North Yorkshire Council to dip into its reserves for £57 million amid ‘worsening situation’Council estimates £105m use of reserves to cover three years of deficits

North Yorkshire Council could be forced to use £105 million of reserves to cover deficits over the next three years.

The council is currently forecasting a shortfall of £25 million at the end of 2023/24.

The authority put the figure down to inflation, rising cost of utilities and taking on structural deficits from other district councils.

Officials had initially forecast a deficit of £30 million, but this has since fallen to £25 million due to savings on changing energy providers and falling fuel bills.

In February, the council agreed a “one-off use” of £30 million of its reserves to cover this year’s deficit.

However, despite the lower deficit, the council still faces being forced to dip into its reserves to cover rising deficits up until 2025/26.

Cllr Gareth Dadd, executive councillor for finance at the council, said:

“We can already see the benefits of creating one single council for North Yorkshire with the chance to make millions of pounds of savings in the first year alone.

“While this is good news for taxpayers in North Yorkshire, we do still need to be realistic as the situation can change with the major financial challenges and uncertainty that are continuing to affect the global economy.”

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The authority has estimated another £30 million shortfall next year, followed by a £45 million deficit in 2025/26.

According to a report due before councillors next week, the council estimates that it would need to use a total of £105 million to cover its shortfalls over the next three years.

Council bosses are expected to draw up plans to make savings in the coming years in order to offset any use of reserves.

A financial report before the council in February showed the authority had £285 million in “earmarked reserves”, which is used to “manage financial risk, commitments and support improvement and investment within service directorates”.

Gary Fielding, corporate director for strategic resources at the council, told the Stray Ferret previously that, despite the use of reserves, the council would still be in a good position to withstand another national event, such as a pandemic.

A report on how the council plans to make savings in the next financial year will be brought before senior councillors in February 2024.

North Yorkshire Council has reserves to ride out inflation, says senior official

North Yorkshire Council will have enough reserves to ride out another national event such as soaring inflation, a senior council official has said.

Gary Fielding, corporate director for strategic resources at the authority, said the council has planned for a “one-off use” of its reserves to cover a £30 million shortfall for the upcoming financial year.

The council is facing pressures from inflation, rising cost of utilities and taking on structural deficits from other district councils.

Around £18 million from the districts will be taken on by North Yorkshire Council, plus a further £12 million for an in-year shortfall.

As part of the budget plans, the county council will dip into its reserves to cover the financial blackhole.

Despite the use of reserves, Mr Fielding said he felt the council would still be in a good position to withstand another national event, such as a pandemic or soaring inflation rates.

He said:

“I think we are well placed to ride out the issues in the coming years.

“I would describe these times as unprecedented and that is after two years of covid.”

Part of the council’s shortfall is down to energy costs and pay awards.

Energy bills for North Yorkshire’s current eight councils stood at about £6 million in 2021/22, rising to £15.5 million for the current financial year.

They are predicted to rise to £31 million for the forthcoming financial year from April 1.

Meanwhile, inflationary pressures, including pay awards, previously accounted for an increase of about £19 million a year across the eight North Yorkshire councils.

However, the dramatic rise in inflation to more than 10% a year has seen £66 million having to be allocated to next year’s proposed budget to cope with the increase.

Mr Fielding pointed out that other councils were serving section 114 notices – a measure taken in dire financial circumstances.

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Thurrock Council, Slough Borough Council and Croydon Council have all issued such notices, which effectively declare the authority as bankrupt and ban any further spending.

However, Mr Fielding said he felt confident the council was not in that position.

He told senior councillors this morning:

“I am confident that we are not that organisation and will not be that organisation.”

‘Heavy heart’ over council tax hike

Senior councillors this morning recommended a 4.99% increase in council tax for the entirety of North Yorkshire.

The proposal, which would see a band D rate of £1,759.96 for the year, will go to councillors at the authority’s full council meeting for a final decision.

