Norfolk County Council faces a £145m shortfall in its budget over the next four years due to “abnormally high levels of inflation” and uncertainty over future funding, a new report has revealed.
The report by Harvey Bullen, Norfolk’s director of strategic finance, outlined that the authority needs to close a budget gap of £46.2m in 2024/25, which is set to grow to £126.5m in 2026/27.
However, Bullen stated that if Norfolk’s Medium Term Financial Strategy (MTFS) is extended by a further year to 2027/28, it adds an extra £18.7m to the gap. This means that the council faces an overall budget gap of £145.2m over the next four years.
Bullen highlighted that the council’s budget deficit is due to several reasons, which include lack of funding, service demand, inflation and uncertainty of financing.
He stated that despite the government giving councils “more generous” funding settlements in 2021/22, a lot of the money was initially for adult social care reforms and was accompanied by an increasing expectation that local authorities would raise resources through council tax.
“Alongside this, there continues to be a significant gap between funding and service pressures driven by a complex mix of factors including demographic changes, unfunded burdens such as the National Living Wage, the needs of the people who draw upon social care services becoming increasingly complex, and by the wider economy including (more recently) the abnormally high levels of inflation,” Bullen said.
Bullen also highlighted that the council’s services are “subject to significant financial stress” as the increasing cost of energy and fuel has had a widespread impact across service delivery and commissioned services.
Funding uncertainty
In the report, Norfolk’s director of strategic finance stated that “uncertainty” over future government funding has also put significant stress on the council’s MTFS.
In February 2023, the final local government finance settlement was published for 2023 to 2024; this was the fifth one-year settlement in a row for councils despite sector-wide calls for a long-term funding plan.
Bullen said: “The failure to publish full medium-term funding forecasts is disappointing and impacts on the council’s ability to plan over the longer term.
“The further significant delay to long-awaited funding reforms (until at least 2025/26), alongside the absence of any detail at this stage about the likely terms of reference for this funding review, only serves to add further uncertainty to the council’s financial planning and associated forecasts.
“The 2023/24 settlement enabled the council to prepare a balanced 2023/24 budget, but was not sufficient to support a balanced position over the life of the MTFS.”
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Therefore, Bullen stated that Norfolk expects to draw down on its earmarked reserves over the period of the MTFS. “This includes a significant draw on one-off resources in 2023/24, continuing the trend seen in the previous year, 2022/23. This is not however a sustainable position in the longer term,” he added.
The report proposed that the council set a savings target of £46m to plug the budget deficit for 2024/25. Also, it suggested that Norfolk seek to deliver an efficiency savings target of 3%, which will be applied to support services’ “controllable spend”.
The report is to be presented to Norfolk County Council’s Scrutiny Committee on 21 June.
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