East Lothian Council’s financial situation is now the “greatest challenge” the authority has ever faced, with the delivery of critical services under “very significant” threat over the short to medium term without further government support.
The council is forecasting a £14.6m overspend this year and must identify further savings of £71m over the next five years – equivalent to just under a quarter of its annual running costs – according to a finance update report presented to a council meeting on 29 August.
The projected overspend for this year would remove “in full” the authority’s minimum reserve level, with the council having “exhausted all avenues to apply fiscal flexibilities”.
This means that, as it stands, the authority will “be unable to sustain the level of services currently being provided and very tough decisions are going to be required”, Norman Hampshire, council leader, said.
As reported, East Lothian highlighted the “unprecedented” financial challenge it is facing in early July, when it reported an overspend of £12,537m for financial year 2022/23 after use of reserves and other mitigations.
Urgent temporary mitigation measures including controlling of recruitment, reviewing of operational assets to minimise costs, and pausing some capital projects, were approved at the council meeting.
Representations are also being made to stakeholders at a national level, including Scotland’s deputy first minister, to highlight the need for additional resources.
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The prospect of a £14.6m overspend this year comes despite previous efficiencies, budget measures and increases in council tax, East Lothian Council said.
The authority noted that a “combination of external factors” were driving up costs, including inflation and rising interest rates. East Lothian is also facing significant increased demand for services “related to supporting a growing population”.
A cross party group of elected members is meeting regularly to discuss the financial situation and look at budget proposals for the future. The authority’s budget for 2024/25 and beyond will be set at a meeting of full council in early 2024.
The council said it was also working to progress its transformation programme, which aims to identify and implement “new and different ways of working which are both innovative and enable high-quality services to be delivered as efficiently as possible”. Examples include maximising digital technology and income generation.
A budget consultation, which is planned for early Autumn, will give people an opportunity to provide their views on the range of options to close the financial gap, the authority noted.
“The financial situation is now the greatest challenge that East Lothian Council has ever faced,” Hampshire said.
“Currently in East Lothian, our grant from central government is the third lowest in Scotland per head of population. There is no recognition within the grant received of East Lothian’s increasing population and the recurring rising costs that arise, for example the staffing and running of new schools.
“Income overall is not keeping pace with the cost of delivering services and this is putting huge pressure on our budget.
“We continue to advance the case for East Lothian to receive additional resources, for example meeting last week with the Deputy First Minister, in order to address the very acute financial difficulties facing local government, particularly the very significant, immediate and ongoing financial pressures in East Lothian associated with supporting population growth.
“The reality is that, without further support, we will be unable to sustain the level of services currently being provided and very tough decisions are going to be required which would undoubtedly have a negative impact on service provision in East Lothian.”
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