Yorkshire council to use £30 million of reserves as other fight off bankruptcy

One of the main pressures is heating and electricity costs. Energy bills for North Yorkshire’s current eight councils totalled around £6 million last financial year, but rose to £15.5 million in the current year.

They are predicted to rise to £31 million for the forthcoming financial year from April 1, when the new North Yorkshire Council launches.

It comes as the Office for National Statistics (ONS) said government borrowing reached a far higher-than-expected £27.4 billion last month, jumping by £16.7 billion year-on-year and marking the highest monthly figure for December borrowing since records began in 1993.

In North Yorkshire, Conservative council leader Carl Les said while setting this budget had been the hardest he’d been involved in, the situation would have been considerably worse without the planned local government reorganisation.

But director of finance Gary Fielding warned many other councils were in a far worse position.

He said: “There's a risk of hyperbole because every year we say it's the toughest budget yet but it doesn't mean it's not true.

“But this one you do feel like you're at risk of falling off a cliff.

“In North Yorkshire we've managed things well so we've been able to build up reserves to pay that £30 million, but if you look around the country you will see a number of councils who don't have that ability.

“So if they were facing something of the same magnitude I would be worried if I were their treasurer.

“That's why you're seeing lots of treasurers around the countries writing section 114 notices.”

A section 114 notice is a technical instrument which legally suspends spending at a local authority if its head of finance judges it does not have a balanced budget, or an imminent prospect of one. Money can only be spent to provide statutory minimum services.

This is not a position North Yorkshire County Council finds itself anywhere near, but Mr Fielding said it was a reality for numerous other councils.

He said: “It is systematic financial pressure.

“A few months ago there were stories about Kent and Hampshire being on the precipice and potentially facing 114 notices. Those are two really big, really well-run county councils.

“When you get well-run councils making those noises you know there is an existential threat.”

As things stand, before potential savings from removing duplication between councils, such as HR departments and facilities management divisions are realised, he said the council will be forced to use almost all its reserves over the next three years.

“Our position is that we think we need 30 million next year.

“Over the next three years, if we can't fill the gap we're going to need 105 million of reserves not to go bust.

“We could afford that, and it will leave virtually nothing in the reserves.

“But we shouldn't do that, because this is one-off money and we will still have a problem in year four.

“Who wants to spend money just making themselves survive when you could be spending that money on highway schemes, on broadband, on extra support for vulnerable people.

“it's a cliché that these unprecedented times but they really are this time

“If you don't have contingency money (from reserves) you are going to emergency mode and you'll just have to say: ‘stop doing this, stop doing that’.

“Then unintended consequences kick in. We could just say right we can't afford to pay for that care home anymore so we're moving people into a cheaper care home but these people's lives you're dealing with.

“If you move people you're causing huge distress to families. People may die as a consequence of those moves so you've got to do everything you can to make sure you've got sufficient funding to make sure that you don't have to go into that nuclear option.”

Mr Fielding went on to say that inflation was now accounting for a huge chunk of the authority’s budget.

“In previous years, inflation has accounted for about £10 million worth of the county council's budget.

“Next year we’re accounting for 66 million worth of inflation going into the budget.

“For example, last year we spent about £6 million on energy across the eight councils. In the current year that's gone up to £15.5 million. Next year it's due to go up to £31 million. So in two years it will have gone up five fold.

“Each swimming pool for example has seen their energy costs rise by about 20 to 30 thousand pounds per month.”

Coun Les continued: “It would certainly be worse if we weren't doing local government reorganisation at the same time because of the potential savings there are which are helping to mitigate the impacts of the problems were facing.

“Every budget round is always a challenge because you need to have sufficient cash in the organisation to deliver the services that are essential but because of our government funding position we are more reliant on council tax than other councils so we are having to go back to the same people who live in North Yorkshire and they are under pressure every year over what they can afford to pay.

“Largely because of inflation I think it's much more difficult than it ever has been before.

“We've been speaking to the government for a number of years now about fairer funding.

"We haven't got there yet and I understand the government's problems with a fragile economy coming out of the pandemic and then Putin's war.

"Those circumstances are not helping us develop new ways of funding local government, however my message to the Government would be that local government is hugely important in the lives of people and we need a better way of funding it.”