Action needed to bring budget back in line, finance chief warns

Shropshire Council is heading for an overspend of £2.8 million this year despite government grants covering its coronavirus costs, according to a new report.

The authority says the financial impact of the pandemic is not expected to result in any overspend in 2020/21, having previously warned it could be £10 million short.

But head of finance James Walton has warned the council will need to tighten the purse strings in other areas to get the budget back in line, or risk an overspend of £2.771 million.

In his quarter two monitoring report, Mr Walton says the forecast for the current financial year has “deteriorated” since his quarter one report, which predicted an overspend of £1.925 million by next April.

The financial position is however still better than at the same point last year when the predicted overspend for 2019/20 was almost £6 million.

Mr Walton says the increase in predicted overspend during quarter two is because of a “significant increase in the costs of homelessness provision”, to the tune of £1.8 million.

The updated financial strategy signed off by cabinet in July said cuts of £18.725 million would need to be made in the current financial year to keep the council in line with its £575.462 million budget.

But £6.689 million of savings are currently rated ‘red’, meaning they are not expected to be delivered, with a further £3.607 million in savings rated ‘amber’.

The report says: “Managers have provided assurance that plans are in place to deliver the savings that have been categorised as amber, however as evidence of the delivery has not yet been identified, there is still a risk that these savings could impact on the out-turn position for 2020/21.

“As the year progresses, these amber savings should gradually turn to green as the evidence becomes available.

“Non-delivery of the amber rated savings would result in a projected out-turn of £581.840m, and a total overspend of £6.378m which would leave the General Fund balance at an unsustainable level.”

While other councils have called on the government for more funding to cover the cost of the pandemic, Mr Walton says the amount of money the authority has received is sufficient.

The total cost to the council is estimated at £24.511 million, but the report says this “may increase as the year progresses”. At present, this is likely to be fully covered by government grants already received and a further payment expected.

Mr Walton says: “There is currently no budget pressure arising in year as a result of Covid-19 but we are monitoring the position closely.”

However, he adds that there will be an estimated council tax and business rates loss of £3.310 million in future years as a result of the pandemic.

The report will be considered by Shropshire Council’s cabinet at a meeting next Monday.