Cheshire East Council’s head of finance has warned the authority may not have enough in reserves next year to support the budget, writes Belinda Ryan.
The council is already facing a funding gap of £13.1m for the year 2023/24, and is working to reduce that by the end of March.
Any overspend will be funded by reserves.
But as costs – particularly adult and children’s social care – continue to rise, the outlook is bleak for the next financial year unless service costs can be cut and prices increased.
The report states: “Net expenditure in 2024/25 is expected to increase by £34.3m, however income from additional funding is only forecast to increase by £22.6m, creating a budget deficit of £11.7m, which will have to be taken from reserves if further transformational activity does not take place by the end of 2024/25.”
Director of finance Alex Thompson warned: “Spending in 2022/23 alongside forecasts for 2023/24 and 2024/25, are reducing total reserves to an inadequate level.
“In 2023/24 net spending is forecast at £366.1m against net funding of £353.1m. This £13m forecast deficit reduces general reserves to £1.1m.
“Earmarked reserves are expected to close at £32.9m, leaving total reserves of £34m.
“The requirement to treat £8.7m of spending on HS2 as revenue further reduces total reserves to £25.3m.
Mr Thompson said over the next financial year, net spending is forecast at £387.4m against net funding of £375.7m.
“This £11.7m deficit further reduces total reserves to just £13.6m,” he said in the report.
“Of the total remaining reserves, several are ring-fenced or already included in the spending forecast to be utilised, leaving just £3.8m – one per cent of net expenditure.
“This position is clearly unsustainable as a one per cent variance in spending could trigger the requirement for a S114 report.”
The finance boss said delays or changes in budget proposals being implemented will not have adequate financial cover from reserves.
Mr Thompson said: “Based on my engagement and observations of the process to manage in-year spending and determine a balanced budget for 2024/25, I can report that the budget presents a robust set of forecasts, but that the council must address the current trend of overspending.
“Based on my assessment of the risks that the council can currently value, I am not satisfied that the reserves strategy presents an adequate level of reserves to support the MTFS.”
The council’s top officers are currently in talks with the exceptional financial support team at the Department for Levelling Up, Housing and Communities (DLUHC).
Mr Thompson said: “If HS2 spending and high needs related interest costs were resolved, even if only in the short term, this could increase the overall reserves levels by as much as £18m.
“Addressing short-term overspending could release further resources and thereby provide the ability to manage local risks and provide essential funding to support a comprehensive transformation programme.”
The corporate policy committee meeting takes place tomorrow (Tuesday) at 2pm at the council’s Westfields HQ at Sandbach.