Luton Borough Council faces a £10m overspend in its 2022/23 budget which poses a “serious risk” to the authority’s financial sustainability.
A report by Dev Gopal, director of finance, revenues and benefits at the authority, outlined that the forecast overspend is due to an increased demand for council services, rising inflation and expected pay pressures.
It said: “The prospects for the council’s budget remain extremely difficult, with combined challenges from the high levels of demand for services’ ongoing delivery of budgeted savings, and now supplemented by the acute rise in price inflation and expected pay pressures.
“This represents a grave challenge for all local authorities, not just Luton.”
Gopal’s report stated that the council set aside £5m to deal with the impacts of inflation and Covid-19 on core services, but highlighted that if inflation levels continue to rise, the authority’s reserves will be insufficient to cover the cost increases that may occur.
It also predicted a £3.9m increase in costs for this year’s pay awards as a result of the impact of the cost-of-living pressures.
The report added that the forecast cost pressures “present a serious risk to the council’s financial sustainability, and robust measures will be needed to prevent the full impacts becoming embedded in the council’s cost base”.
Recovery plan
The report outlined a recovery plan to mitigate the cost pressures highlighted in the report, which included service managers cutting back current spending to a position within the existing budget set for each service and to consider reducing capital spending.
However, commenting on the recovery plan at a council executive meeting on 15 August, Cllr Tom Shaw, stressed that the council has already made significant budget cuts and should look to create revenue to overcome the overspend.
“When you have budget issues there are two things you can do: cut or increase your revenue. We can’t keep cutting and we need to look at our assets and how can we increase the revenue in all our assets,” Shaw said.
The forecast cost pressures present a serious risk to the council’s financial sustainability, and robust measures will be needed to prevent the full impacts becoming embedded in the council’s cost base.
Fairer funding settlement
Hazel Simmons, Luton Council leader, highlighted that the authority has already cut £160m out of its budget over the last 12 years and called for fairer funding from the government.
She said: “Over the years, councils in more deprived areas such as Luton, have not been allocated our fair share of funding from central government as part of the finance settlement.
“We are still waiting for the fair funding review which is long overdue.”
Trading opportunities
The council is also planning to generate additional income to balance its budget through trading opportunities.
A Luton Borough Council spokesperson told Room151: “One area we have developed with considerable success in recent years, and will be looking to further expand, is that of generating income through trading opportunities.
“The council has three subsidiary companies and we are particularly looking to see whether we can expand their role to benefit the council’s budget, albeit at a time when inflationary pressures are likely to cause the wider economy to stagnate.”
Over the years, councils in more deprived areas such as Luton, have not been allocated our fair share of funding from central government as part of the finance settlement. We are still waiting for the fair funding review which is long overdue.
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