An update on the financial position was detailed at Tuesday's full meeting of East Lothian Council.

Elected Members heard that the council is continuing to operate within the most extreme and challenging financial environment that it has ever faced with significant challenges in 2023/24 and an estimated recurring financial gap in excess of £70 million over the next five years which is equivalent to a quarter of annual running costs.

While mitigation measures have been taken and there has been an improvement regarding the in-year position, an overspend of £8.2 million is forecast for the current financial year, after applying the use of reserves.

A report from officers warns of a significant risk to financial sustainability, the ability to deliver on strategic priorities and of diminishing the council’s capacity to respond to unforeseen events.

Council Leader, Norman Hampshire, has commented on the scale of the current challenges and encouraged local residents to have their say through the council’s current budget consultation.

He said: “This report is a very timely reminder of the extreme financial challenges facing local government.

“The situation in East Lothian has been compounded by external pressures such as significant growth in the population.

“We have seen external pressures including significant growth in the population of East Lothian over the last two decades, at a time when the council has been playing its part in meeting nationally set housebuilding targets.

“However, council tax provides only around a quarter of the money we need to run services. Each new home represents a further increase in demand on our services which is not fully covered by the council tax income or our grant funding from central government, which provides the majority of our revenue budget and is the third lowest in Scotland per head of population. There is no recognition of East Lothian’s increasing population and the additional costs that arise, including the staffing and running of new schools.

“Income generally has not been keeping pace with the rising cost of delivering services. Additionally, the increasing amounts ringfenced, or grant funding directed to specific services and national policy objectives, has greatly reduced our ability to fund identified priorities for East Lothian.

“Although there has been a small improvement in the in-year position, a number of key services are having to deal with huge pressures. For example, we are seeing a requirement for additional external placements within Children’s Services and costs associated with fostering and kinship care allowances.

“As Audit Scotland highlighted earlier this year, councils are now entering the most difficult budget setting context seen for many years. Increasingly difficult choices about spending priorities will need to be made.

“Our financial management is recognised as well run as evidenced by external and independent audit reports and we have already brought in a number of actions including reviewing staffing levels, increasing ways of generating income, reviewing delivery of services and selling surplus assets. However, we are rapidly reaching a stage where our options will become so limited that it may result in service reductions that could impact some of the most vulnerable people in our communities.

“We are currently running a consultation asking local residents for views on the services that matter to them and for suggestions on how the council might find further savings. This will give us useful information ahead of setting the council’s budget in February. I would urge as many people as possible to have their say. We need to hear people’s views to inform the very tough decisions that will need to be made.”

Published: Wednesday, 13th December 2023