Reserve funds to be used to deal with Covid fallout
MONEY held back for a rainy day will help Swansea council deal with the economic fallout of the coronavirus pandemic.
Cabinet members are being asked to approve the use of reserves to help offset additional spending, such as bolstering services to vulnerable people, at a meeting on October 15.
Councils have to balance their books every financial year, and Swansea council is currently facing a £30.1m overspend by its departments.
Throw in a council tax shortfall and the current estimated deficit rises to £33.6m.
It is far more than anyone could have expected when the budget for 202021 was set early in the year, but money has been clawed back from the Welsh Government and more claims are expected to be reimbursed.
Reallocate money held in a contingency fund and other pots, crunch the numbers again and the expected overspend, measured at the end of the first quarter of the year, drops significantly from £33.6m to £10m.
The report before cabinet recommends that this £10m is covered from money held in reserves.
It also recommends that officers make no further spending commitments this financial year.
Finance chiefs say the coffers are in a pretty healthy state, all things considered.
Council leader Rob Stewart said: “The first quarter of the financial year is always the one where you have the most pessimistic view.
“Last year we were looking at a £7m to £10m overspend and we managed an £18m surplus at outturn (end of financial year).”
But things are different in 2020.
“We are dealing with extreme variances in terms of the budget,” said Cllr Stewart.
“The unknown is significant. What other impacts will hit us? What support will we get?”
Asked by the Local Democracy Reporter Service what the big risks were, the Labour leader replied: “It [the pandemic] goes on longer than everybody has planned for, and governments do not provide the necessary levels of support.”
The UK Government has borrowed vast amounts of money to pump into the economy, including the public and private sectors in Wales. But that does not mean councils are claiming back every penny of additional spending and lost income.
Then there are the annual inflationary costs to consider, such as rises in teachers’ pay, which the council said it cannot afford without national Government support.
The numbers will change as 2020-21 progresses, before spending priorities and new council tax levels are agreed for the following financial year.
Meanwhile, the council is ploughing on with major capital schemes like the indoor arena, which leaders hope will be completed when coronavirus restrictions will have eased.
Ben Smith, the authority’s chief finance officer, said the outlook was challenging but that “we are where we need to be to continue delivering our services to the public”.
He added: “Financially, we’re in a good place compared with many other councils. Our significant underspend at out-turn for last year has clearly stood us in very good stead.”