High Inflation and Cost-of-Living Drives New Demand for Council Services

INFLATIONARY pressures and a sharp increase in demand for essential Council services - including caring for vulnerable children and preventing homelessness - mean savings and efficiencies totalling £12.9 million are likely to be needed over the next three years.

In common with other local authorities, Reading Council’s provisional budget shows the impact of high inflation on the cost of delivering local services and how the cost-of-living crisis means more residents are turning to the Council for support.

Particular pressures in Reading include:

• An additional £7.5 million next year, consisting of £5.9m for increasing placement costs for looked after children and £1.6m of net inflationary increases, being reported by Brighter Futures for Children
• £5.8 million extra next year for essential adult social care services, such as caring for older and vulnerable residents, of which £4.5m relates to inflation 
• £1.0 million more across the next three-year period for homeless prevention services as a result of the rise in private sector evictions due to the cost-of-living crisis, and an increase in the cost of providing emergency accommodation.

A Medium-Term Financial Strategy (MTFS) update to the Council’s Policy Committee on 13 December is currently forecasting an overall funding gap of £4.1 million for 2024/25. This will need to be closed before a final budget can be set in February. There is an additional £8.8 million funding gap across the following two years with future savings, efficiencies and income required to close the gap. https://democracy.reading.gov.uk/documents/s29503/Budget%20and%20MTFS%20Reportv5.pdf

These are provisional figures ahead of the Provisional Local Government Finance Settlement, expected to be announced by the Government in mid-December. A public consultation on the draft budget will take place after the Policy Committee meeting. The Council’s MTFS will be debated on 27 February 2024 as part of the budget setting process, which is also when the proposed Council Tax rise in Reading will be finalised.

Despite the financial challenges, Reading Council intends to continue with its programme of investing in modern new facilities for local residents through its capital programme. 

Key projects include: a continuation of Reading's biggest ever road repair and resurfacing programme; a modern new Central Library and Civic Centre Reception; a brand new performance space at the Hexagon; a continuation of the Council’s major investment in leisure facilities, including the opening of the town's flagship new pool at Rivermead; dedicated new cycle lanes in the Bath Road / Castle Hill area, adding to new cycle lanes on Shinfield Road; quicker, cheaper and more reliable buses as part of the Bus Service Improvement programme; quicker journey times along the A33 as part of Phases 5/6 of the South Reading MRT project; continued investment in renewable energy and sustainability initiatives; preparatory works for the major regeneration of the Minster Quarter area;  new sheltered housing facilities for older and vulnerable residents, including on Battle Street at the old Central Pool site; and a continuation of the Council’s investment to provide 400 affordable new homes between 2021 and 2025.

The Council’s draft capital programme of investment totals £291.0 million over the next three years, made up of £166.8 million on core services and £124.2 million on the Housing Revenue Account.  It is funded from a combination of successful bids for grants, cheaper borrowing available to councils, developer contributions, infrastructure funding and capital receipts, which are received when the Council sells a building it no longer needs. It is different from the money the Council uses to run services and cannot be used to balance the Council’s revenue budget.

Councillor Jason Brock, Reading Borough Council Leader, said:

“The link between high inflation – precipitating the on-going cost-of-living crisis – and pressures on council budgets everywhere is undeniable and now clear to see.

 “Locally in Reading, we are seeing a significant spike in demand for the essential local services the Council provides. The cost of placements to protect children in care is rising fast, as is the cost of caring for older and vulnerable residents. Social care is a sector largely ignored by this Government for many years, and the consequences nationally are stark.  And as residents continue to struggle financially, we are seeing a rise in private sector evictions, with the Council left to pick up the increasing cost of providing emergency accommodation.

 “Twelve Section 114 notices have been issued by local councils since 2018 – declaring themselves effectively bankrupt – compared to just two over the previous 18 years. Nottingham was the latest example only last week. Some of those will be the result of poor financial decisions, but what we are now seeing is councils struggling due to high inflation, the knock-on effect of rising demand for essential council services, and 13 years of real-terms Government cuts to local authority budgets. Ultimately, those Section 114 notices mean that residents in those areas will suffer, with vital services cut back. 

“By contrast, this Council has successfully delivered nearly £30 million of savings over the past three years. Many years of prudent financial planning means we remain in a relatively strong position in Reading to absorb the pressures, in comparison to other councils, while at the same time continuing to invest in modern new facilities for residents through our capital programme.  The latest forecasts mean we will need to continue to look for new savings, efficiencies, and income, however, in order to set a balanced budget in February, which every council must do by law.

“It remains to be seen whether Government intends to use this year’s settlement to address the financial pressures being felt across the local government sector by increasing the level of funding that councils receive, but the Chancellor’s Autumn statement suggests that remains far from likely. Indeed, there seems to be a head-in-the-sand approach coming from Westminster as public services groan under the strain of a faltering economy and failures of public policy.”

On the same Policy Committee agenda is a Quarter 2 Performance and Monitoring report which details an in-year budget gap of £3.7m for 2023/24 and the steps being taken by the Council to close that gap (https://democracy.reading.gov.uk/documents/s29495/Quarter%202%20Financial%20Monitoring%20Report%20v3.pdf). These include an ongoing review of adult social care packages to ensure they are fit for individual needs; an increase in on and off-street parking charges from January; and a review of concessionary travel costs, with no direct impact on residents, to ensure reimbursement to bus operators reflects the number of concessionary fares being used.

The Quarter 2 report additionally proposes that budgets for several schemes in the 2023/24 capital programme should be re-profiled to later years, resulting in a revised overall Capital Programme budget for 2023/24 of £100.7m. Other than fully grant funded and rolling programme schemes, no new schemes funded by borrowing have been added into the Capital Programme at this stage as this would result in an increased overall budget gap. This will be further reviewed following the Provisional Local Government Finance Settlement.