Explaining the Council's projected budget deficit...

Yesterday's Greenock Telegraph carried a story on potential job losses at Inverclyde Council  due to the projected budget deficit we face in the next three years. I have repeated below my Tele column from 8 October, which explains how officers have arrived at their figures. Hopefully this gives a bit of context to the Tele story.

"In my last column I spoke about the considerable financial challenges facing the Council, which the Tele’s headline last Thursday described as a “£15.3million budget black hole”.

While the projected funding gap over the next 3 years is of this order it is important to look behind the headline at how our officers have arrived at the figure quoted by the Tele.

The Council has already set an indicative budget for the next financial year 2015/16, which currently shows a surplus of £1.9m. Over the following two years officers are estimating a combined deficit of £17.2m, leading to a net deficit of £15.3m over the three year period.

They anticipate that in financial years 2016/17 and 2017/18 the Scottish Government will cut our grant by a total of £6.7m. Officers have also assumed a modest pay rise of 2% per year for employees at a cost of £4.2m and non-pay inflation of £2.6m (increases in utility charges, property costs, etc.). The grant we receive from the Scottish Government does not make any allowance for pay rises and general inflation.

Changes to public sector pensions add another £2.4m to our savings target. We are looking to continue major investment in the Council’s infrastructure, particularly roads and footways, which will cost £0.8m in borrowing costs. The final £0.5m to bring us to the £17.2m figure is due to anticipated budget pressures, such as the requirement to meet the needs of our growing elderly population.

No increase in the Council Tax has been assumed at this stage. A 5% increase in Council Tax would raise an extra £1.6m per year.

This is obviously a bleak outlook and if we do have to make £15.3m of savings there will be significant impacts on Council services and staff and in turn on you as the consumers of these services.

We will of course be lobbying the Scottish Government to try to secure a higher level of grant funding and the flexibility to increase the Council Tax. The Government itself will have greater flexibility as the Westminster Parliament has already granted it a number of new tax and borrowing powers. 

We will need to have an honest discussion with our workforce about the affordability of even a modest rise in pay due the constraints we face. This will not be easy given the pay restraint workers have had to endure for a number of years now.

And we will need to consider if we can continue to invest in our capital infrastructure if the price is savage cuts to frontline services.

It is important we hear the views of you, the community, before we make any decisions on savings.

The Council will be undertaking the most wide-ranging public budget consultation that we have ever conducted. There will be a range of ways for you to express your views.  

I would urge residents to take part in the budget consultation, which is planned to begin in November. It is important you have your say and examine the detail of any proposals officers put forward.

I can assure you that the feedback we receive from the community will inform the difficult decisions that elected members will ultimately have to make."