Reading leader on tough financial climate facing council

It’s that time when local councils are working on their budgets for next year. In that regard, and contrary to popular belief, it’s certainly not the most wonderful time of the year.

Everywhere you care to look, there are warnings that more and more councils are on the verge of declaring themselves bankrupt. The narrative is strikingly similar. The rising cost of proving services at a time of high inflation has been compounded by an ongoing cost of living crisis that means more people are turning to councils for help, further driving up demand and costs. All this after 13 years of Government cutbacks which have eroded any financial buffers which may at one time have existed, and a seemingly head in the sand attitude towards funding for a social care sector which continues to barely keep its head above water.

And so it is that after only two section 114 bankruptcy notices being issued by councils over the previous 18 years there have now been 12 since 2018 – Nottingham being the latest example. Although some of those are the result of poor financial decisions – particularly around disastrous property acquisitions – we have entered a phase where the financial precarity of councils is increasingly the result of little more than day-to-day spending pressures. The Local Government Association rightly acknowledged this only last week, when it warned almost one in five local councils in England are likely to issue a section 114 notice this year or next year after their own survey of councils.

Reading is not teetering on the brink, but we are seeing those exact same pressures on our budgets, and this reduces our room for manoeuvre. After years of cuts to preventative services owing to Conservative austerity, an additional £7.5 million is needed next year to pay for the increasingly complex child placements we are seeing come through the system. £5.8 million extra next year is required for care for older and vulnerable residents in the social care sector. An estimated £1 million more over the next three-year period is necessary for homeless prevention services in Reading because of the rise in private sector evictions, especially due to the cost of living crisis, and the rising costs of providing emergency accommodation.

Current estimates are that we will need to find around £13 million extra in savings, efficiencies, and income in Reading over the next three-years in order to balance the books which, unlike NHS Trusts, local councils have to do by law. Years of prudent financial planning means we are in a relatively strong position in comparison to some other councils, particularly those in our immediate neighbourhood. That isn’t to say challenges don’t lie ahead, especially when you consider Reading Council has successfully delivered nearly £30 million of savings over the past three years. The low hanging fruit has gone.

Sound financial management and success in attracting investment also means we are able to continue with our programme of delivering modern new facilities for our residents despite the circumstances, whether that is continuing with our record investment in new road surfaces; modern new leisure facilities (with the new pool at Rivermead set to open next year); building a brand new central library; a new performance and community space at the Hexagon; new dedicated cycle lanes in the Bath Road / Castle Hill area; more investment in making our already fantastic bus services even quicker and more reliable; a continuation of the biggest council house building programme in Reading for a generation; and modern new facilities for older people.

A quick reminder here that the capital investment money that pays for many of these projects is not allowed to be used to balance the council’s day to day expenditure, which is why it always looks strange to be talking about the need for savings alongside an investment of many millions of pounds in new facilities for residents. What is true, however, is that we could not afford the repayment rates on borrowing costs (which do come out of day-to-day expenditure) without that sound financial planning.

I don’t claim to have a crystal ball, but I do confidently predict that over the coming weeks you will hear noises of ‘council waste’ from this Government, citing isolated examples from across the sector. Councils will soon be announcing their council tax rises after all, and heaven forbid there should be any suggestion the Government’s own economic mismanagement is in any way to blame. There will be local examples too, with some opposition councillors criticising decisions with no realistic alternatives to offer and safe in the knowledge that the ultimate responsibility to balance the books in Reading does not lie with them but, instead, with Labour.

That’s politics you might say, but behind the headlines will be individual residents struggling as high inflation and the cost of living crisis bites. It is an increasingly inconvenient truth for this Government, but during difficult times local councils are the ones on the frontline. It’s councils that residents turn to for help.

As it’s nearly Christmas, the charitable side of me likes to think our otherwise totally dysfunctional Conservative Government will finally acknowledge the problem and provide local authorities with a Local Government Finance settlement that recognises the immense financial pressures councils find themselves under. The realist in me suspects the usual Scrooge-like (or Grinch-like) response is more likely to be the order of the day.