Medway Council is in a ‘grave’ financial situation and has requested exceptional financial support from government.
The authority is seeking permission to extend its borrowings and fund its remaining shortfall and investment programme to avoid having to issue a section 114 notice.
The requested exceptional financial support would come in the form of a capitalisation direction of up to £14.6m in 2024/25, and a further £16.2m in 2025/26.
Without the exceptional financial support, the authority said a section 114 notice might be needed in “the next few months” to be able to keep key services running.
A request for flexibility to increase council tax above the referendum limit has not been granted by government.
Last summer, Medway Council revealed it was anticipating a budget gap of £17.267m for the current financial year, which was reduced to £12.251m by the second round of revenue budget monitoring. Measures proposed to address the forecast overspend include using unspent earmarked reserves and remaining general reserves.
In setting its budget for 2024/25, the authority said it was still facing severe financial pressures including inflation, increased demand on services such as social care and temporary accommodation, and funding cuts.
In a bid to avoid issuing a section 114 notice, the council commissioned the Chartered Institute of Public Finance and Accountancy (CIPFA) to carry out a review of the council’s financial position to try and identify opportunities to reduce costs, increase income and improve service delivery.
CIPFA’s report concluded that Medway is in “a grave situation in relation to its financial sustainability” but did not identify any governance or financial failures. It read: “Our assessment is that it will not be possible to set a balanced budget that is credible and does not result in an overspend in 2024/25 without some form of intervention from government.”
CIPFA agreed with a November 2023 report from auditor Grant Thornton that the council needs a “realignment of priorities” including making “politically unattractive decisions” in “the interest of the authority’s future viability”.
CIPFA’s report stated: “Urgent action is needed which recognises the need for this realignment and supports the case for intervention. Our perception is there has been an historic focus on regeneration culture and environment, including place related activities and in sustaining what has been described as a ‘Rolls Royce’ waste service. This is where many of the ‘politically unattractive’ decisions lie. Without negating the value of these services to the residents of Medway, it is time to reconsider priorities and how they are delivered.”
Medway Council wrote to the Department for Levelling Up, Housing and Communities to request exceptional financial support after receiving CIPFA’s report in January.
Vince Maple, leader of Medway Council, said: “We have had to take some incredibly difficult decisions now to ensure we can deliver the services that we know local people need and value, and have tried to minimise the impact where possible – particularly for our most vulnerable residents.
“If the government had granted us permission for council tax flexibility, we could have achieved financial sustainability more quickly.”
Maple said the authority was doing all it could to avoid a section 114 notice. “This is an outcome that we want to avoid as it would inevitably involve the withdrawal of services many people in Medway need and value,” he stated.
Maple said it was “absolutely critical” to act now to bring the council back into long-term financial health.
“If the government supports our request for borrowing and if this important decision is agreed through the Cabinet and Full Council processes, as well as putting in place the improvement plan outlined by CIPFA, it will help us head in the right direction towards becoming financially sustainable,” he said.
Maple said changes to council fees and services would also be taken to Cabinet and Full Council. These include increasing parking charges, and introducing them at country parks. The authority is also proposing to stop a free swimming programme for over 60s and under 16s from 31 March 2024.
—————
FREE bi-weekly newsletters
Subscribe to Room151 Newsletters
Follow us on LinkedIn
Follow us here
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
