A council finance boss has revealed North Yorkshire’s new unitary local authority is facing a possible black hole of close to £50m a year, largely due to deficits it will inherit from district councils and high inflation.
North Yorkshire County Council’s executive member for finance, Councillor Gareth Dadd, said it was far too early for the authority to be considering service cutbacks and the council did not wish to see potential savings from local government reorganisation used to cover inflation.
Due to the range of uncertainties facing the authority including the ongoing impact of Covid-19, Coun Dadd likened setting the council’s budgets to “trying to juggle two bowls of jelly”.
He was speaking at a meeting of the Conservative-led authority’s executive where a move to top up a fund to cover the costs of local government reorganisation to £38m was approved.
Although he did not estimate the total structural deficits that the seven second tier authorities would have accumulated by the time the new council is launched in April, he said it was believed it would be “substantial”.
However, it has been estimated the combined ongoing deficits of the district and borough councils could be in the region of £10m.
In addition, ahead of the recent increasing inflation rate the county authority had been prepared to cover a deficit of up to £20m.
With inflationary pressures, which include the council’s gas and electricity bill rising by some £3m, it is believed the total deficit could nearly reach £50m.
Coun Dadd told the meeting: “That is a frightening figure, but nonetheless, I think we are right to raise that at this stage.”
An officer’s report to the meeting stated: “As further savings are required the schemes to achieve these will become more challenging and inevitably contain a higher level of uncertainty and risk. Therefore, it is imperative that delivery of each saving is closely monitored.
“As well as direct costs, higher inflation will feed into increased charges from suppliers and put pressure on wage levels for our own workforce and the wider supply chain. Effective budgetary control will remain critically important in the coming year but this alone is unlikely to be able to stave off unanticipated price increases in delivering the range of council services. This is, of course, at the same time as undertaking key work in transitioning to the new unitary council.”
Coun Dadd said while the authority had been successful in cutting costs during austerity, it would never be complacent about sound financial management.
The meeting heard the county council’s business case for local government reorganisation had provided for a £252m saving over a five-year period after £38m in costs were taken off.
Coun Dadd said he would be astounded if all of the £38m was needed for the reorganisation.