Rising Energy Costs Impact on Council Budget
The Highland Council’s new Budget Leader has warned that the Council faces a £19.6 million gap in its 2009/10 budget, £14 million of which is due to spiralling energy costs. And Councillor David Alston says the situation will also be challenging in 2010/11 when the gap is estimated at £15.1 million.
The first meeting of the new cross-party Budget Information Group was advised on Thursday of the shortfalls and trades union representatives and staff were told earlier today (Friday).
Councillor Alston said: “The Group acknowledged the difficult and worsening economic environment in which these budgets will be framed and were advised, in particular, of the exceptional cost pressures to be faced by the Council, including energy cost increases, implementation of the job evaluation scheme, landfill tax increase, pay and pension increases and costs of a sizeable capital programme.
“Based on the best information available, currently the roll forward budgets for 2009/10 and 2010/11 have been estimated at £612.2m and 625.5m respectively. These include increases in overall resources of £24.2m in 2009/10 and £17.8m in 2010/11. However, when compared to total funding availability for these years, funding gaps (before considering Service pressures) of £19.6m and £15.1m have been identified.
“Increases in energy costs on our buildings have been estimated at approximately £10m in 2009/10 and an additional £4m pressure has been identified as direct and indirect implications from fuel prices e.g. school transport contracts, bitumen materials, waste contracts etc.
“After energy and fuel pressures have been factored into budget considerations, there remain limited resources to meet all other cost pressures including pay awards and other inflationary pressures.”
He said an additional £8.7m had been factored into the 2008/09 budget (representing 6% of the paybill) to address the implementation of the job evaluation scheme. By year 5, following initial implementation, the total annual cost had been estimated as £17m (representing a 12% increase on the paybill). The rolled forward budgets also include provision for new Administration Programme commitments for home care, payments to Foster Carers and the promotion of benefits uptake.
He added: “Given such budgetary constraints and pressures, it is important for the Council to assess service delivery proposals at an early stage. In this regard Service Directors have been instructed to develop two year savings proposals with 5% annual targets. This should provide the Council with some flexibility in budget development considerations.
“In addition a programme of challenging reviews of existing service delivery arrangements is to be progressed which, with suitable planning and the cooperation of all concerned, will be managed and delivered effectively to generate efficiencies over the longer term.”
He concluded: “There are clear signs of a really challenging budget ahead and it is crucial we take early action to identify the necessary savings. We will do all we can to manage what is a very difficult financial situation and we will be consulting closely with the trade unions throughout the budget process.”
Follow up meetings of the Budget Information Group have been scheduled for late October/early November to consider Services’ more detailed budget proposals with a view to these being considered by political groups in November/December.