Consultation on our budget proposals for 2023/24
Have your say on proposed budget savings and council tax rates for next year (2023/24).
Thank you to everyone who took part in the consultation between 25 October and 22 November 2022 to help us to balance the budget for 2023/24. During the same period and beyond to 1 December 2022, presentations were made to the 14 Area Action Partnership Boards, County Durham Partnership (CDP), County Durham Association of Local Councils (CDALC) and the Youth Council and met with Trade Unions representatives. We were able to engage with 1,020 people who provided their views. For full details of the consultation feedback and view the Medium Term Financial Plan report go to Cabinet agenda and minutes 8 February 2023
Background
We are in the process of preparing our budget proposals for the next financial year and have updated our medium-term financial forecasts. Outlined below are the challenges we face in setting a balanced budget and the difficult decisions needed as a result.
The economic context
We are operating in a period of significant uncertainty and volatility - the likes of which we have not seen for over 30 years.
For next year, and across the next four year period, the budget setting process will be more difficult than it has been previously, largely due to a range of external factors that are outside our control, including demand pressures in social care and significant increases in inflation, which are impacting on our energy costs and on our transport, waste management and other major contracts.
These factors are being further compounded by interest rate rises, expected pay settlements, and continued uncertainty about future government funding.
It is very difficult to plan ahead with any certainty at this time and the unprecedented challenge in balancing the budget next year could worsen if any further cost pressures arise, or if the government's funding for councils is reduced.
How these factors are affecting our costs
Across our services, some of the biggest impacts are as follows:
- Increasing energy prices are adding substantially to operating costs for our buildings including leisure centres, libraries and cultural venues, and the costs of street lighting across the county.
- Increases in fuel prices are affecting the operating costs of services such as rubbish and recycling collections, road gritting and home to school transport.
- Rising inflation and interest rates are adding to projected costs of our regeneration programmes and projects and making it more expensive for us to borrow to invest in these programmes.
- Forecast increases in the National Living Wage are expected to add significant costs across the board, particularly in Adult Social Care commissioned services, as well as driving higher than previously anticipated pay awards for our staff, which are subject to national pay bargaining.
- Over 60% of our expenditure goes into caring for our most vulnerable children and adults, so the following is, or will potentially, also have a significant impact:
- Increased demand for looked after children services, as well as children presenting with more complex needs.
- Increased costs associated with increased demand for home to school transport for children with special educational needs.
- The outcome of the national 'Fair Cost of Care' exercise and the social care funding reforms, which are being implemented by the Government, where there is a concern that insufficient funding is being made available to finance these changes.
The diagram below shows the expenditure on our services during the current financial year.
Impact on our budget forecasts
These rising costs are having a substantial impact on our budget, particularly in the short-term, with the savings required for 2023/24 now being £37.4million, and almost £53million over the next four financial years.
Since 2010, we have had to save £250 million from our budget because of a combination of reductions in central government funding and unavoidable and unfunded cost pressures we have faced.
To meet these savings requirements, we have had to transform the way we do things and have sought to protect frontline services as much as possible, by increasing or introducing new charges, reducing staff levels and making savings to management and back-office functions wherever we can. We employ around 3,000 less people today than we did in 2010.
It is becoming increasingly hard to make savings in this way and going forward it will be extremely difficult to avoid impacts on front line service delivery.
We will need to make some difficult decisions for next year's budget and beyond, and we're seeking your views on our proposed approach as we continue to look at ways we can meet the savings required.
You can read the Cabinet agenda and minutes - 12 October 2022.
Proposed approach
The approach has five elements, three of which are from savings and additional income proposals.
1. Savings from back office and staff reductions
We've looked at all our services to identify ways in which we can make further savings which will hopefully not affect front line service delivery, including changes to contracts, back-office processes and staffing reviews. This includes the identification and deletion of vacant posts and reviewing contracts as they reach their renewal dates and looking at alternative ways of delivering services. Almost 59% of the draft savings plans that have been developed can be achieved in this way.
The opportunities available to save money in this way going forward are getting much more difficult to achieve.
2. Income raising
We have looked at ways in which we might raise additional income and the following proposals have been identified:
- Selling renewable energy back to the grid generated at our former landfill sites - benefitting from the increased energy prices at this time.
- Additional income due to greater demand for planning application and building control services.
- Additional income from increases in charges for some rubbish and recycling services (including garden waste, trade waste and bulky waste collections), cemetery fees and road licence fees.
