We're facing big reductions in government support year on year while demand for our services continues to grow. This is increasing our costs and creating a greater challenge than ever to balance our budget, while delivering as many services to you as possible.
Central government has not been clear about the long-term future funding arrangements for local government which makes planning difficult. We expect to know more about future funding arrangements when the Government publishes information about what it calls the Fairer Funding Proposals. These proposals should give more certainty to local government about how funding will work into the future. At the moment, we are expecting that Fairer Funding Proposals will begin in 2020/2021. So, until then we can only plan based on the information we currently have available to us.
Of particular concern locally is the fact that our largest single area of spend is also the area growing at the fastest rate. Adult social care costs in Shropshire are increasing on average by more than 8% each year, driven by the ageing population and the complexities of their care needs. The ageing population in Shropshire is growing at almost 30% above the national average. The cost of this growth equates to more than £8-10m every year. The government has acknowledged this pressure at a national level and estimated that an additional £3.5bn needs to be directed at a National Level to fund Adult Social Care over the next four years.
From 1 April 2016, the government gave local authorities the power to charge an additional precept on council tax. It put limits on the amount that could be raised (6% in total over a three-year period). In Shropshire, an additional 3% Adult Social Care precept only generates income of £4m in 2018/19 against a pressure of £10m. Other parts of the country will be able to use this precept income to fully solve their Adult Social Care funding gap because they will be able to generate much greater income, but in Shropshire there is still a shortfall which will have to be funded from elsewhere.
After the Council’s budget for 2017/18 was set, local authorities received the announcement within the Spring Budget Statement that they were to receive additional improved Better Care Funding. In Shropshire, this will total £11.9m between 2017/18 and 2019/20. Whilst this funding is very much welcomed, it is one-off and time-limited, and therefore does not change the Council’s underlying funding gap. The funding comes with several conditions, which restrict its use. This means that the Council cannot use it to fund cost pressures that would be ongoing in nature such as long-term care costs. This is because it would not be able to afford these costs after the grant has been withdrawn. Instead, this money is being focussed on new schemes and pilots which focus on meeting or reducing both health and adult social care costs.
During the summer, the Council carried out an in-depth review of expenditure requirements over the next five years. This review considered how costs in all services are likely to grow according to demography, inflation pressures and service planning assumptions. This was then set against the available funding and a funding shortfall of £36.5m in 2018/19, growing to £59.3m in 2022/2023 was identified.
The result of this position is that greater levels of funding need to be raised locally and some services need to be reduced to help fund the growth in costs in statutory services.
In December 2015, the Council consulted with the public via it’s ongoing ‘Big Conversation’. The purpose was to identify which council services the public valued, and to capture thoughts on how it should look to tackle the funding shortfall. In 2017/18 the Council rejected savings proposals which impacted on those areas most prioritised by feedback from this exercise. However, the scale of savings now required means the ability to do this into the future is limited, though proposals still have regard to those priorities wherever possible.
Possible solutions
Rather than simply focus on the cutting of services, the Financial Strategy has focussed on looking at solutions under four headings:
1. Innovate
This means doing things in a different way to make services cheaper in the longer run and focussing this practise on those areas that are most likely to provide the greatest reward, such as Children’s Services, Health and Adult Services. An example of this includes the Digital Transformation programme which, amongst other things, will see a new social care system introduced which will mean more efficient ways of working for social workers. It is expected that more than £20m will be raised over the next five years from innovation proposals.
Appendix 3 describes the Digital Transformation programme.
2. Raising income
This means increasing the amount of income that the council raises overall. The budget sets out ambitious income generation schemes which focus on large scale investment and commercial activity. Additionally, the Council can benefit from its ability to borrow money at relatively low cost to fund strategic investment. For example, this facility will allow investment in the development of the Shrewsbury shopping centres for a regular cash return as well as allowing strategic direction over a key county town centre asset. It is expected that £17.2m of savings will be raised from all of the income generating proposals over the next five years.
3. Cut services
Cuts to services will still be necessary to achieve the level of savings required to balance the budget in the short term. Cuts include reductions to services as well as withdrawal of services altogether, whether on a permanent or temporary basis. For example a reduction to expenditure on the highways for a period of time will allow reserves to be built up which can then be used in future years to help bridge the gap between now and a more certain future.
4. Use of reserves
Even with the proposals presented the Council will still need to use some of its cash reserves to make the budget balance next year and in the years after that. The budget proposals reduce the reliance on these reserves so that the budget is more resilient to changes in year.
Savings proposals value
The total value of savings proposals identified under headings 1 to 3 is £15.4m in 2018/19, rising to £47.9m in 2022/2023. The full list of savings proposals is shown in Appendix 4. If reserves are applied to fill the remaining gap this means we can balance the budget up until 2020/2021 when we are left with a gap of £3.1m. By this time, it is anticipated that the Fairer Funding Proposals will have been announced which will provide greater ability to plan for the future years.
Summary
In summary, the proposals to deliver a balanced budget in 2018/19 include:
- £12.8m of savings proposals ranging from service innovation to service reduction (after deducting the cost of investment).
- £10.5m from the use of one-off government grants anticipated to be received in 2018/19 (but which cannot be relied upon in future years).
- £10.5m of cash reserves.
- £2.7m from further increases to Council tax above those already planned (see Section B).
The Summary Revenue Budget for 2018/19 is attached for information in Appendix 1.
The government recently announced that it would increase the referendum limit from 1.99% to 2.99% for 2018/19. We are planning to increase our share of Council Tax by 2.99% in 2018/19. In addition, we are proposing to raise the precept for adult social care to 3% for this year (reducing back down to 1% next year to remain within the limits set by Government). This total 5.99% increase in Council Tax will generate £8.2m in income per year, and has already been assumed when identifying the funding gap as outlined in Section A. If we didn't generate this additional council tax income, further savings to key council services would need to be identified to fund this shortfall.
The 2.99% council tax increase would mean an additional £37 on Band D council tax for the year, which is less than 75p per week.
An alternative to implementing all of the proposed savings in the budget would be to put Council Tax increases to a local referendum. This means asking the citizens of Shropshire if they would be prepared to accept a Core Council Tax increase above the Government’s limit of 2.99% so that the authority could generate more Council Tax income. This would mean that some of the proposed savings could be stopped.