County council could stop non-essential spending due to £46m budget black hole

By Callum Parke, Reporter14th September 2023News EnglandBusiness / Funding / Finance, Derbyshire, Local Authorities, News England

A county council could cease all non-essential spending to plug a £46.4 million budget gap.

Derbyshire County Council’s cabinet will discuss measures to bring down its forecasted overspend at a meeting on September 21.

If the measures are approved, the council will stop or defer new projects, bring in financial controls and freeze recruitment to cut costs.

The budget gap comes despite £29.6 million of council reserves being used to balance the books, and after £55m was used to balance the council’s budget in the last financial year.

The council’s leader said that while many of the causes of the situation were outside the authority’s control, the financial pressure was “now greater than ever experienced before”.

In a joint report published, Emma Alexander, managing director at the council, and Mark Kenyon, director of finance and ICT, said: “If the forecast overspend is not addressed, the Council’s General Reserve balance will be depleted.

“Therefore, the Council is taking a number of actions to mitigate the overspend.

“In taking these actions now, it is anticipated that the forecast overspend can be significantly reduced.”

The report blamed inflationary and demand pressures, particularly in adults and children’s social care, which combined are responsible for more than £20 million of the overspend.

The council also said that the expected, nationally-set pay award for 2023-24 was a “significant financial pressure”, but that using reserves to balance budgets meant they had “depleted significantly”.

Its reserves have been left at around £28 million, meaning the current overspend would “more than deplete” what it has left to pay for emergencies and other unexpected expenses, the report said.

Meanwhile, the council is attempting to save £16 million this financial year, as well as a further £12 million brought forward from previous years, as it attempts to deal with funding cuts.

It comes just weeks after Birmingham City Council – Europe’s largest local authority – issued a section 114 notice, meaning it is effectively bankrupt.

The report issued to Derbyshire County Council’s cabinet did not state that such a notice would be issued imminently by the authority.

Council leader, Councillor Barry Lewis (pictured), said: “We have always been a well-managed, efficient and financially stable council which has balanced our books, maintained a robust level of reserves and been able to support vital, high quality, value-for-money services for our residents across Derbyshire.

“However, the reality is that the financial pressures we are facing, along with other councils and households, are now greater than ever experienced before, with most of these pressures being simply outside our control.

“We’ve been taking many measures over the past few years to make sure we carefully control our costs, such as vacancy control measures, but now we need to do much more.

“We are continuing to lobby the government for extra funding so that we can continue to run vital services to those who need them most, but we also recognise that even more difficult decisions will be needed to be made to try to balance the books.

“This is a position that no one who goes into public service ever wants to be in.

“But despite this intense pressure on our budget, we are ambitious for Derbyshire, committed to supporting people through the cost-of-living rises, helping to drive our local economy, working towards a devolution deal and working with partners to get the best value in all that we do.”