Urgent mitigation measures are to be taken by East Lothian Council to address the deteriorating financial position affecting local government.

The council, along with other local authorities, is currently dealing with very significant external pressures such as rising utility and energy costs as well as the impact of inflation, interest rate rises, the cost of borrowing and pay awards agreed nationally which are not fully funded.

The council’s income is not keeping pace with the cost of delivering services, particularly at a time when East Lothian is one of Scotland’s fastest growing areas.

It is projected that the council will overspend by more than £5 million in the current financial year.

The council has already drawn on reserves in its budget for the current year and it is now likely that uncommitted reserves will be required to deal with the impact of this overspend. This presents a risk to the council as maintaining reserves is an important aspect of its financial strategy to ensure it can manage unplanned expenditure such as emergency situations.

A special council meeting was held on Tuesday afternoon when councillors agreed that a number of enhanced mitigation measures would be taken, including:

  • Delivering service commitments within approved budget levels, including preserving existing underspends and supporting cost recovery actions
  • Prioritise recruitment to roles in business critical risk areas
  • Enhanced review of reserves
  • Explore opportunities to apply ‘flexibilities’ within existing national funding streams
  • Enhanced review of all capital projects and exploring opportunities to pause non committed spend projects
  • Enhanced review of council assets to minimise energy and maintenance costs, including options to temporarily mothball buildings, and where possible bring forward capital receipts
  • Maintain temperature in all public buildings at a maximum of 18 degrees where possible
  • Introduce energy champions in all public buildings and explore the option of community champions.

Council Leader Norman Hampshire said:

“The council has clear priorities aligned to protecting the most vulnerable in our communities and has a good record of delivering commitments within available resources. But the scale of the challenges faced by the council is now raised to a level that we have not experienced in many years and doing nothing is not an option.

“While the measures and controls agreed today will help mitigate the current situation, it is essential that councils are supported in ensuring financial stability going forward.

“Like all councils, we continue to operate within an extremely challenging and complex financial environment with a wide range of uncertainties and demand pressures, while income is not keeping pace with the rising cost of delivering services. We are also dealing with the delivery of substantial growth. The council is currently delivering this growth without the necessary increase in our revenue and capital grants. This is also adding to the pressure all council services are facing.

“It is currently estimated, based on projections, that the council could face a potential funding gap of in excess of £60 million in the next five years.

“The current level of reserves will not be available going forward, and it needs to be recognised that the bulk of our budget is from central government, with council tax revenue only contributing around 24%.

“If no additional funding is made available to support local services and communities, an urgent and honest conversation is now needed as to how local government and East Lothian Council is funded.

“Following today’s council meeting I will be writing to both the UK Government and Scottish Government setting out the scale of financial challenges facing East Lothian and calling for an urgent review on how local government is funded.

“It is a difficult time for everyone at present but I would like to thank our council employees who continue to do a fantastic job in delivering the very best for East Lothian. They have a strong track record of innovation and building on improvements to services, which will continue to be our biggest asset in dealing with the challenges ahead.”

Published: Tuesday, 22nd November 2022