High Inflation and Rise in Demand for Services Increases Council Costs

HIGH inflation, and an increase in demand for services prompted by the ongoing cost-of-living crisis, are behind a £20.6 million increase in costs for the Council next year.

With the cost of delivering local services continuing to rise, and more people turning to local councils for support,  Reading Council’s 2024/25 budget has had to provide for: 

• £5.5 million extra for adult social care services, including caring for older and vulnerable residents, with costs rising due to high inflation
• An extra £7.4 million for children's social care, with more children and families being referred, and costs also increasing due to increased complexity of cases and inflation
• £1.0 million extra for homeless prevention, due to a significant increase in families needing council support and the cost-of-living crisis causing more private sector evictions and the increasing cost of providing emergency accommodation
• An additional £1.1 million to address inflationary increases in waste disposal

As a result, the Council is proposing a 2.99% increase in Council Tax and an additional 2.00% increase in the Adult Social Care Precept for 2024/25 - an increase of £1.84 per week for an average band D property.

Around 70% of properties in Reading are band C or below, with only 15% of households in band D, making the usual band D comparison less relevant in the town. The proposed council tax increase works out as £1.64 per week for a band C household, excluding police and fire precepts, which are yet to be confirmed by Thames Valley Police and the Royal Berks Fire and Rescue Service respectively. 

With the continuing cost-of-living crisis impacting on low-income households the most, Reading Council is again proposing to maintain the discretionary reduction for residents in receipt of local Council Tax Support in Reading. This means eligible residents will have their Council Tax bills automatically reduced by £80 this year. Residents can go to www.reading.gov.uk/council-tax to check for eligibility.

Notwithstanding the acute financial challenges facing all local authorities at this time,  Reading Council is proposing to continue with its programme of investing in modern new facilities for local residents, through its substantial capital programme.

Key projects include: a continuation of Reading's biggest ever road repair and resurfacing programme; the construction of a modern new Central Library and improved Civic Centre Reception; a brand new community and studio 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, scheduled for this summer; 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 £333.1 million over the next five-year period, made up of £190.5 million on core services and £142.6 million on the Housing Revenue Account.  It is funded from a combination of successful bids for grants, revenue contributions, external borrowing, 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.

Reading Council's proposed budget will initially go to a meeting of its Policy Committee on Monday February 19, but will not be debated in detail and finalised until the Full Council meeting on Tuesday February 27. The Council's draft budget report can be found at https://democracy.reading.gov.uk/documents/s30256/MTFS%20Report%20February%202024%20v2%20003.pdf

Councillor Jason Brock, Reading Council Leader, said:

 "Years of prudent planning means Reading remains financially stable and is able to continue to invest in improved facilities for residents, unlike many other local councils.  That does not however mean we are immune to the acute pressures facing us all. Stubbornly high inflation impacts on the cost of providing services, and the on-going cost-of-living crisis means more people are approaching the Council for support.

"Pressures are particularly evident in the social care sector, where the cost of placements to protect children in care is rising fast, as is the cost of caring for older and vulnerable residents. In Reading, the percentage of our overall budget being spent on adults and children's social care has now reached 68%, which places a considerable burden on the budgets of remaining universal services, which residents quite rightly value. 

"A total of 12 Section 114 notices have been issued by local councils since 2018 – declaring themselves effectively bankrupt – compared to just two over the previous 18 years. The sector is in crisis, and we will see much more negative news from elsewhere in this county and the country. And while the hasty announcement of some additional funding was recently made by Government as part of the Final Local Government Finance Settlement, in reality it pales into insignificance and is a mere 10% of the additional £20.6 million for additional costs we have had to find next year alone. 

"We fully acknowledge a Council Tax rise is never welcome, particularly in the midst of a cost-of-living crisis, but these rises were once again assumed by the Government in this year's finance settlement. As always, my preference would be that the Government provides a realistic and sustainable funding solution for local councils, rather than placing the burden on local residents. 

"Reading Council is again protecting those hardest hit by inflation by increasing the discretionary reduction for residents eligible for our local Council Tax Support Scheme, which means eligible residents will have their Council Tax bills automatically reduced such that they are protected from the increase."

A recent budget engagement exercise held through December and January showed that the top service areas for suggested spend were roads maintenance, and children's and adult social care. The Council's proposed Revenue Budget and Capital Programme responds to this feedback by investing heavily in these services. 

After including £4.6m of efficiency savings and increased income that are being delivered through more efficient delivery of services - including adult social care provider payment efficiencies, reducing the level of concessionary support paid to Reading Transport Ltd to match the actual usage of concessionary fares and through leisure contract efficiencies - there is still a requirement to draw on £3.1 million of reserves to balance next year's budget, which all local councils must do by law.   

Over the three-year length of the proposed Medium Term Financial Strategy, the Council is planning to deliver nearly £8.5 million worth of savings, with more savings needing to be identified in future years to ensure that the current projected budget gaps in years two and three are closed, and the Council remains financially sustainable. Between 2020/21 and 2022/23, the Council successfully delivered savings totalling £29 million.