14/10/22

A stark financial warning has been issued by Cardiff Council which says spiralling inflation, increased demand and lower than anticipated income levels, has left it with a £53m hole in its budget for 2023/24.

The potential increase in costs to deliver services like education, social care and waste services is the highest ever seen in a single year by the local authority.

The pace and volatility of economic factors is such that its budget gap for 2023/24 has almost doubled, meaning the council will now have to find £53m in savings and income generation next year instead of the £29m it was anticipating in July.

The warning comes in an emergency budget update report which will be presented to the Council's Cabinet when it meets next Thursday, 20th October.

Cabinet Member for Finance, Modernisation & Performance, Cllr Chris Weaver, said: "This is a crisis that the entire public sector across the UK is facing.  The First Minister has warned that "thousands and thousands" of jobs could be cut from public services if the UK Government imposes large cuts on the Welsh budget. Unless there is a recognition by the UK Government of the scale of the price increases we face, councils across Wales and the UK will be forced to cut local services and jobs.  After a decade of austerity and with the growing pressure on family budgets, this is deeply worrying.

"Over the past ten years this council has already made around £250m in savings. We've managed to do this while maintaining services, but the massive increase in costs and demand for our services, which has grown through the pandemic, will leave us facing some very tough decisions. We will need to review everything we do."

Most of the council's current £744m annual budget - around two thirds - goes on paying for schools and social services.

A budget gap is calculated by comparing predicted funding (the grants the council receives from Government and revenue generated through charges like council tax and parking) from its predicted spend on delivering services like education, social care, libraries and hubs, street cleansing, street lighting, road maintenance etc. Currently Cardiff Council delivers around 700 services to residents across the city.

Cllr Weaver added: "The estimated £53m budget gap for next year reflects the dramatic acceleration in inflation and increasing economic uncertainty. Costs are going up but there's no sign that the money we receive from Government will increase by enough to meet these costs. Take energy as an example.Next year we are expecting increases of more than 350% for gas and 150% for electricity. That could see our energy bills increase by £15 million in 2023/24.

"Food costs are escalating, meaning it will cost the council around £1.4m moreto prepare school meals. Fuel inflation is affecting the cost of operating the Council's vehicle fleet, most notably in waste management, and this all comes at a time when demand for our services is rocketing.

"During difficult times, many of the city's residents, particularly the most disadvantaged, will also turn to the Council for support. That is already apparent given the huge increase in the number of people contacting the Council's advice service, which is up by 107% since April last year.

"Taken together, the Council is facing soaring demand pressures and spiralling costs resulting in a budget challenge as great as anything faced over the past 10 years."

The report being brought to Cabinet puts the spiralling increase in the 2023-24 budget down to a number of things, including:

• Rising inflation and the effect this is predicted to have on the costs to Cardiff Council for goods; workforce pay; and commissioning services.
• Increasing demand for Cardiff Council services. The most significant of these is in Children's and Adult Services not only in terms of numbers, but also in terms of the complexity of cases, and therefore the time needed to manage them appropriately.
• Loss of income caused by the cost-of-living crisis.

Cllr Weaver said: "Ultimately, most of the budget gap will need to be identified through budget savings. As always, every effort will be made to continue to identify efficiency savings. However, building on the levels of savings found over the past decade, it will not be possible to balance the 2023/24 budget through efficiencies alone, and there will inevitably be a need for savings that impact on service delivery. Council directorates are currently drawing up service change options for review. We will be consulting with residents on likely changes and possible cuts in advance of setting the budget early next year."

You can read the full budget report  here.