Urgent action needed - council budget update

News at a glance:

• "the situation is perilous for local government & it is simply not sustainable" - Leader of West Lothian Council
• The council's Head of Finance has warned that this is the most severe financial position ever faced by the council and that urgent action is now required to help ensure the council remains financially sustainable
• The council now estimates that the budget gap facing West Lothian Council is £57.7 million
• To assist with the financial crisis facing the council, a number of measures will now be considered in order to address the increasing budget gap

The news in full

West Lothian Council's financial position has worsened considerably following the Chancellor of the Exchequer's Autumn Statement amid massive cost pressures facing the local authority. 

Each council area has a legal duty to balance its budget each year. In order to do this, West Lothian Council must make significant savings.

The council's Head of Finance has warned that this is the most severe financial position ever faced by the council and that urgent action is now required to help ensure the council remains financially sustainable.

Since October, 2021, the council has reported regularly to councillors on the projected budget gap and five year revenue strategy for 2023/24 to 2027/28. In October this year, the council estimated that the gap between projected spending requirements compared to funding available would be £47.1 million. The council has recently consulted residents on officer budget proposals that would help the council reduce services over the next three years, and allow the local authority to balance its budget.

However, following The Chancellor of the Exchequer's Autumn Statement, the council now estimates that the budget gap is £57.7 million. The Chancellor's Autumn budget provides an overview of planned public spending, economic growth and predictions on inflation, public sector debt and borrowing.

The spending decisions made by the UK Government impact on the Scottish Government through the Barnett formula. This in turn has implications for available resources for West Lothian Council through the local Government Finance Settlement received from the Scottish Government. West Lothian Council receives 80% of its funding from the Scottish Government with remaining 20% generated via Council Tax.

The Scottish Budget will be announced on 15 December which will provide clarity on the level of grant funding each council area will receive for 2023/24.

A report to the Council Executive (Tuesday 6 December) set out the scale of the challenges faced by West Lothian and called for urgent action to help ensure the council's continued financial sustainability.

Donald Forrest, the council's Head of Finance and Property: "Decisions made by the UK and Scottish Governments have a direct impact on our financial position as do the significant cost pressures such as staffing costs and energy prices.

"Our customers know through our recent public consultation of the huge challenges that were already facing us. Unfortunately, the most recent forecast now means that even more severe and difficult decisions are necessary.

"Urgent action is required to assist with the financial crisis facing the council. 

"The magnitude of the pressures faced, with constrained funding in a time of extremely high inflation, should not be underestimated. We are now forced into a position that we must act to reduce costs and increase income in order to protect local services."

To assist with the financial crisis facing the council, Council Executive agreed that the following will now be considered in order to address the increasing budget gap. They include:

• Further consideration being given to Council Tax options for future years. The council's current planning assumption for Council Tax is an annual increase of 3.5%. Consideration is now being given to increasing Council Tax further with a final decision being made next year. An increase of 4.5%, for example, would generate revenue of £5.7 million over the next five years which would be used to protect some services
• Officers will review savings proposals to assess if they can be accelerated where possible
• Developing new savings measures not included as part of the council's current public consultation. New measures would be subject to a future public consultation in 2023
• Introducing temporary cost savings options
• Considering use of revenue flexibilities set out by the Depute First Minister, where existing policy commitments and funding streams will be reviewed to consider scope for savings

The above actions will form part of the work being done to prepare the revenue budget for consideration in February 2023. 

Leader of West Lothian Council Lawrence Fitzpatrick added: "This is an alarming budget gap and the situation is perilous for local government. All thirty-two Directors of Finance , from all Scottish councils, have recently written to the Depute First Minister to set out their serious concerns and to ask for changes to the way in which we are funded. Action is needed now. There are significant changes ahead for local services and councils are not going to be able to provide existing high quality services. It is simply not sustainable."