East Lothian Council faces an estimated funding gap in excess of £14.4 million in 2023-24, with projections this will rise to more than £45.5 million deficit in the next five years.
A paper presented to a meeting of Cabinet highlights the complex nature of the draft central funding settlement councils have received from central government, which relates to the 2023-24 financial year only.
National funding revenue currently makes up more than 76% of the council’s overall general services revenue funding.
The paper notes that most of the additional funding for councils relates to supporting new or existing policy commitments. Based on the draft settlement received in December, East Lothian Council will receive a total cash increase in national grant funding of £4.920 million, with the core revenue support grant increasing by £1.861m (0.9%).
There is an increase in core capital grant of £0.098 million, with specific grant funding to support cycling, walking and safer streets and free school meals expansion funding.
Although the settlement is for one year only, East Lothian Council sets multi-year budgets. In planning ahead it is assumed there will be a ‘flat cash’ settlement across the period 2023-28, with an estimated council tax increase of 5% in each year, as set out in the budget approved last March.
'Significant pressures'
Council Leader Norman Hampshire said:
“This report highlights that the significant scale of financial pressures facing the council remains at a highly critical level.
“We have clear priorities aligned to protecting the most vulnerable in our communities and have a good record of delivering commitments within available resources. But the scale of the challenges we face has been raised to a level that we have not experienced in many years.
“Councils have been dealing with very significant external pressures such as rising utility and energy costs as well as the impact of inflation, interest rate rises and the cost of borrowing. Income has not keeping pace with the cost of delivery services, at a time when East Lothian is one of Scotland’s fastest growing areas.
“We have already agreed urgent mitigation measures to address the deteriorating financial position affecting local government and to help mitigate an overspend in the current financial year. But the current level of reserves which we are drawing on will not be available going forward. It is important to know that most of our revenue budget comes from national government with council tax income from residents only accounting for less than a quarter of our funding.
“It is currently estimated that the council could face a potential funding gap of in excess of £45 million in the next five years.
“Councillors will have difficult decisions to take in setting our budget at the end of February. I would like to thank residents for participating in our recent budget consultation – the feedback received is invaluable.
“I would also like to thank 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.
“We have already called for an urgent review on how local government is funded while COSLA Leaders unanimously have written to the First Minister and reiterating their deep concern about the level of resources allocated to Local Government, and the impact of the draft settlement will have on local communities.”
The formal budgets including setting of Council Tax and Rent Levels for 2023-24 will be considered at the full council meeting on 28 February 2023.