- Better enforcement of Fixed Penalty Notices (fines), for example, bus lane infringements and weight limits for moving traffic.
3. Savings from changes in the way we deliver front-line services
We will continue to explore ways to deliver services in different, and more effective and efficient ways, to help better meet the needs of our residents. Where appropriate, we will involve you in further conversations to get your feedback in more detail.
At the moment, this part of the proposed approach accounts for 5% of the savings proposals put forward for 2023/24. Proposals outlined so far, which would be subject to further conversations, engagement or consultation with service users and/or the public are:
- Review of Area Action Partnerships
- Review of services and opening hours in our least used Customer Access Points
- Ongoing consultation regarding the transformation of library services
- Review of non-assessed community-based services that offer support to vulnerable adults with aspects of their every-day life such as debt support, finding work, health and lifestyle
- Changes to One Point family activities from 'in person' to virtual. This will be part of the development of new Family Hubs across the county.
- Introducing charges for those residents where we act as financial appointee - bringing our policy in line with other local councils.
4. Council tax increase of 2.99% (1.99% plus 1% adult social care precept)
As in previous years, to try and reduce the impact of cuts to services and possible impact on many of our most vulnerable residents, an increase in council tax is also proposed.
The £53million savings figure has been calculated after an assumed increase in council tax of 2.99% next year, 2.99% the year after and 1.99% in the two years after that. These increases are in line with the Government's expectations and represent the maximum increases permissible without a referendum.
A 2.99% increase in our council tax equates to a £52.47 increase on a Band D property which is around £1 per week. However, in County Durham, 83% of all properties are in Bands A to C, which means that the majority of people will be charged less than this. For example, those living in a Band A property would be charged £35.98 more next year - or around 67p per week.
In County Durham, financially vulnerable households are afforded significant protection - much higher than elsewhere - as we retain a Council Tax Reduction scheme which continues to provide up to a 100% reduction / rebate against the charge depending on the financial circumstances of the household.
Higher or lower increases
Local councils are currently only able to increase council tax by up to 2.99% next year, on the condition that 1% of the increase is earmarked for adult social care. The government may decide to remove this cap later in the year. If they did so, we could be given the power to raise council tax by more than we are currently planning to do, in order to protect more services.
Setting a lower council tax increase would mean we would need to find more savings than we've currently forecast.
5. Use of reserves
At the moment, to meet the £37.4million budget shortfall, we are faced with plugging the gap between our cost pressures, the amount we can raise from council tax, and the savings proposals that have been developed, by using £25.6million of reserves.
However, this is not a sustainable position, and we cannot continue to do this going forward. Reserves are held for a number of reasons including:
- to help cushion the impact of any uneven cash flows, for example, delays in expected income or funding
- to avoid unnecessary temporary borrowing, especially important given rising interest rates
- as a contingency to cushion the impact of any unexpected events or emergencies, for example flooding, and other exceptional weather
- as a means of building up funds for known or predicted future liabilities. These are known as earmarked reserves.
So, any use of reserves to bridge the budget gap impacts on our financial stability and programmes and projects funded from earmarked reserve. We are reviewing all our spending commitments to ensure we can free up sufficient funding to meet our budget requirements.
Other things we are doing
We will continue to do what we can to identify savings which avoid impacting on frontline services for our residents and communities, in particular those who are most vulnerable.
The budgetary pressures we are experiencing are not unique to us. Through prudent financial management over many years, we are resilient and can utilise our reserves to buy some time to consider what reductions or service transformation we need to implement to bring about more sustainable budget solutions.
Many local councils that do not have reserves could become unsustainable over the next year. Indeed, if there is a return to funding cuts alongside the inflationary pressures outlined above, we will find ourselves in an increasingly difficult position.
We have written to the government, and will continue to lobby them, for additional financial support to balance budgets during these unprecedented times and try and alleviate some of these difficult choices we face.
Financial support for households
There is help and support available if you're struggling to pay your council tax and we are one of a small number of councils who continue to offer a Council Tax Reduction scheme which provides council tax discounts of up to 100% to eligible households.
Find more information about the range of financial help available to residents, including the Council Tax Reduction Scheme.
Have your say
The closing date for online comments was 5.00pm on Tuesday 22 November 2022.
Next steps
As the economic uncertainty we face continues, we will continue work to identify other areas where savings can be made both next year and beyond. Your feedback in this consultation will help us shape and finalise our budget proposals for 2023/24 which will go to our cabinet and full council in February 2023.
We anticipate further consultation on how to shape future savings proposals will be carried out next year.
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