Stoke-on-Trent City Council faces a £12m budget gap for 2022/23 due to rising inflation, which may risk the affordability of its levelling up projects.
A report by Nick Edmonds, chief finance director for the council, outlined that the local authority is experiencing a significant financial challenge due to the UK Consumer Price Index rate increasing to over 9%.
He said: “The city council, along with the rest of the local government sector, is seeing an emerging and growing financial pressure driven by the rapidly rising levels of inflation.
“The net pressure (after initial mitigations) is currently forecast at circa £12 million for 2022/23.”
In the report, Edmonds outlined that inflation has increased the cost of construction and borrowing, which puts at risk the affordability of the council’s capital investment programme and could lead to the deferral or removal of some of the scheme’s projects.
Stoke-on-Trent’s capital investment programme is part of the council’s levelling up agenda. This includes the recent £5.7m investment into the new Spitfire Gallery at the Potteries Museum and Art Gallery, and investment in town halls in Longton, Stoke and Tunstall.
Edmonds said: “Affordability must remain the underpinning factor whilst balancing the need for much needed investment in the city.
“The capital programme will remain under review, with the need to assess each project in terms of priority and the potential curtailment or deferment based on overall affordability.”
Edmonds also forecast that the service most impacted by inflation was children’s social care, with the demand for children’s placements and the increase of providers prices expected to cost the council £5.9m.
The city council, along with the rest of the local government sector, is seeing an emerging and growing financial pressure driven by the rapidly rising levels of inflation.
Pay Inflation
Edmonds also estimated that a 4% pay award for council employees is required to address inflation, which is expected to cost the authority £4m.
“Based on current estimates, a minimum requirement of 4% is anticipated to address national pay claims, cost of living increases, and the national living wage rise.
“Every 1% increase in the national pay award adds around £1 million to the forecast financial pressures,” he added.
Edmonds also highlighted that inflation “disproportionally impacts” places like Stoke-on-Trent, which has a relatively low wage economy.
He continued: “The balance between pay restraint, inflation, and maintaining vital services to our residents will continue to present a significant challenge.”
The report also outlined other reasons for the budget gap, which include the increased cost of goods and services, a rise in the level of debt, growth in the demand for elderly care, and a loss of income and fees from council services due to the cost-of-living crisis.
Council leader’s reaction
The report was discussed at a cabinet meeting on 19 July. Cllr Abi Brown, leader of Stoke-on-Trent City Council, told attendees that she had written to Greg Clark, secretary of state for levelling up, housing and communities, outlining the authority’s inflationary challenges and calling for additional government funding.
She said: “Along with many other local authorities we are preparing to ensure we can deal with the challenges of inflation over the next coming months and years.
“A number of actions are under way including making representations to the government and I have written in the last week to the secretary of state outlining our position.”
The balance between pay restraint, inflation, and maintaining vital services to our residents will continue to present a significant challenge.
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