York Council: Warning future budget cuts are 'inevitable' amid cost pressures and rising services demand

Increased demand for services, an ageing population and recent high levels of inflation are among the pressures on York Council’s finances, according to its Draft Statement of Accounts for 2023-4.

The document, which is currently available for public examination, stated that considerable challenges remain for the council this financial year, including underlying pressures in adult and children’s social care costs.

It comes after councillors approved the authority’s budget in February which included £14m in savings to be made during the current financial year.

They included a £300,000 reduction in contractual funding to Explore York libraries and archives and a £46.50 yearly charge on green bins was also agreed to raise money.

The Council forecast £40m in savings were needed over the next four years and its Labour leader Coun Claire Douglas said she would not allow it to hurtle towards bankruptcy.

The Draft Statement of Accounts stated the council would need to continue finding savings amid pressures including interest rates being held at 5.25 per cent for longer than expected.

The council’s debts totalled £328,487,000 as of the end of March, up from £302,621,000 12 months prior. The authority took out £30m in four new loans from the Government and also paid off around £6.2m.

An overall overspend on during the last financial year was avoided, including by using almost £3.2m in earmarked reserves, £500,000 in contingency funding and £2.6m in central budget cuts.

But there was a more than £6m overspend in adult social care, one of the areas putting the most pressure on council finances. More than a third of the council’s budget, 37p in every pound, was spent on adult social care in the 2023-4 financial year. There was also a £2.6m overspend in the children and education budget.

The amount in the council’s total reserves fell from around £154.5m at the end of the 2022-3 financial year to roughly £141.7m by the end of March.

The council was planning major investments in a variety of schemes to try and raise further funding, according to the Draft Statement.

The document stated that while York Council was in a strong financial position due to sound planning, other authorities elsewhere were under severe strain.

The document stated: “At a time of significant reductions in grants and rising demand it is absolutely essential to set a prudent, stable and achievable budget. The scale of future budget reductions required will inevitably affect all services and all residents to some extent. In considering what savings can be made we have taken long term approaches to the development of future services.”

The £14m in savings agreed in February were met with opposition, including from Liberal Democrat opposition leader Cllr Nigel Ayre who said they did not have to be made.

Conservative group leader Coun Chris Stewart said the green bin charged should be reversed and savings made elsewhere, including by axing the authority’s communications team. It comes as councils across the country face mounting pressure on their finances.

A number of them including Birmingham City Council and Nottingham City Council have issued Section 114 notices, effectively declaring bankruptcy. The Local Government Association (LGA) warned earlier this month that councils were set to face a funding gap of more than £6bn over the next two years.

It has called for an overhaul of the local government financing system including multi-year settlements from Whitehall and more spending on preventative services. This year saw the sixth one-year settlement in a row for councils which many claim makes it harder for them to plan for the long term.

The Government pledged a funding settlement worth £64.7bn in February for the current financial year. The Department for Levelling Up, Housing and Communities stated the amount was an increase of 7.5 per cent in councils’ core spending power.

Levelling up Secretary Michael Gove said it would provide local authorities with the tools to support local communities, reform services for the long term and prepare for the future.