‘We have to make big changes to council services or axe jobs’
THERE will be “fundamental” changes to Fife Council services in order to balance the books – as the “crude” alternative is axing jobs.
Chief executive Steve Grimmond said the “magnitude” of the budget gap they’re likely to face means some difficult choices are ahead.
Finance chief Eileen Rowand told last week’s cabinet committee that it’s almost £16 million for 202223 and could be as much as £60m by 2025-26.
Mr Grimmond told councillors: “Going forward, the position we’re outlining is we believe we’ve got a means of squaring the budget for 2023-24, subject to the points Eileen’s been making, partly based on realigning underspend, but, beyond that first year, the magnitude of the potential gap between the resources we understand we’re likely to have and the cost of continuing services as they currently operate, is significant.
“There’s two ways to approach that.
“One would be a fairly severe approach: effectively reducing head count in a crude way.
“The second approach, the one which is outlined, is that we explore ways we can re-engineer and redesign services in a way that would potentially respond more effectively to the needs of our communities, but at the same time at less cost.”
Although the council has significant reserves – the general fund services budget carried forward £182.8m into this financial year (see page 23) – Ms Rowand said they “cannot be utilised as a sustainable solution to close this budget gap as they are one-off in nature”.
Giving a budget update for 202326, she admitted it was hard to plan ahead as they have to wait for the UK Government’s Autumn Statement and then the Scottish Government spending review to see how much funding they’ll receive.
The executive director of finance and corporate services said the situation with pay negotiations was also “very dynamic” while rampant inflation and huge increases in energy costs were also making it difficult to make budget assumptions.
For pay and pensions, the council has now budgeted for a five per cent increase in 2022-23 but Ms Rowand said that was before the Scottish Government announced an extra £140m for local authorities, to help them deal with pay pressures. Fife’s share of that money is £9.6m.
While that would reduce the estimated budget gap of just over £30m, she said it would probably increase again as they’d likely have to offer workers more than the 2.5 per cent pay rise they’ve currently budgeted for in 2023-24.
Ms Rowand said that, by 2025-26, it’s estimated that the budget gap will rise to £60m – £17m more than forecast originally.
She explained: “Due to the continued demise of the overall economic climate which has been exasperated by the invasion of Ukraine, these assumptions were optimistic and have since been reviewed.”
A dual approach will, in the short-term, rely on realigned budgets and underspends to balance the books.
Ms Rowand continued: “This would then provide time and space to develop a longer-term, more fundamental change planning approach to ensure that the council continues to be financially sustainable.”
Cllr Craig Walker said: “The elephant in the room is inflation. We’ve got budget assumptions of 2.5 per cent on pay and seven per cent on other updated assumptions where we’ve got inflation predictions of 18.6 per cent next year.
“Clearly, there’s nothing that Fife Council or the Scottish Government can do to control inflation so how much of a worry is it to you that the healthy position we’re in now may change due to inflation?”
Ms Rowand replied: “We’re seeing inflationary pressures now that we haven’t seen for 40 years. Local government have done well in the last number of years, dealing with tight financial settlements and being able to deliver savings that balance the books.
“That was in a time of low inflation but what we have now is high inflation so I’m quite concerned.
“As a council, we’re in a position where we have a high level of balances so that will help us manage the risk, but we have to make sure what we do going forward is sustainable.”