Highland Council needs to find £17.7 million in savings this year alone, as it battles to close a projected £50m budget gap.
A report for the corporate resources committee sets out the bleak figures, together with a warning that cash reserves are well below recommended levels.
In the first three quarters of this financial year, Highland Council has spent £438.1m.
By that trajectory, council services will face a £3.27m overspend by the end of the year.
It’s actually an improvement on previous projections, which put the figure closer to £9m.
A freeze on recruitment and tight spending controls have reduced it considerably.
However, when you factor in inflationary pressures and the staff pay award, council finance bosses say they must find savings of £17.7m this year.
Where are the overspends?
Currently, service heads are reviewing every penny of spend, with a target to make 15% cuts across the board.
It’s not just the general public feeling the pain of the cost-of-living crisis. Rising inflation, fuel, energy and labour costs have also hit councils hard.
Highland Council’s communities and place budget covers things like bin collections, community services, environment and toilets.
That service is forecasting a £1.2 million overspend mostly due to the cost of petrol and vehicle components.
On the same theme, increased costs for bus contracts have resulted in a £2.7m overspend in the economy and infrastructure budget. There’s also a deficit relating to the Corran Ferry.
And housing bosses have been forced to halt all non-urgent repairs as labour and utilities costs create a £2.59m overspend.
The teacher strikes have contributed to a £1.72m overspend on education budgets. Going forward, the broader staff pay award is creating a £4.1m budget pressure, because the council had only budgeted for a 2% increase.
Some services have come in under budget – mostly due to unfilled staff vacancies – but every department is feeling the pressure.
The finance report states that the vast majority of these overspends are recurring – they will continue and increase into 2023-24.
Yet some of the savings the council has already identified are one-offs.
So to balance the books, the council will need to deliver nearly £18m savings this financial year, and up to £50m in the medium-term.
Highland Council budget pressures put squeeze on reserves
Unlike many other local authorities, Highland Council did manage to shore up its reserves in recent years. Those will take a hit now.
The projected £3.27m service overspend will come out of non-earmarked reserves.
Highland Council says this reduces the pot to just short of £12m. At 1.75% of the annual revenue budget, that’s well short of the recommended 3%.
But the council has also agreed to fund cost of living support measures and provide extra financial help to partners including High Life Highland. That takes reserves even lower, to about £7.4m by year end.
The detailed revenue budget report will go to the corporate resources committee on February 22.
However, for now, councillors are just being asked to note the content.
The real crunch time will be the revenue budget meeting on March 2, when the full scale of cuts and savings will be up for debate.
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