Council takes responsible action to reduce its in-year overspend

Published: 6 February 2024

Derby City Council has significantly reduced its forecast in-year overspend by more than £4 million.

The overspend was initially reported at £6.1 million by the end of the first quarter of the financial year. At the end of quarter 2 this had increased to £6.5 million. The latest figures show the forecast overspend is down to £2.4 million.

This now means the Council having to draw less from its reserves than anticipated, and with a plan to replenish reserves over the next three years the Council is hoping to strengthen its financial sustainability.

An update report going to the Council’s Cabinet next week outlines how the savings at the end of Quarter 3 have been achieved through strict controls on spending and recruitment. The Council has also generated more income, and more business rates have been collected. Pressures still continue to be challenging in areas such as social care and housing.

So far the Council has achieved 96% of its in year saving targets, and efforts are continuing to reduce the overspend further in the final quarter of the financial year.

This is against the backdrop of continued financial challenges in the local government sector, with increasing demand, high levels of inflation and the impact of the cost of living crisis putting councils under increasing strain to the point where some can no longer deliver a balanced budget. More and more have either issued a Section 114 notice or declared themselves at risk of doing so.

Derby City Council is not immune from these pressures. With other councils it is calling for central Government to change how we are funded. The Local Government Association (LGA) reports a £6 billion funding shortfall for the sector.

The effects of over a decade of Government austerity and cuts to local authority funding mean we are forced to rely more on Council Tax and Business Rates payments, and one-year grant settlements which make it difficult to plan ahead. This makes it harder for councils to have the resilience to stand economic shocks.

As well as improvements to its in-year position, Derby City Council is proposing a balanced budget for 2024/2025, and the latest update will also be presented to Cabinet at the meeting on Wednesday 14 February.

However the Council’s financial position remains the most challenging it has ever been, and as well as plans to top up reserves, there are savings targets to meet budget gaps for years two and three of the three-year Medium Term Financial Plan, while remaining ambitious for Derby.

Councillor Baggy Shanker, Leader of the Council and Cabinet Member for Strategy, Governance and Finance, said:

We are moving in the right direction. It is welcome news that we’re entering the final three months of this financial year in a much better position than we had previously inherited, and our priority is to maintain our responsible approach to our in-year finances as well as delivering a balanced budget.

However many challenges still lie ahead, and these will continue to do so until there is a reform of the way we are funded by central Government. We are still assessing what the recent one-off settlement will look like, and how we can use it, and won’t know the full impact for a couple of weeks. Ad hoc funding does not go far enough to solve the issues with local government finances.

Rest assured, we remain as ambitious and determined as ever to deliver on our commitments to create a vibrant city for all, always putting people first.

Democracy