Tipping point reached as council balances 2024/25 budget

Chelmsford City Council is warning that without more funding from central government, next year is the last time it will be able to balance its finances without making significant changes to its services. Like almost every other local authority in the country, the council is tackling the most difficult budget position it has ever faced, leaving its financial position ‘severely challenged’ according to a budget report going to Cabinet next week.

The council identified cost pressures before funding of around £7,550,000 for the coming financial year, created by big increases in homelessness costs, pay and other inflation and expensive energy bills. Although it has been possible to balance the 2024/25 budget through a mix of belt-tightening, an increase in fees and charges and some use of the council’s rainy day reserves, the report cautions that a tipping point has now been reached.

Central government funding falling since 2010/11

Government support for local councils has been falling since 2010/11 and the report estimates that after allowing for inflation, Chelmsford City Council has ‘lost’ funding of around £11,000,000 a year. For 2024/25, the Government is increasing its core grant to Chelmsford City Council by £450,000.

Spiralling demand for accommodation for homeless families

At the same time, demand for council services is at a record high. Last October, the city council issued a warning that its rapidly growing bill for temporary accommodation is placing a huge strain on its finances. Chelmsford City Council has a legal duty to provide housing for anyone officially classified as homeless and this is contributing around £3,700,000 to next year’s potential budget shortfall. In November, there were around 470 homeless households in temporary accommodation and many more families in overcrowded housing waiting to move on.

Local councils can apply to the Government to get some money back for what they spend on temporary accommodation, but the amount councils can reclaim is set by assuming property rents are still at 2011 levels. With housing costs far higher in 2024 than in 2011, each new case of homelessness is costing the council around £13,000 a year because this funding has fallen so far behind market rents.

Councillor Stephen Robinson, the Leader of Chelmsford City Council, says the current situation isn’t sustainable for any council.

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“We’ve already seen high-profile cases of councils failing and many others will run out of road in the coming year, even if they are well run. This is not yet the case in Chelmsford and we are setting a balanced budget, however, unless the Government changes the way all councils are funded, very difficult choices will have to be made in 12-18 months’ time.

"For more than a decade, councils have faced the challenge of providing services against a backdrop of falling government support. We are already doing whatever we can to reduce our shortfall, whether through economies or by using our contingency fund, but these measures will not fix the problem forever. Reserves quickly run out and there is only so much you can cut before local services are diminished.

"We are doing everything in our power to protect the vital services we deliver to our residents, but we can’t do this alone. We need some help, particularly where supporting our homeless residents is concerned. Anyone paying rent or a mortgage over the last 15 years will understand how much more everything costs in 2024 than in 2011. This isn’t about government handouts – simply giving those councils responsible for preventing homelessness the going rate would help.

"All these problems affect the day-to-day cash (or revenue) budget. It is a quirk of local government funding that one-off investment (or capital) spending is not so restricted. Therefore the city council will continue to make a number of important, one-off investments in local facilities.”

Cllr Stephen Robinson, Leader, Chelmsford City Council

Balanced budget will be presented for 2024/25

The report presented to Cabinet outlines a number of measures being proposed to close the city council’s budget gap for the coming year, but it cautions that some of these lifelines will not be available in future.

Efficiencies made and reserves used

Efficiencies of around £1,000,000 have been found for 2024/25 across council services and a financial plan will be produced to deal with future predicted shortfalls from 2025/26. It’s also planned for £1,240,000 of reserves from the council’s rainy day fund to be used to help balance the books for the coming financial year.

This contribution from reserves is designed to protect services while the council gets a clearer picture of the challenges ahead. However, this level of contribution from the contingency fund is unlikely to be possible next year because reserves would drop below the minimum level recommended by the Chief Finance Officer to cover possible risks.

Fees and charges and council tax increases proposed

Paid council services have become much more expensive to deliver during the current cost of living crisis, and although inflation is now lower than the record highs of late 2022, everything costs more than it used to. Three years ago, the council spent £1,100,000 a year on fuel and energy. This year the budget for this is £3,900,000 and for the coming year will only fall to £3,100,000. This has made the council’s four, popular sports centres (including an ice rink and three pools), permanently costlier to run and entry fees alone do not cover their costs. Prices are scheduled to rise at the leisure centres next year to reflect these continuing cost pressures, along with other charges, such as parking.

The Government expects councils to increase their share of council tax by the maximum level allowed each year and this assumption is baked into how it calculates funding for local authorities. This means that Chelmsford City Council is proposing to raise its share of council tax by 2.99% this year. The city council only keeps 11% of the council tax paid by the district’s residents, so an average band D property will pay it an extra £6.44 in 2024/25, or an extra 54p a month. Most of the council tax paid by residents goes to Essex County Council.

Capital programme reprioritised

With the cash (revenue) budget under strain, some planned spending on projects in the council’s investment (capital) programme has been either deferred or shelved for now to alleviate pressure. These measures should save £500,000 in interest payments in the coming year - a saving to the cash budget. Schemes removed from the list will be kept under review and may return to the programme as they become more affordable, or conditions change.

Improvements given green light

A number of new investment projects will, however, still go ahead, improving and maintaining key council facilities in the district used by residents and visitors. Two key city centre car parks - High Chelmer Multistorey and Fairfield Road - will receive crucial investment, and lighting will be improved at The Stables car park close to Hylands House.

Essential works are proposed for the museum, indoor market and Civic Centre to ensure that more costly roof repairs aren’t needed in future, and a commercial property owned by the council will also be refurbished under the plans to secure key rental income in future years. The council’s sports facilities would also benefit, with enhanced floodlights for pitches at Chelmer Park, along with works to modernise the pool heating system and save energy at South Woodham Ferrers.

A CHESS Homeless project to support some of the district’s most vulnerable residents is proposed to receive funding through a housing grant of £350,000. This award will help towards 24 modular units for single homeless people. This additional supported housing will provide much-needed temporary accommodation in the city and would make savings in the council’s ongoing costs of emergency housing.

Additionally, programmes such as improving the environment by planting trees will continue, as will plans to refurbish children's play areas and to build at least 58 new, genuinely affordable flats and houses for Chelmsford families.

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“We find ourselves in an incredibly challenging position and in tough years it pays to be mindful of all aspects of your spending, but we remain ambitious for Chelmsford. It’s sensible to reprioritise the projects we are bringing forward so that we can strike a balance between prudence and investment, and we must continue to find opportunities to shape our young city in the years to come despite the very difficult economic outlook for local authorities.

"As we work on ways to set us on a sustainable path, we’ll explore every available avenue to protect services and help the city to thrive. We are committed to ensuring that Chelmsford is a fairer, greener and more connected place, ready for the challenges of the future. Everyone will be doing all they can to protect our services and deliver the best value for our residents.”

Cllr Stephen Robinson, Leader, Chelmsford City Council

Proposals discussed at January’s Cabinet meeting

Chelmsford City Council’s Cabinet will discuss the report when it meets on Tuesday 30 January. You can watch the meeting via the council’s YouTube channel and the agenda for the meeting is published on our website.