Shropshire Council is confident it can resolve its “long-term financial gap”, but the authority will need to reduce spend by £51m this year, according to its cabinet member for finance and corporate resources.
Gwilym Butler told Room151 that while “like many other councils of all political colours” the authority is facing financial challenges, “unlike many other councils in similar situations we are robustly prepared with a clear understanding of the challenge and a detailed plan to tackle this”.
The Conservative-controlled council’s financial situation had been raised in the chamber of the House of Commons by Liberal Democrat MP Helen Morgan earlier this month. “Shropshire Council is in a dire financial state, with bankruptcy looming,” she said. “There are serious questions to be answered from the cabinet and county leadership about how we have ended up in such a weak position, with so little left in our reserves and so many examples of wasteful spending.”
Morgan suggested the council had a savings target of £1m every week and spent £4,000 a day “on consultants hired to undertake a ‘transformation’ programme of cuts”.
In a financial outturn report of the council’s position for 2022/23 published earlier this month, an overspend of £8.499m was stated for the financial year. However, this represented an improvement of £1.451m when compared with projections made in Q3.
The year-end position for the General Fund Balance of £7.1m, though, represented approximately 50% of the recommended minimum level. The report recommended that council members note that “the combination of earmarked and un-earmarked (general) reserves is below a level that would be regarded as safe, taking into account local circumstances” but that “the MTFS [medium term financial strategy] sets out an agreed plan to restore these balances to safer levels”.
The financial outturn report also noted comments from the most recent Local Government Association (LGA) finance peer challenge review. “The council has very little remaining in its general reserves to cushion the impact of under-delivery, and will require the delivery of at least 95% of [2023/24] savings in order for it to avoid depleting its reserves to a level which seriously jeopardises its financial solvency. This is a position which leaves no room for under-delivery.”
Acknowledging this position, the outturn report said that the council’s MTFS and budget for 2023/24, agreed by council in March 2023, includes plans to improve the reserves position with “no room for under-delivery in spending reduction plans”.
Innovative interventions
Butler told Room151 that the forecasted spend reduction of £51m this year comes despite the authority’s net budget increasing by around £20m this year, “due to inflation and continued increasing demand for our services”.
Explaining the council’s specific circumstances, he stated: “Shropshire’s funding gap is compounded by our rural nature and sparse population, which makes it more expensive to provide services like social care, which accounts for around 75% of the council’s net budget.
“However, unlike many other councils in similar situations we are robustly prepared with a clear understanding of the challenge and a detailed plan to tackle this, which includes monitoring our finances even more closely and using innovative interventions to manage demand for our services.”
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Butler revealed that the council had already delivered – or had “high confidence” in delivering – £19m of spending reductions in the first two months of this financial year. “This is equivalent to 37% of the total required for the year and plans to deliver the remaining £32m are well underway. This is a significant achievement so early in the year,” he said.
“In addition to the strong start to spending reductions that we have been able to make, we are in the advantageous position of having relatively low levels of borrowing and have been able to boost our general reserves by £20m to £27m since April 2023.
“Limited levels of outsourcing allow us to maintain close control of spending and provide the means for us to be agile and adaptable in response to the challenges that we face.”
Butler noted that the greatest pressure on finances “has always been increasing demand for our services due to local pressures and national and international issues beyond our direct control – inflationary pressures, the cost-of-living crisis fuelled by the invasion of Ukraine”. This is compounded by the wider health and care system pressures that increase demand and costs, he said.
“We are confident, though, that we will deliver our plans and finally resolve the long-term financial gap that the council has faced to create an efficient, modern and sustainable council for the future,” Butler concluded.
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