The proposed spending plans of £127.4m to deliver essential local services in the new financial year, beginning in April 2025, are an increase of £36m against this year’s budget and include efficiency savings of £5.6m from transforming services. These proposals – which need the support of central government - will enable the council to set a balanced budget and deliver the services residents need.
Recognising the level of support needed to undo years of cuts and underfunding, and that the council is on the brink of effective bankruptcy - the draft budget also addresses recommendations following external reviews earlier this year and the council’s Financial Improvement and Sustainability Plan.
The measures are proposed in the context of the challenges of high inflation and interest rates, alongside increased demands for services, being felt by councils across the country.
However, the Royal Borough’s unsustainable low level of council tax income compared to most other authorities, due to historic decisions to cut council tax year after year over a sustained period from 2010, combined with high levels of debt means it doesn’t have the financial resilience to meet these pressures.
This is despite significant action being taken by the council over the past 18 months to get the financial situation under control - by making savings, transforming services, generating income, and strengthening governance and reporting.
Need for government support and increase in council tax
The draft budget includes the council’s Exceptional Financial Support request to government for a £60.3m loan, alongside being able to raise council tax by an additional 20% above the current limit of 4.99% set by government – reflecting the level of support needed to make the council sustainable and rectify £30m of historical accountancy errors. If the council is unable to secure the level of support required from government, the issuing of a statutory Section 114 notice – which means the council is effectively bankrupt - is almost inevitable.
While this could mean an annual increase of up to £320 for the council element of bills for an average band D property – the equivalent of £6.15 a week - borough bills would still be the lowest of all other Berkshire authorities, and over £450 lower than Reading.
Up to £2m is already built into the budget, to provide support for the borough’s most vulnerable residents - protecting them from the additional council tax increase.
Rectifying historical issues and investing to meet demands of the future
Another challenge the council faces is a high level of debt, relative to the size of the overall budget. With a service budget for 2025/26 at £127.4m, council debt now stands at over £230m – the cost of which is more than £18.6m a year, the equivalent of almost 15% of council spend.
Some of this pressure is due to the council’s financial position being negatively impacted by the discovery of historic accountancy errors going back to 2021, that must be rectified.
To help rectify these historic budget issues, rebuild capacity in essential front-line services, and respond to increases in demand-led pressures in children’s and adult social care, and housing services - the draft budget includes proposed increased spending on:
- Adult social care: Additional funding of £6.6m to meet the needs of the services and retain permanent staff now the service is back in-house.
- Children’s services: to meet rising demand and costs of care placements – an additional amount of £6.8m will be invested.
- Housing and temporary accommodation: an additional £1.7m funding to meet rising demand and costs.
- Neighbourhood Services: reinstating £3.4m of maintenance budgets for trees, street lighting, lampposts, play areas and road signs.
Council Leader, Cllr Simon Werner said: “While difficult decisions have already been made over the last 18 months, it’s clear that we will need to continue to make tough calls - to fix the mess we inherited and prepare a budget for 2025/26 that balances.
“The horror show we have inherited means that the council will need additional support from government to set a balanced budget.”
The council’s Deputy Leader and Cabinet Member for Finance, Cllr Lynne Jones said: “While we are proposing to increase spending to help deliver the services residents need - the damage from years of underfunding is extensive. It is unfortunate that previously there was not the will to undo the historical issues and their impact.
“If the council had not made the cuts it did, the budget would now be at least £30m higher and we would not be facing the scale of challenge we currently are.
“While this Cabinet and council officers are working together, to right the errors of the past, and in discussion with government on exceptional support – we know we also need to increase council tax bills which are currently so far below those of our neighbouring councils – to provide the services residents need.”
Following the Cabinet meeting; the proposals will be subject to public consultation, with results reported to Cabinet in February 2025, ahead of the budget being put to Full Council in March 2025.