Freeze on council tax as reserves used to plug black hole

Council tax is set to be frozen in East Renfrewshire and £3million could be taken from reserves to cut an £8.5m budget gap.

That shortfall would be reduced to £5.5m under outline proposals for the 2021/22 financial year going before councillors later today.

But “painful” savings are still expected and will be decided once the council’s settlement from the Scottish Government has been finalised.

Reserves would fall to the “low level” of the council’s “comfort zone”.

Currently, the council is expecting to get £196.1m from the Scottish Government.

The grant, which makes up 60 per cent of the council’s income, would be a 0.5 per cent increase on last year.

Council leader Tony Buchanan said: “That’s a slightly better deal than we had been expecting as all our financial forecasts were based on a one per cent cut in funding.

“As a result, we’ve been able to reduce some of our most challenging savings, but we will still have to make some difficult decisions and some difficult savings.”

In Finance Secretary Kate Forbes’ Scottish budget speech last month, she announced £ 90m for local authorities that freezes council tax.

East Renfrewshire will get an extra £1.8m - equivalent to a three per cent increase - if councillors agree to the freeze.

Councillor Buchanan said: “The Scottish Government did this to help many people suffering financially as a result of covid and that is a decision we fully support.”

However, the council’s reserves would be cut, and shortfalls are forecast for the next five years.

Councillor Buchanan said: “Our reserves are down by almost half between 2018 and 2021, so we may not be able to use so much in the future, but we felt it was important that we did so this year.

“We will still have to make painful savings, but not anything like to the same degree as we faced just a few short months ago.”

He added: “That’s part of the problem with not having a multi-year settlement, you’re always trying to second guess what might happen and where we might be.”

Chief financial officer Margaret McCrossan said: “We’re still in our comfort zone, but we’re getting towards the low level of it.”

Reserves would be reduced to around £5.6m by March 31, 2022, which is “close to the limit of what is considered prudent by the chief financial officer”, a council report adds.

The proposed budgets for health and social care - delivered in partnership by the council and NHS - and East Renfrewshire’s culture and leisure trust are also set to be agreed later today.

Almost £5.3m is set to go to the trust and over £54.3m to the Health and Social Care Partnership (HSCP).

Both bodies will identify their own savings, leaving £3.5m for the council to find.

Council directors have outlined savings options totalling £9.4m and some will be proposed to “cover the remaining gap” at a meeting on March 15 - after the UK and Scottish Government budgets are finalised.

“Our level of savings may be smaller if we get a better deal,” the council leader said.

Covid-19 costs, estimated to be around £9m, have not been included in the reported shortfall. They are expected to be covered by government funding and fiscal flexibilities.

Councillor Buchanan said while the use of flexibilities had not been finalised, the costs would be managed over time.

When councillors meet, they will be asked to set the council tax rates for 2021/22 and agree to taking cash from reserves.

Today’s virtual meeting takes place at 10am.