Cllr Gareth Dadd, deputy leader of the county council, said it was “with a heavy heart” that the authority had to propose an increase.

He said:

“As we sit here today I can see no alternative to that 4.99% increase.

“Every one per cent that we take off that equates to a loss of funding of £4.1 million year on year.”

The council is proposing the sum in order to meet costs for providing public services across the county.

It has also decided that council tax rates will be harmonised for the next two years – meaning taxpayers will pay the same sum across the county.

Harrogate council could dip into reserves to cover soaring energy costs

Harrogate Borough Council could be forced to use cash reserves after forecasting a £700,000 overspend on this year’s budget due to soaring energy and fuel costs.

The authority has proposed to set aside half-a-million pounds in emergency money in case it is unable to balance the books at the end of its final year.

With sharp rises in energy prices expected in autumn, the council has forecast to spend an extra £1 million on gas, £750,000 on electricity and £366,000 on fuel to keep its buildings and services running this year.

Paul Foster, head of finance at the council, told an overview and scrutiny meeting on Monday that it would be a “worst case scenario” if cash reserves were used and that it was still “early days” in predicting how the year would pan out.

He said: 

“There is an overspend position which is not something we have experienced – even during covid we managed to out-turn on budget.

“Hopefully the position on utilities may improve.

“We haven’t had any bills yet and this will be updated as the year progresses.”

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Mr Foster added increased energy costs were expected to be partially offset by extra recycling income.

He also said money was being saved due to staff vacancies and that these savings were expected to rise further as the council is currently experiencing a high turnover of workers.

Yet the forecast is still a cause for concern for the authority, which this time last year was predicting an underspend of £32,000 for 2022/23.

Household energy bills could top £4,000

The news comes as households have been warned annual energy bills could hit £4,266 next year.

The estimate from consultancy firm Cornwall Insight means the average household would be paying £355 a month, instead of £164 a month currently.

The government has already announced all households will receive £400 off their fuel bills this autumn when eight million of the poorest will get an additional £325.

There will be a separate £300 payment to help pensioners – also expected to assist eight million households.

But Labour has called on the government to go further, with party leader Keir Starmer set to call for a freeze on the energy price cap which determines the maximum amount suppliers can charge customers.

Previously, the level of the cap was only reviewed every six months, but UK energy regulator Ofgem changed the rules this year, meaning that it is expected to rise in both October and again in January.

County council faces using up to £11m of reserves to balance books

North Yorkshire County Council could dip into its reserves to balance its books in the next financial year.

Ahead of a budget meeting next week, senior county councillors have warned that the council may have to use up to £11 million of its reserves — despite hiking council tax rate.

The authority currently has £271 million in reserves, much of which is earmarked for capital projects and other costs, such as £31 million to fund the transition to the upcoming new unitary authority North Yorkshire Council.

Cllr Carl Les, leader of the county council, said the authority still faced risks over the ongoing impact of covid and social care.

He said:

“We are facing an unprecedented range of risks – the continuing impact of covid, harsh winters and climate change, the need for interventions to prop up social care, the escalating costs of transport for special educational needs students, to name but a few.

“These pressures are such that given the need to continue to deliver key services at a time of rising demand and the need to successfully transition to a new council, our final budget will require a higher degree of support from reserves than would otherwise be the case or is desirable.”

County councillors will meet next week to decide whether to support proposals for its budget for 2022/23.

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Among the plans will be an increase in council tax. The county council has the power to hike its rate by as much as 4.5%.

Depending on the level of council tax set, the county council will have to use between £6 million and £11 million of its reserves.

The authority has also warned it will still face a black hole of at least £30 million in three years, even if it levies the maximum permitted council tax rise this year.

Cllr Gareth Dadd, deputy leader and executive member for finance, said: 

“These continue to be turbulent times. We are responding to increased pressures that the pandemic has placed on our communities and the county’s economy.

“At the same time, long-term challenges grow, for example the massive pressures in social care. This means we face further tough choices as we budget for the future.”