Council’s £23.8m budget black hole just two months into financial year prompts ‘immediate action’

Councillors and officers are set to make “very swift and decisive decisions” to bring a £23.8m budget black hole that has emerged two months into the financial year under control.

The existence of the grim position is not a huge surprise for those following council reports, with the outturn report last month noting budget pressure areas, although the scale and urgency of the new unscheduled report is highly unusual.

The sum is 7.8% of the overall budget for Wrexham Council and is being blamed on a lack of funding from Welsh Government, and in turn UK Government, to reflect the now common volatility of finances – with the council pointing to knock on effect of pay rises, spiralling costs of already expensive social care placements and general inflationary increases.

On Tuesday (11 July) The Executive Board are set to green light “immediate actions” to mitigate the budget forecast, including all departments looking to identify in-year savings of around 15% with ‘all areas of expenditure and income’ to be examined to ‘bring the budget back in line’.

Yesterday staff were told it could affect council employees as they “might need to reduce the size of our workforce”.

In another unusual move, decisions that are often delegated to senior council officers only – or in consultation with lead members – will now will see Chief Officers “in consultation and agreement with the appropriate Lead Member and the Leader and the Deputy Leader of the Council” around signing off budget fixing moves.

A wider list of ‘mitigation measures’ areas is at the footer of this article, however some specific revenue raisers are likely to be signed off on Tuesday:

– An increase in charges for green waste collection to £35 from 1st August 2023.
– A review of car parking charges in council owned car parks, with the current wide free parking offer likely to be significantly changed.
– Formal notice given for the cancellation of the council PCSO contract provision.

Table showing the £23.8m forecasted ‘pressure’, with Social Care making up £17.8m.

Speaking at a media brief earlier this week, Council Leader Mark Pritchard said: “We have budget pressures of around about £23 million forecast.

“There will be extremely difficult discussions that we have as politicians on where we find the savings and what we politically support to achieve this as a balanced budget at the end of this financial year. It doesn’t look good at the moment, but we’ve been here before.

“We will bring the balanced budget in at the end of this financial year as we do every year. But, there’s going to have to be some tough discussions and conversations on what we take forward to find these savings, efficiencies and cuts.

Last month we queried around the sustainability of ever increasing social care fees, specifically children’s services costs and the sustainability of that position.

We referenced that point at this week’s media, with Cllr Pritchard stating: “The pressure in Social Care and Children’s Services is immense.

“I remember the last meeting you asked if it was unsustainable – well we are hoping that the Welsh Government will give the 22 authorities more money to cover these costs.”

It appears there won’t be cash coming down the line from Welsh Government to help the council out of the hole.

Cllr Pritchard explained: “At last week’s Welsh Local Government Association (WLGA) meeting I spoke up on the pressures along with other leaders across Wales.

“A clear message came back from the Minister that there is no more money, so we have to manage our budget.

“You never know with budgets and when money comes. The Minister says there’s no more money, there always might be more money coming, but I don’t think there is personally.

“We have to address this now, because if you leave it to quarter three or quarter four, it would be too late.”

Table showing the breakdown of the £17.7m social care ‘pressure’

Deputy Leader Cllr David A Bithell added: “What we have got to do as leaders and the cabinet and the administration, we’ve been working with officers to look at how can we manage the budget in-year and clearly the first part is taking the report to the Executive Board to make sure that we’ve got enough mitigation in place to start that process so we can bring the budget back in line by the end of the financial year.

“Some of the things we are looking at is vacancy control, agency staffing, reducing overtime, monitoring sickness and absence more effectively, job evaluation, consultancy, traveling and subsistence, conferences and courses, supplies and services.

“That’s not exhaustive, but that’s just some of the issues and some of the challenges that we will be facing as lead members and as officers, they’ll be tasked and challenged to go away and be as efficient as we can over the next eight to nine months.”

Wrexham Council Chief Executive Ian Bancroft said: “What we are really talking about here is inflationary costs pressures that are going on longer than expected, pay rises that are above what was anticipated.

“Thirdly, within the social care market, actually it’s not the number of placements anymore because we’re fairly stable on numbers, it is the cost of placements that’s going up.

“I think those three issues all mean that the financial situation at the moment is very volatile, very uncertain.

“Whereas in previous years if we had this projection at – and it’s not even Quarter One it is the end of month two, so this is the end of May, figures that we have at the end of May – normally we would probably sit on these and say, ‘Actually, this will probably work its way out during the year’.

“However, I think we’re being absolutely right because of the volatility of the financial context that we can’t do that.

“We actually have to make very swift and decisive decisions at this point, so that we can manage the in year budget and protect critical services for residents.

“It’s not something we’re facing alone. It’s being faced nationally. However, I think we’re acting really quickly about this because of that uncertainty and complexity of the financial contexts.”

Chief Executive of Wrexham Council, Ian Bancroft

There was clear frustration aimed at Welsh Government and UK Governments, with Cllr Pritchard saying: “I must congratulate Minister Rebecca Evans for the support she’s given the authorities in the last two years and the settlements have been better, but we need a continuation of a settlement.

“It needs to be a continuous and it needs to be every year. If there are any consequentials, if there’s any extra money which comes from Westminster into Cardiff, that it comes directly to local authorities.”

“I hope there will be lots more discussions during this financial year with the WLGA with the Ministers, but I know there’s been conversations with officers throughout Wales on sustainable services across Wales because it can’t continue, we need to be funded properly.

