite this, we’re continuing to work hard to keep our finances on track to deliver a balanced budget that invests in local services for our residents, whilst prioritising those who are most vulnerable.
“But we need to do more. It because of this that we are proposing to increase the amount that people pay for the services they receive. We know that things are difficult for everyone, so we need to make sure that any increase is kept to an absolute minimum. It’s not an easy proposal to make, but it will make a significant difference to the services we deliver in the future.”
