Inflation pushes council budget gap to £4.2 million
Inflation has significantly increased Chelmsford City Council’s budget gap, according to a new projection. The latest forecast of council finances estimates a shortfall of £4.2 million for 2023/24 – much higher than the deficit of £1.7 million expected as recently as last February.
Full Council will vote on strategy
The Council’s Cabinet has noted the updated forecast and Full Council will decide next week whether to allow some of the council’s rainy day savings reserves to be used to bring down the gap to around £3.2 million.
The bigger shortfall has been caused by soaring inflation affecting the whole economy, resulting in greatly increased costs, lost income, and greater demand for key services such as temporary accommodation. The unpredictability of world events means that the forecast is likely to need significant revision in the months to come.
Forecast predicts a challenging year
The Medium-Term Financial Strategy, which is published every July, allows the council to prepare for its next budget and to look at ways it might close the gap. Cllr Stephen Robinson, Leader of Chelmsford City Council says volatile economic conditions, which show no sign of stabilising, will make for a challenging year.
“We are all relieved to move on from the restrictions of the pandemic, but in some respects the last few months have been just as difficult, as everyone in the country is now dealing with a cost-of-living crisis. We know many of our residents are struggling with rising bills. We (and every council in the country) are facing similar problems.
Like everyone else, it’s costing the City Council a lot more to simply provide our services at current levels. To give a couple of examples, the bill to heat our leisure centres at Riverside and South Woodham has doubled (that’s an extra £480,000 a year) and we predict an extra £300,000 will be needed for fuel to keep our fleet of bin lorries, street care and parks vehicles on the road.”
Government funding settlement unknown
Although Chelmsford City Council collects all the council tax in the borough, it only keeps 11%, with the other 89% split between Essex County Council, Essex Police, Essex County Fire and Rescue Service and parish councils.
Council tax revenues aren’t Chelmsford City Council’s only source of income, but its other income is also down as a result of both the cost-of-living crisis and changes brought about by the pandemic. On top of big inflationary pressures in the form of rising costs, councils are also expecting the money they receive from central Government to go down in the next financial year. Cllr Robinson is urging the Government to properly support local government services at such a critical time.
"We can bring the gap down to £3.2 million using our savings – the money we have set aside for a rainy day. But with so much potential unpredictability ahead, we don’t know what’s around the corner and there is only so much we can do on our own. We really need the Government to step in to help us tackle some of these issues caused by a volatile global economy so that we can continue to provide the services our residents need. The Government has many more options to deal with financial issues than do councils.Cllr Stephen Robinson, Leader, Chelmsford City Council
“Although we faced a bigger shortfall at the height of the Covid-19 pandemic, Government support meant that we could bring our budget gap down to a still significant but more manageable amount. We don’t yet know how much money will be allocated to local councils from central Government in 2023/24.”
Chelmsford City Council’s Full Council will decide whether to accept the recommendations in the Medium-Term Financial Strategy when it meets on Wednesday 20 July. The meeting will be streamed on YouTube from 7pm.
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