'Difficult choices' ahead for Northumberland County Council despite strong financial position

The £17m gap has been blamed on rising inflation, particularly in regards to a pay settlement for local authority staff and fuel costs. A total of £5m was set aside in the previous budget to deal with inflationary pressures, meaning the net overspend is £12m.

Speaking at Wednesday’s meeting of the council’s audit committee, chief financial officer Jan Willis said the council was in a good position to “weather the storm” thanks to its reserves. However, she also acknowledged there were significant challenges ahead.

Speaking at the meeting, she said: “Clearly, there are some quite strong financial headwinds which are developing. The question is how much worse things are going to get.

“The latest estimates for interest rates is around six per cent which is significantly higher than we have anticipated. The council is in a strong position; we go into that challenging period with significant reserves and strong financial discipline.

“We are probably as well placed as any to weather that storm, but we are going to have to batten down the hatches in a number of areas because it’s going to be a very difficult 18 months.”

A report presented to the audit committee stated that, as of the end of March this year, the council held general reserves of £70.081m and reserves earmarked for specific future purposes, including those held for schools, of £185.325m.

However, Ms Willis added that the council was yet to receive any steer on the local government grant from central Government, making planning ahead difficult. She felt that without further funding, many councils could go bankrupt.

She continued: “We’re not getting any indication at all which is quite worrying. Undoubtedly, the Government are going to have to do something or we are going to see a whole slew of section 114 notices from other councils in worse financial positions than we are.

“The real concern is the size of the budget next year and beyond. The expectation is that the Government will step in and do something. We could draw down from reserves this year and next but even for Northumberland there comes a point where we can no longer continue to do that.”

Ms Willis also discussed the council’s £3m-a-year Strategic Transformation Programme, designed to “not only transform the council and the way it operates but also deliver significant savings”.

The report added that the council’s medium term financial plan has focussed on “protecting front line services” and prioritising efficiencies from “back-office functions”. However, the finance chief acknowledged there would be “difficult choices ahead”.

She added: “Our efficiencies programme will be a major part of our response to make sure we can make the budget without cutting front-line services.

“We are going to have to make some difficult choices, otherwise we will be forced into cutting the services we most value and we don’t want to do that – unless we absolutely have to.”