Big budget challenges may lie ahead as council awaits key information from Whitehall

Cherwell District Council is planning ahead for the possibility of budgetary challenges next year.

Published: Wednesday, 23rd September 2020

These stem from general issues to do with local government funding across the nation and the long-term impact of COVID-19. 

The council is working to a possible scenario of having to make around £9.5m of savings in 2021/22. Staff and councillors await the outcome of the Government’s Spending Review and updates from central Government on how business rates, the New Homes Bonus and other grants will be re-configured nationally. 

It is thought key information will begin to become available in mid to late November, with detailed announcements anticipated in mid to late December. 

A report setting the scene for the forthcoming budget-setting period will be considered by the council’s executive committee on 5 October. 

Cllr Tony Ilott, lead member for finance, said: “This is a challenging situation. We are setting a savings target of £9.5m in the expectation that this figure will be significantly reduced once we receive news from central Government as we move towards setting a final budget for 2021/22 in February. 

“However, we must plan responsibly for every kind of scenario and that is why we are letting residents know at this early stage that challenges may lie ahead. 

“In addition, the unpredictability of COVID-19 and the potential for a second wave adds an extra layer of complexity, both for councils and central Government.  

“The council’s staff along with councillors are all working flat out to maintain the high standard of service that Cherwell District Council provides for its residents.” 

Why has this situation arisen? 

The projected shortfall has come about as a result of longer-term national issues combined with more recent issues stemming in part from the impact of COVID-19. 

Longer-term issues include: 

  • The Government’s national plans on resetting business rates, which could adversely impact councils that have seen strong business growth. Cherwell District Council has been successful at creating the right conditions for local business growth, with a resulting dividend for local services over the last decade. Cherwell’s growth since 2014 has been well above the national average and so therefore has the income via business rates. This has helped protect Cherwell District Council from the cuts that have been experienced elsewhere.  
  • The national New Homes Bonus Scheme is due to wind up shortly. This scheme provides cash for areas that allow new homes to be built in their area. Government funding has been set aside for local councils that welcome new housing development, which they can spend to benefit their local community.  

Recent issues include: 

  • An expected negative impact on Council Tax income as a result of increased numbers of Council Tax Reduction Scheme claimants and a lower-than-anticipated number of new homes being built. 
  • Other impacts on services relating to COVID-19, such as loss of income from car parking and other income-generating services during lockdown. 

Cllr Barry Wood, leader of the council, said: “The financial impact of COVID has compounded a difficult situation for which we had already begun to prepare – namely the changes to business rates and the New Homes Bonus Scheme. 

“There is no doubt that our success in creating a climate in which businesses can thrive has helped insulate Cherwell District Council against the cuts that have been experienced elsewhere.  

“We have made our views about resetting business rates known to central Government and we will continue to work with them.” 

Timeline 

  • The council will publish detailed proposed savings in late November/early December. These will factor in updated information from central Government. 
  • During December, central Government will reveal how much funding each council in England will receive in grant funding in its annual Local Government Settlement Day. 
  • Various committees at Cherwell District Council will discuss the budget, culminating in a final budget being set by all district councillors during February 2021.