Chief Executive, Peter Holt's narrative on the financial situation

Senior officers at Uttlesford District Council today briefed councillors and staff on the current anticipated scale of financial challenge facing the authority over the next five years, taking into account the local implications of the national recession and international economic crisis, as well as local circumstances and changes in Government policy that look likely to substantially reduce income, such as from Business Rates.

Despite the world being a very different place at the end of 2022 to the start of the year when the Council set both its one year budget and five year medium term financial plan, today's professional and technical assessment has shown relatively modest need for additional financial constraints beyond some immediate belt-tightening in routine council expenditure.  Where in February this year, senior council officers began planning for how to make £3.5-£4 million savings over the next five years, the latest projections show that five year financial gap to have risen from that level to an estimated £5 million, albeit with an option being explored of selling one or more commercial investment assets that have risen in value in the few years since they were brought, to in turn bring the scale of budgetary problem down to £3 million a year by that fifth year.

Today's assessment showed how various issues facing the authority have contributed to this latest challenging financial situation, including the increase in utility bills adding a pressure of £271,000 over the next year (on top of potentially over £250,000 to keep leisure centres and swimming pools warm and open), £300,000 in inflationary rises in costs of other goods and services, and £600,000 in the higher-than-budgeted for nationally-set pay rise for council workers (averaging 6% pay rise per employee against near double-digit inflation faced by households).

Today's assessment also included predictions of how the council, like others round the country, will be potentially negatively hit by changes anticipated in central government funding regimes in two or three years' time, including both the removal of New Homes Bonus funding and possibly locally detrimental changes to the way that Business Rates are charged to companies round the country and then channelled back to local councils by central government, with more money heading elsewhere in the country as part of the government's 'levelling-up' agenda.

The assessment also takes into account higher interest rates nationally on council borrowing - whilst revealing that the Council successfully fixed over £80 million of borrowing in the late summer just before two subsequent Bank of England interest rate rises, which has substantially reduced Uttlesford's exposure to ongoing interest rate risk.

Today's assessment did reflect some other positive elements too - including how the council's £250 million+ portfolio of commercial assets is predicted to continue to contribute substantial profits to council coffers, as well as having grown in their saleable value by several tens of millions over recent years.

Councillors and staff were briefed on how this overall set of projections taking everything into account is likely to impact on the affordability of council services by the end of the next five years, with 20-25% net reductions in spending anticipated by 2027, matched by a similar drop in the number of staff employed by the authority.  They were told how this equates over five years to a possible reduction in the order of 60-80 jobs, down from the current c320 full-time employee headcount - and with that, a reduction or ending of some council services.  Compared to this average requirement to reduce the number of staff employed by 10-20 per year, the Council typically has 30-40 casual job vacancies in a typical year, as staff retire or move to new jobs elsewhere, making such a headcount reduction much more manageable with less additional disruption to other staff or to service users.

The Council remains as a matter of policy firmly committed to minimising and if possible avoiding compulsory redundancies, and has long had systems in place to make this a reality, such as by default only filling most vacant posts with fixed term staff, and only then if the current workload cannot be covered without needing to replace a vacant post.

No specific proposals for service or job reductions over the next five years were discussed, and none have yet been developed.  A timetable was shared today for setting a balanced budget for next financial year, as usual, in February, and for work to be done over the winter and spring developing longer term savings options to be brought back to Councillors for decision in the summer of 2023.

Because of its historic record of prudent financial management and supported in large part by the building up of a highly successful commercial asset portfolio over recent years, Uttlesford District Council is well placed - and better placed than many other councils - to weather this tough but manageable challenge, albeit with the prospect over the next five years of a reduction in service levels and staffing to the tune of approximately 20-25%.

Presenting their technical assessment, Uttlesford's Finance Director Adrian Webb and Chief Executive Peter Holt characterised the challenge overall as "tough but manageable".

Today's technical assessment also trailed a 30 year business plan currently being finalised for the authority's stock of 2,800 council houses, which will be brought to Councillors for consideration over coming weeks.  The finances of the Council's housing stock sits aside from the rest of its finances, as required by law, and whilst also exposed to similar pressures around cost inflation and ability of tenants to pay their rent, they are overall much less constrained.  Officers revealed that the long term financial prospects for housing are financially very sound, allowing for ambitious programmes to be developed for investing in existing homes over coming years to ensure they continue to meet modern standards, and building more affordable new homes in the district for local people.

22 November 2022