22/02/23

What's a budget gap?

A budget gap is calculated by comparing 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.

Why is the Council Facing a Budget Gap?

The Council is facing a projected budget gap of over £24.2 million - this is the gap between the projected cost of delivering our services and the amount of resources available.

There are a number of reasons why the Council is projecting a budget gap.

Increasing Demand for our Services:

As the cost-of-living crisis deepens, more and more people are turning to the Council for support, which means that the demand for our services is increasing. We know, for example, that the number of people claiming Universal Credit is almost double the pre-pandemic level. The number of people accessing our advice service has also doubled since April last year, whilst Free-school-meal caseloads have increased significantly. With more people seeking to access Council services, the cost of delivery is going up.

Inflationary Pressures:

With inflation now over 11%, the costs of delivering public services and investing in our buildings and infrastructure are all going up.

Energy:

Soaring energy prices means that the Council is looking at paying an extra £12m next year to heat and light our buildings and power our streetlights.

Pay:

We believe public sector employees - who deliver vital services across the city - should be paid fairly. Pay awards are being negotiated for teachers, carers and other public sector staff which - due to inflation - are likely to see the council's wage costs rise.

Materials:

This means the cost of buying materials to maintain assets- such as roads and schools, or to deliver new schools and council houses- are all going up.

Legacy of Covid:

The lasting impact of Covid is still being felt, with some services experiencing an ongoing loss of income whilst others are facing greater challenges and more complex issues as they support recovery.

How we propose to close the Gap

The budget gap of £24.2m will need to be closed through a combination of:

Efficiency Savings and Service Change Proposals:

The Council is committed to protecting frontline services and is therefore looking to generate as much savings as possible through back-office efficiencies. This means driving down the running cost of our buildings, reducing the amount of office space we need, and using new technology where it can save us money. The scale of the financial challenges also means that the Council has been looking at a managed reduction in the number of staff employed, through voluntary severance, to generate savings whilst keeping compulsory redundancies to a minimum.

Unfortunately, efficiency savings will not be enough, and some changes to services may be necessary to balance the books. That is why we want to know what the people of Cardiff think about some of the potential changes that we could make to save money.

Council Tax:

Council Tax accounts for around 27% of the Council's budget, with the remainder coming from the Welsh Government. Each increase of 1% in Council tax only generates around £1.6m, therefore closing the budget gap through tax increases alone is not realistic, especially in a cost-of-living crisis.

Use of Reserves:

The Council has to be very careful when using its financial reserves, there is only a limited amount available and once they're gone, they're gone. The majority of the Council's reserves are earmarked for specific purposes and are therefore already committed in support of delivering services, for example funding one off community initiatives and supporting Homelessness Prevention Services. The Council does maintain a level of General Balance totalling £14.2M to cover unforeseen costs and this equates to less than 2% of the Council's overall net budget.