Medway Council’s Financial Worries Ease as Overspend Reduced to £12 Million

Medway Council’s financial worries have significantly lessened as its projected overspend is reduced to £12 million. New financial estimations show that the authority is predicted to overspend by £5 million less than was previously believed – but it still has a steep hill to climb. In August the council announced it had a possible £17 million overspend, but this has been lowered due to underspends in some areas and re-evaluations of the spend elsewhere. There was a £1.7 million reduction in the projected overspend for Children and Adult services, although a pressure of £10.8 million remains. And there was a £1.5 million reduction from quarter one for the Regeneration, Culture and Environment Directorate, which the council says is due to increased revenue from sport centres. Some areas did see a rise in costs, such as spending on homeless services which increased due to a higher number of rough sleepers. Despite this reduction in the amount of money Medway Council needs to find or save by February, when the budget for the next year is set, the authority still needs to find the remaining £12 million. Even if the authority used its reserves, which currently stand at around £10 million, this would still not cover the whole cost and would also leave them without a safety blanket in future years. The council also said that they were working with the Chartered Institute of Public Finance and Accountancy (CIPFA) and other local government groups to try and find savings, efficiencies, and revenue raisers. In August, the council announced that they were projected to exceed their budget by £17 million and would need to make drastic reductions in order to avoid a Section 114 order. This is where a local government cannot balance its budget, which it is legally required to do every year, and if a s114 is submitted central government takes control, enforcing strict financial limits. This would mean reducing spending on non-essential services completely, and only performing those that the council is legally required to. However, even these would see reductions in the level and quality of service as cost-cutting measures are introduced. Across the country, many councils are facing financial difficulties, with such high-profile s114s such as Birmingham City Council and Woking Borough Council, and the Local Government Association (LGA) has warned that soon even well run councils will be at risk of bankruptcy. Medway Council Leader, Cllr Vince Maple, said: “I am encouraged that the financials are heading in the right direction and I remain committed to taking every step needed to balance the budget by the end of the financial year. There is still some way to go but by taking the positive steps to bring in experts to help support us in working to reduce costs, increase income and improve service delivery I am confident we will meet our goals. The financial stability of a huge number of local authorities across the country is now on a knife-edge and we hear daily of councils warning of their impending inability to balance their budgets. It is critical that the government takes urgent heed of the need for a fairer settlement for councils, to ensure that critical services for residents, particularly the most vulnerable in our society, can be maintained. As agreed at our recent full council, we call on the government to ensure they take action in the Autumn Statement next Wednesday.” Tory leader, Cllr Adrian Gulvin, said that the reduction was partly due to overestimations in previous rounds but that challenging decisions were ahead to reduce costs. He said: “It’s about what I was expecting. Every time, the first quarter report is always appalling and then you chip away at it for the next few months. Then officers come up with more realistic estimates of what’s required. I’ve seen it so many times before it’s a little bit of a joke. All this scaremongering that was going on was ridiculous, trying to blame us for everything. I’m not saying that the squeeze back to a balanced budget is going to be easy, because I know from prior experience that it’s not. There’s still a long difficult path to go. But silly things like scrapping Christmas lights, which is 0.4% of the £17 million deficit that we started with, seems to be a policy of extracting the maximum amount of misery for the least possible gain. I’m not saying local government is easy, I know from my eight years in the previous administration that it’s not and sometimes the job of getting the last bit of overspend down is very difficult. But I would expect the overspend to come down further in the next quarter. If it were really bad we would be seeing recruitment freezes and things like that to really get a grip of the problem but we’re not. The report on the council’s finances will go to cabinet next week for approval, the day before the Chancellor Jeremy Hunt’s Autumn Statement which many are hoping will include some extra funding or support for local authorities, which may further ease Medway’s difficulties.