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Council blames unfunded pay cap for ‘deficit doomsday’ and may dip into reserves

A struggling local authority has blamed unexpected expenses incurred through the unfunded removal of the public sector pay cap and higher children care costs on its forecasted £6m budget deficit for 2019-20.

In a report submitted for this week’s Finance and Policy Committee meeting, Hartlepool Council director Chris Little wrote that without these extra costs, the 2019-20 budget “would have been broadly balanced.”

The expected deficit is almost six times larger than the original estimate of £1.4m, which reflected planned savings and a council tax increase in line with the provisional referendum limit set by central government.

But this then “increased significantly” due to the impact of the national pay award and continuing pressures on looked-after children (LAC) services.

The report criticised Whitehall for failing to provide additional funding to meet all – or even just part – of the cost incurred through scrapping the pay cap, “despite the fact that this will lead to higher income tax and national insurance contributions being received by the government.”

Its position for the following year, 2020-21, is still “extremely uncertain” and will be “critically dependent on the impact of national funding changes proposed by the government” – such as the fair funding review and business rates devolution.

But cuts implemented up to 2019-20 mean that councils will likely face “even greater financial challenges” in the next decade.

While these issues are not unique to Hartlepool, with children’s service pressures at the centre of many councils’ financial battles, the local authority argued that it faces “significantly greater challenges than many other councils.”

In the report, Little acknowledged that addressing the £6m overspend “will be extremely challenging to achieve in one year” and argued that Hartlepool may have to dip into its reserves in 2019-20. Yet he stressed that this strategy “is not without risk” as it will just defer budget cuts to 2020-21 instead, as reserves can only be used once.

During the meeting, council leader Christopher Akers-Belcher blamed the problem on central government, who have reportedly removed £20m of funding from the local authority.

“There is the doomsday of the deficit burdened on this council from government, but our priority has to be adult services and looking after children,” he told Hartlepool Mail. “We need to look after the vulnerable, the frail and the elderly, and that is what a big part of our budget will go on.”