Thanet council faces a budget black hole of ‘upwards of £1.5 million’ next financial year (April 2020-March 2021).
The shortfall comes amid plunging income from Government. The Revenue Support Grant to Thanet from central government was £97,000 for the 2019-20 financial year. In 2018-19 it was £809,000 and in 2017-18 the grant stood at £1.446m. This is compared to £6.636m in 2013-14.
A one year settlement will be made for 2020-21 with amounts to be confirmed later this year. Plans to end the government revenue support grant from 2020 have now been rolled forward to 2021
The 2019-20 budget for Thanet council faced a £1.8 million shortfall. To reduce this councillors agreed to ditch £500,000 funding to keep Ramsgate port in readiness for a ferry operation and axe a further £130,000, totalling £630,000 (or £730,000 in a full year) from port spending.
However, the council’s corporate risk updates show Thanet still faces high risk associated with limited resources.
In an update to councillors Chris Blundell, of Financial Services, said: “The high score for Limited Resources reflects the fact that it is one of the few risks that in extremis could result in the council losing control of its own destiny.
“Due to national political uncertainty and an unresolved Brexit, the chancellor has confirmed that councils will now get a ‘one-year roll-over settlement’. This has severe implications for accurate financial planning in the Medium Term Financial Plan and any longer term planning.
“Due to the government’s focus on Brexit, the Fair Funding Review, planned to be implemented in 2020-21 is also at risk of slipping to 2021-22. Therefore, the likelihood and severity of the impact of the risk becoming manifest e.g. TDC having to terminate services, make large-scale redundancies and/or be externally governed or managed, remains high, not only now but for the immediate future.”
The meeting was told that Kent had been unsuccessful in a bid to enter the 75% business rate retention scheme pilot. This would have allowed the council to retain 75% of the income from any growth in business rates. Thanet will now remain in the 50% retention scheme for 2020/21.
There is an opportunity to increase council tax by up to 2% without the requirement to hold a referendum to raise funds. It was hoped that the increase level would be increased to 5% but this has not been the case.
‘Long way to go’
Thanet council’s deputy chief executive and finance officer Tim Willis confirmed the £1.5 million funding gap during a council meeting on Tuesday (October 22) during a discussion on raising fees and charges by 2.5%. This would raise an extra £208,000 but Mr Willis said: “We have a £208,000 assumption of extra income from higher fees and charges but the budget gap is upwards of £1.5million – and that’s after the £208,000 so there is an awful long way to go.”
Budgets and the law
Local authorities are required by law to have a balanced budget. There is no legal definition of what constitutes a balanced budget, although legislation does say a budget is considered not to balance where the increased uncertainty leads to budget overspends of a level which reduce reserves to unacceptably low levels, or where an authority demonstrates the characteristics of an insolvent organisation, such as an inability to pay creditors.
If the council’s chief finance officer judges that the authority is unable to set or maintain a balanced budget they must consider the possibility of a Section 114 notice. Such a notice is only given in the gravest of circumstances. The process is governed under legislation and once issued the council has 21 days to consider a response. However, during that time spending and other financial activity is suspended.
The notice also results in the loss of financial control by the leadership team. External audit would then become involved during the process.
Looking for examples
Cabinet Member for Financial Services & Estates, Cllr Rob Yates, told Tuesday’s meeting: “The authority remain under financial pressure. I have asked officers to look at best practice in other councils to see if we can do things more creatively.”
Thanet District Council is currently asking 6,000 residents to tell them what they think about the services the authority provides and if a service they use were to be reduced or cut, which of the range of options available to the council they would be most willing to support.
The results will be published by the council and will be used to help inform its budget and service priorities.
Thanet’s 2020-21 budget is due to be discussed by cabinet members on November 14.
Final approval of Thanet’s budget will take place on February 6, 2020.