Bradford Metropolitan District Council has warned that its reserves are “reducing at an unsustainable rate” as the authority has drawn down £100.3m in 2022/23.
A report by Christopher Kinsella, Bradford council’s director of finance, outlined the authority’s year-end financial position for 2022/23. It detailed that the council is forecasted to overspend its £388.5m net revenue budget by £32m, a deficit which will need to be bridged by reserves.
He said: “Overall, reserve levels have reduced significantly in 2022/23. £100.3m of reserves have already been drawn down in 2022/23.
“Other reserves will also get drawn down at year-end to pay for earmarked commitments, and any year-end overspend, currently forecast at £32m, in 2022/23 will also have to be funded from reserves.
“The 2022/23 year-end reserves are currently forecast to be sufficient to cover the needs of the 2023/24 budget only, and reserves are reducing at an unsustainable rate.”
Kinsella detailed that at 28 February 2023, Bradford’s reserves stood at £174.5m, with £128m of them council reserves and £46.5m for the schools delegated budget.
The unbudgeted impact of inflation is currently estimated at circa £28m and this is resulting in significant forecast variances across all service departments.
Inflationary and social care pressures
Kinsella’s report outlined that one of the main reasons for the council’s £32m overspend is due to high costs within children’s social care, which has resulted in a variance of circa £50.5m.
It also detailed that another dominant reason for the overspend is a result of high inflation. Kinsella stated that the council originally budgeted for inflation at 4%, but the Treasury’s latest forecast of the consumer price index is now estimated at circa 10% in 2022, with it likely to increase further in 2023.
“Further, the unbudgeted impact of inflation is currently estimated at circa £28m and this is resulting in significant forecast variances across all service departments,” he said.
Kinsella’s report also highlighted that the inflationary impacts are largely constituted of circa £12.6m of additional forecast costs associated with the 2022/23 pay award. “Overall, we estimate that the pay award will cost circa £18.6m compared to the £6m budgeted,” he said.
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The report added that other major inflationary costs relate to energy prices, with gas and electric prices from the council’s supplier estimated to increase by 118%.
“The overall financial impact of energy cost inflation on the council’s estate and street lighting is currently forecast to be circa £9m over budget. There are also further knock-on impacts on our supply chain which is resulting in additional inflationary pressures,” Kinsella said.
In September 2022, Bradford council reported that it faced a budget gap of £77m in 2023/23 due to inflationary pressures and what it called “repeated delays” to local government finance reforms.
The council highlighted that delays to the reforms, inflation and international issues have meant that Bradford’s financial position is under “unprecedented levels of uncertainty”.
The report will be discussed at a meeting of the council’s executive on 4 April.
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