1 December 2020 Council and democracy

Setting the Council Budget and Council Tax 2021/22 during Covid-19

The council budget covers everything we do as a council, what council tax will be set and how we will fund services for residents in the year ahead. 

An update on the council’s budget for next year will go to the council’s Policy & Resources (P&R) committee this week (Thursday 3 December). The final budget decisions are made at Budget Council in February 2021. 

Budget shortfall – the how and why

The Covid-19 pandemic has been the focus of the year so far and has had an impact on our Budget planning for the year ahead.

Local Authority budgets are also reactive to the Chancellor’s annual spending review and this came unusually late this year, it was issued last Wednesday. Despite the uncertain nature of the pandemic, the spending review also only provided the council with one year of certainty.

The government Spending Reviews allows local authorities to add a 3% Council Tax increase towards the rising costs of Adult Social Care.

The budget update at P&R shows that, taking into account the Spending Review announcements, the council is still estimating a budget shortfall next year of between £14.839 million and £13.039 million (depending on how government funding is distributed nationally).

The demand and costs for adults and children’s social care services is rising in a big way.  The extra cost of these services amounts to almost £20 million. This is the main cause of the shortfall. 

Adding to the situation are the rising costs of homelessness and increased costs in other essential services. Looking at all the factors together, the pressure local authority budgets are under is huge and looks set to continue for some time.

The immediate pandemic pressures will hopefully ease in the year ahead. As this happens, we will monitor trends closely to follow the changes as they happen and be ready to adapt. 

Important decisions

Council leader, Councillor Phelim MacCafferty, said: “This year we are facing not only the knock-on effect of more than a decade of cuts to local government but the financial reality of a global pandemic. 

“Covid-19 has seen the council’s finances put under even more strain. While our spend has increased to buy things like protective equipment (PPE), our income from sources such as parking has dropped. 

“We have only been given short-term and short-sighted ways to deal with this from the Chancellor, such as shifting the burden of this gap onto council tax payers, which isn’t fair and doesn’t deal with the long term nature of the funding gap.

“Our priority in this perilous financial time is to make sure residents of this city are provided with the services they need and to ensure the most marginalised in our city have the safety net of local services. This is no easy task. We will explore all options for balancing the budget and delivering where most needed. 

“We are dedicated to making the city a better place through our continued commitment to house building, reducing toxic emissions and sustainable travel. In this Covid budget we will be doing all we can to prevent the spread of the pandemic, protecting the vulnerable and supporting our local economy.

“This is a city to be proud of and the budget is the way we plan how to deliver essential services for all our residents.”

In numbers

£30 million 
Total estimated cost and demand of pressures over next year

4.99%
The total increase in Council Tax for the year ahead will be 4.99% if the usual 1.99% rise and the Adult Social Care precept (see below) are both taken up by the council.

3%
The government has allowed councils which provide social care to adults to increase their share of Council Tax by 3%. This Council Tax charge is called the Adult Social Care precept (and is included in the total expected Council Tax rise percentage shown above).

£14.1 million to £15.9 million
Total additional resources from the Spending Review announcement (including the 3% Adult Social Care precept). 

£6.4 million
The amount identified in the current council budget proposals as savings for the year ahead. The focus is on generating more income, achieving savings in our contracts and commissioned provider services, and continuing to implement improvements to the local social care system. Savings also include efficiencies on operational costs such as energy usage, vehicle fleet costs, and other supplies and services.

0% to 1% 
The government has announced a public sector pay freeze. There are exceptions. The NHS is excluded from the pay freeze and people earning £24,000 or less who could receive £250. This will mean no pay increase for the vast majority of the public sector and average increases of around 1% for lower paid workers. It will reduce costs next year if this is applied to local government.

Next steps

For those familiar with the budget process, you’ll notice the dates for reports and information being shared are later than usual as a result of Covid-19.  

At P&R committee on 3 December, councillors will consider an initial report about the Spending Reviews as well as draft budget proposals.

This is very early stages for the budget process and the proposals will evolve before being presented to Budget Council on Thursday 25 February.

The months ahead will involve looking at more ways to resolve the shortfall before the final proposals from the Green administration are put to all 54 councillors for consideration to try to set the budget for the year ahead.

Before Budget Council, a further report will go to January’s Policy & Resources Committee. This will feature an update on the detailed Local Government Financial Settlement together with a full set of draft budget proposals put forward by the Green administration. 

Key dates

More about the budget 

The council provides more than 700 services residents of the city see or use every day, paid for by the annual council budget.

It takes just over £2 million to run our services every day for the city’s population of almost 300,000 people. Every year the costs continue to rise for a wide range of reasons, including the increasing population and number of households. 

The government will announce the funding for local authorities for the next financial year in the Provisional Local Government Financial Settlement, expected around mid-December.

The outcome of the settlement will be taken into account during the local budget setting process. It could alter the amount of funds available from what is currently anticipated from the headline Spending Review announced on 25 November.

Budget council in February also sets council tax for the city for the year ahead. Council Tax currently provides less than £1 in every £5 of what we spend on running services in our city.

Find out more about where council funding comes from and how the money is spent.