Observer column: 16 December 2016
Christmas Money Worries
At this time of year, councils across the country are putting together their budgets. Government grant settlement figures are issued around Christmas Eve, leaving just a couple of weeks to finalise the draft budget. And every year, these grants are cut further. As well as affecting jobs and services, that means councils have to find new ways to make ends meet.
The main grant paid to councils is the Revenue Support Grant (RSG). This is being cut dramatically, and will disappear completely by 2020. There are other Government grants, the biggest of which is New Homes Bonus. This is based on the council tax charged on new homes built in the council area, to act as an incentive for councils to promote new development. However, in Hastings, council tax bands are relatively low, and there's not much space to build new homes, so the amount we get from NHB is small compared to other councils, particularly those in wealthier areas.
The biggest crisis is in adult social care funding. This is provided by East Sussex County Council rather than Hastings Borough, but councils are simply running out of money to meet the ever-increasing demand for adult care services. The Government is considering allowing councils to put up the council tax to cover the gap, but in East Sussex that would require a 10% increase - not just in this year, but in subsequent years too.
In district councils such as Hastings, there are many different services provided locally which, although they cost nowhere near as much as social care, are still necessary. For next year's budget, Hastings Council will be using its reserves to balance the books. We can't do that for long - the reserves will be quickly used up. And there are some big additional burdens on our budget. For example, the council has to compensate businesses when they win a rating valuation appeal, even though the council has no role in setting business rates. Successful appeals, for example from big supermarkets, are costing the council hundreds of thousands of pounds - which has to be met from reserves. So this year, we need to bridge a million-pound gap in the budget. By 2020, that's over £3m, out of a £16m net budget.
This means we'll need to raise more income, as well as making savings. Fees and charges for discretionary services the council provides will, unfortunately, need to be raised. But we'll be using new ways to generate income. New kiosks and chalets on the seafront are being built. The council recently agreed to set up a housing company, to buy and develop housing for sale and rent. We'll also be investing more in commercial property. Hastings Council already owns many commercial and industrial units, and has recently bought the Dunelm and Pets at Home retail park on Sedlescombe Road, bringing in an additional £150,000 a year. And there will have to be much more - the way councils work is changing, as we're forced towards the Government's ambition to make local government self-financing.
So enjoy whatever you're celebrating this time of year, be it Hanukkah, Yule, Saturnalia, Christmas, or another mid-winter festivity. But spare a thought for the council finance officers spending the holiday season pondering spreadsheets as they desperately try to balance their council's books. Their task gets harder every year.
Council Leader's column