What is the council’s budget position this year?
Your council has faced budget pressures in recent years, due to a significant increase in demand for our services.
To balance the budget, we have made more than £20 million in savings in the past four years.
Despite this, we anticipate a pressure of around £2.9m on this year’s budget.
There are financial pressures across our services, with the main issue being the cost of providing residential accommodation for children in our care, where the cost of the most expensive places can be between £500,000 and £1 million per year for one child.
We are not alone in facing this challenge – it is an issue for many councils nationally and the result of too few places available for a rising number of children in care.
We have a legal and moral duty to care for the most vulnerable in society and our staff will continue to provide children and young people with the best possible start in life.
Social care – supporting our vulnerable children and older residents – is becoming increasingly expensive and now accounts for around 65% of our total budget overall.
Because we are legally obliged to provide some of our services – including social care – we cannot simply stop spending in these areas.
If our projection of a £2.9m pressure turns out to be correct at the end of the financial year, we will need to use our reserves to make up that shortfall.
- What about next year?
We do not anticipate that the current pressures on the budget will ease, and there is a possibility that the cost of meeting our residents’ needs will increase even further.
We anticipate a multi-million pounds pressure in providing these services – which we are legally responsible for providing – with the funding we expect to receive. Therefore, we will need to act to balance the budget, as we are legally required to do so.
Another key consideration is the level of our reserves, which every council holds to meet unforeseen costs during the year.
After years of a high demand for our services and the funding we receive not keeping up with the cost of meeting this demand, our reserves are at a critically low level and we cannot rely on them to meet any shortfall next year.
Our budget is similar to a household budget – if we spend more than our income and we have no savings to offset this, we will run out of money to provide services to you.
- What are you doing about this?
Despite the current pressure on our budget, we are confident that our council’s finances will be healthier in the future.
We anticipate significant Business Rates revenue from the development of the Teesworks site, and the Government’s Fair Funding review is likely to see additional money go to councils, such as ours, which have areas of high deprivation.
We are also investing in our own homes for children in our care to offset the huge cost of placing young people in accommodation run by the private sector.
To reach the point where we can invest in our services once again, we must deal with the prospect of a shortfall in next year’s budget.
While the Fair Funding reforms are implemented over the next three years, the Government is providing an additional support scheme, which allows councils to borrow to bridge short-term budget gaps if they have a clear route to sustainability in the future.
This scheme would allow our council to offset the financial pressures we anticipate for next year and bridge the gap between the issues we have at present and the arrival of additional revenues from Teesworks and the Fair Funding review.
Taking advantage of this scheme would protect our core services that the vulnerable and our wider communities depend on. It would also mean we are in the best possible position when the additional funding starts to flow.
We are at the start of these discussions about the arrangements for that borrowing.
- I’ve heard that Teesworks will bring millions of pounds into the council. Why can’t you use this to balance the budget now.
If the ambition for the Teesworks site is fulfilled, the council will receive 50% of Business Rates from the companies which operate from the site.
The regeneration of Teesworks, and other areas associated with the Freeport, could generate significant additional Business Rates income as companies set up and begin to operate there.
However, when and whether this will happen and how much revenue the council could receive is not yet clear.
The level of Business Rates is set for each company by the Government’s Valuation Office and companies only become liable for Business Rates when they become operational.
Any businesses expected to be operational on the Teesworks site next year and therefore expected to then pay Business Rates have been factored into the council’s budget for next year.
- Why do you continue to finance regeneration projects while warning about the threat to day-to-day services?
One-off grants, which make up a large proportion of your council’s funding, are to be used for a specific service or purpose. Often, these are for building or regeneration projects which often cost millions of pounds.
However, by law, these grants cannot be used for anything other than the purpose for which they were awarded – we cannot use them to fund our day-to-day services or to reduce Council Tax.
These grants help us improve our towns and villages and we could not fund these schemes without the one-off grants.
Examples of grant-funded projects are the improvements in Redcar, funded through the Redcar Town Deal, investments in Guisborough and Eston and the revamp of TunedIn! in Redcar.
- Why are you proposing to put Council Tax up?
The amount the Government judges is available to councils through Government grant, Council Tax, Business Rates, and specific grants – is called core spending power.
However, in calculating how much money each council needs, the Government assumes that Council Tax will be increased each year to by the maximum legally allowed.
Any decision not to do that adds to existing budget pressures and potential cuts to services.
The maximum legally allowed increase is a total of 5% – 3% Council Tax and 2% Adult Social Care precept.
Each year, councillors decide whether to increase Council Tax and the Adult Social Care precept.
Last year, Redcar and Cleveland councillors voted to increase by a total of 4.99%.
Even with the level of core spending power assumed by the Government, the cost of providing council services has risen much faster than the income the core spending power provides.
- What are the five areas of funding a council receives?
Your council is funded from five sources:
- Government grant – the amount allocated by the Government each year to help fund services.
- Council Tax – paid by residents. The type of housing in Redcar and Cleveland – a majority of properties in bands A-C – means the council raises less than other councils with more housing in the higher Council Tax bands.
- Business Rates – paid by businesses in the borough. However, small businesses do not pay Business Rates (the council receives a grant in lieu from the Government), so this does not apply to the majority of companies in Redcar and Cleveland. The level of Business Rates is set by the Government and the council has no influence over this.
- Sales, fees and charges for council services – essential services are funded by the sources above, but additional services are charged for, with the fees for some being set by the Government and some set by the council’s Cabinet.
- Specific grants – money provided for specific services or projects. This money is ring-fenced for the specific purpose and cannot be used to fund everyday services.
- Sales, fees and charges for council services – essential services are funded by the sources above, but additional services are charged for, with the fees for some being set by the Government and some set by the council’s Cabinet.
- Business Rates – paid by businesses in the borough. However, small businesses do not pay Business Rates (the council receives a grant in lieu from the Government), so this does not apply to the majority of companies in Redcar and Cleveland. The level of Business Rates is set by the Government and the council has no influence over this.
- Council Tax – paid by residents. The type of housing in Redcar and Cleveland – a majority of properties in bands A-C – means the council raises less than other councils with more housing in the higher Council Tax bands.
The amount of funding from the Government has significantly reduced over the past decade.
Your council has significantly less money to spend each year and has many fewer staff than it had.
- Where does the council spend its money?
The council provides many services each day, from supporting the vulnerable, to maintaining roads and keeping the borough clean.
Demand for our services means providing social care – supporting and protecting vulnerable children and adults – accounts for around 65% of our budget. There is no sign of that demand reducing and we expect that percentage to rise next year.
This will mean there is less money to provide all our other services.
- What help is available to me during the cost-of-living crisis?
The Council has a number of financial support schemes, such as reductions in Council Tax payments and assistance towards rent payments.
This could include a reduction in Council tax of up to 100% for eligible residents of state pension age and a reduction of up to 82.5% for eligible working age residents.
Residents may also be entitled to Household Support Fund assistance of up to £300, dependent on circumstances.
To find out more about Council Tax support, advice about rent payments, the Household Support Fund and other help with the cost of living, go to Cost of living support | Redcar and Cleveland