The cost of delivering services has increased by almost £75m, which means that the Council is facing a projected funding gap of over £23 million. This is the gap between the projected cost of delivering our services and the amount of resources available. Despite Welsh Government providing funding to support an increase to the Council’s budget, it is not enough to cover the cost of delivering services, leaving a budget gap that needs to be closed.
There are a number of reasons why the Council is projecting such a large budget gap.
- Increasing Demand for our Services: As the cost-of-living crisis deepens, more and more people are turning to the Council for support, which means that the demand for our services is increasing. We know, for example, that the number of people claiming Universal Credit is almost double the pre-pandemic level, with the number of people accessing our advice service having doubled since April last year. The number of social service casework has increased significantly over the last two years whilst Free-school-meal caseloads have increased substantially. With more people seeking to access Council services, the cost of delivery is going up.
- Inflationary Pressures: With inflation now over 11%, the costs of delivering public services and investing in our buildings and infrastructure are all going up.
- Energy: Soaring energy prices means that the Council is looking at paying an extra £13m next year to heat our buildings and light our streets.
- Pay: We believe public sector employees - who deliver vital services across the city- should be paid fairly. Higher pay awards than were initially budgeted for are being agreed, although they are still significantly below the rate of inflation for a number of Council staff, and below the private sector pay increases that are being seen.
- Food, Fuel and Transport: The cost of buying food, fuel and transport- to deliver school meals and school transport- are all going up. - Legacy of Covid: The lasting impact of Covid is still being felt, with some services experiencing an ongoing loss of income whilst others are facing greater challenges and more complex issues as they support recovery.
Even though Cardiff Council is due to receive an increase in Welsh Government support of 9% for next year, it is not enough to meet the additional costs the Council is now facing.
The budget gap will need to be closed through a combination of:
- Efficiency Savings and Service Change Proposals: The Council is committed to protecting frontline services and is therefore looking to generate as much savings as possible through back-office efficiencies. This means driving down the running cost of our buildings, reducing the amount of office space we need, and using new technology where it can save us money. The scale of the financial challenges also means that the Council has been looking at a managed reduction in the number of staff employed, through voluntary severance, to generate savings whilst keeping compulsory redundancies to a minimum.
Taken together, these efficiency savings will make the biggest contribution to closing the budget gap. Unfortunately, they will not be enough, and some changes to services may be necessary to balance the books. That is why we want to know what the people of Cardiff think about some of the potential changes that we could make to save money.
- Council Tax: Council Tax accounts for only 27% of the Council’s budget, with the remainder coming from the Welsh Government. Each increase of 1% in Council tax only generates around £1.6m, therefore closing the budget gap through tax increases alone is not realistic, especially in a cost-of-living crisis.
Use of Reserves: The Council has to be very careful when using its financial reserves, there is only a limited amount available and once they’re gone, they’re gone. The majority of the Council’s reserves are earmarked for specific purposes and are therefore already committed in support of delivering services, for example funding one off community initiatives and supporting Homelessness Prevention Services. The Council does maintain a level of General Balance totalling £14.2M to cover unforeseen costs and this equates to less than 2% of the Council’s overall net budget.
There is a legal duty on all Councils in England and Wales to deliver a balanced budget to fund the running of our services.
Councils across the UK are facing huge financial pressures driven by the lasting impact of Covid-19 and the cost-of-living and energy crises. Cardiff Council is no exception and is facing cost increases of over £75m.
These cost increases and delivery pressures are as great as anything the Council has experienced over the last 15 years. This means that public services must continue to identify every possible opportunity to deliver efficiencies, drive down cost and, in some cases, even reduce the level of service being delivered.
When we consulted on your service delivery priorities earlier this year you made clear that your top three priorities were:
- Schools and Education including Youth Services.
- Supporting vulnerable children and families.
- Supporting vulnerable adults and older people.
That is why the budget proposals will protect schools, education and social services. It does mean, however, that more savings will need to be found elsewhere in the Council’s budget.
We are doing all we can to save money through working more efficiently and not impacting front line services and have identified significant back-office efficiency savings for the year ahead. However, this is not enough to close the budget gap and so the Council is considering a number of options to balance the budget in 2023 to 2024.
We want to know what you think of these.