“Or, if you have a crystal ball looking into the future, we will just be delivering statutory services and non-strategy services would be just a fraction of what we do.”

Wrexham Council’s Finance Officer explained: “The main pressures that we are facing are common with other councils – social care – it is not just in Wales but across the UK.

“We saw as we reported in the last report that we took to the Executive Board a real increase in costs and demand in the last six months of last financial year.

“There is a degree of inevitability really that that then continues into the current year because of the nature of the expenditure around things like social care or the demand for services.

“So, we are taking the opportunity to present that position early to allow sufficient time within the year to redress the overall budget position. As the Leader says, we did have a better than expected settlement for the current financial year but it only covered around half of the additional pressures that councils are facing.

“I think the other thing to note is we can’t underestimate the impact that rising inflation is having on cost of services, but also the way that it erodes the value of the funding settlements that we’ve had.

“I think Welsh Government makes that point as well, that the value of the settlement they have from UK Government is reduced significantly because of the way that inflation has behaved over the last seven or eight months, and that we see that coming through in our budget as well.

“As others have said, it is very volatile, but we’re reporting this early in order for us to be able to take the appropriate action.”

As the forecast is of a £23m issue we asked about the accuracy, and why they council were confident that would not spiral into a much larger figure.

Leader of Wrexham Council, Mark Pritchard

The Chief Executive said: “These are always forecasts, and forecasts change. We are being as prudent as we can be at this point, given the volatility of the financial context.

“So I think if it wasn’t as volatile because of pay rises, increasing social care placements and inflationary increases, then we would probably not be including all the things that were included in the estimate.

“But, given that volatility, we are right to be including that. That doesn’t mean it will stay this way. Estimates always change.

“It’s the degree to which it changes. We have looked long and hard at this estimate at the end of month two, to make sure we get as many things that we’re aware of and also what we predict coming.

“But. given the volatility, who knows what’s going to happen in the next nine months.”

We asked what ‘Plan B’ would be if the situation continued, and the volatility was not calmed and budget pressures kept growing.

Chief Executive Ian Bancroft replied: “There are only three things you can do in this situation. One, we can raise it nationally. Clearly it is not a surprise because all the health boards are saying a month or two months in they’re going to be significantly overspending.

“So it’s really important local governments raise the issue, because otherwise local government won’t be considered a priority nationally.

“Secondly, if there’s no national support, we have to look at reducing services and provision to a level that goes down to statutory minimum and that’s the only solution that we’ve got, and that is just what anybody would do in that situation.

“Obviously, we don’t want to do that because we want to provide good services for residents. But, if this carries on we’d have no choice if there’s not national support, but to reduce provision down to a level.

“The real issue comes for local government if you get to a situation where you cannot do either the provision of statutory minimums or bring in a balanced budget. We are not in that position.

“It is right to raise it nationally that it is getting harder for local government, just like it’s been getting harder for health boards.”

Local Group Leaders are being notified of the situation with a wider budget workshop next week ahead of the Executive Board meeting with the Council Leader assuring that he would make sure ‘all information’ is shared, and would welcome ‘proposals on the table’ from opposition groups on where Wrexham Council can save, generate or improve efficiency.

With assurances ‘no stone would be left unturned’ – and later told councillors could have to pay the going rate for car parking and the like, we asked if there would be leading from the front on cuts – with much debated cuts to the numbers of Executive Board members on the cards.

Cllr Pritchard said that, along with everything, it would be on the table, “We will look at everything from photocopying, to printing to staff members. Every stone will be turned over. That’s what we have to do in the circumstances.”

Corporate Budget Mitigation Proposals
To support the delivery of savings in-year, a corporate approach to a number of areas is required.
The aim of the measures is to reduce net cost within the year by stopping or delaying expenditure.
The underlying principle should be to incur the expenditure only when it is essential to do so.

Vacancy Control
Recruitment to new or vacant posts will be paused and will only be approved by exception. A case
for approval will be considered by a peer review panel, agreed by SLT.
Agency Staffing
Use of new agency staff would be by exception only and a review of all existing agency staff
positions undertaken. Exceptions will require Chief Officer approval and consultation with the
relevant Lead Member.
Overtime
Overtime should not be paid unless contractual or deemed essential by the Chief Officer. Review of
all overtime payments to be completed by SLT.
Absence/Sickness Management
Ensure that policies are being applied consistently and effectively to minimise additional cost
through cover costs (overtime or agency costs).
Job Evaluation
There will be a pause on job evaluation requests, unless approved by SLT.
Consultancy
Appointment of consultants will be stopped in the current year, unless fully grant or capital funded.
Any exceptions will require SLT approval. There will also be a review of all existing consultancy
appointments.
Travelling & Subsistence
Claimed mileage and subsistence should be kept to a minimum. SLT to review service expenditure.
Conferences & Courses
Attendance should be for essential events only and remote attendance where possible. Overnight
accommodation costs will not be approved, other than in exceptional circumstances, approved by
the Chief Officer.
Supplies & Services
All non-essential expenditure should pause in the current year. Chief Officers will determine what is
essential in their service areas. Supplies and services that are deemed essential must be purchased
in compliance with procurement policies to ensure value for money in every instance.
Income
The Cost Recovery Policy should be being applied. Income lines will be reviewed by SLT in line with
the Cost Recovery Policy and to ensure maximum income generation.