Greenwich Council is predicting a £136.8m budget deficit in four years’ time if changes aren’t made to balance the books. In updated financial projections that were to go before the council’s Cabinet on Tuesday, (September 16), officers fear the authority will have a budget gap of £45.1m next financial year which will increase to over £100m by 2028/29.
Greenwich Council insists it is “in a better position than most” despite this budget gap, and it has blamed inflation, increased demand for its services and the cost-of-living crisis for the deficit increase. Conservatives at the Labour-run council have criticised the council’s administration for “years of dither and delay” in realising “the scale of waste and inefficiency” that needs to be removed from the council’s budget.
A reduction in Government funding has also been blamed as one of the factors for the budget deficit increase. The Government’s Fair Funding Review 2.0 (FFR 2.0) plans, published in June, will result in a significant overhaul of how local authorities receive funding if approved. FFR 2.0 would update the formula which calculates how much each council will receive, incorporating area cost adjustments and accounting for councils’ ability to raise revenue through council tax.
According to analysis undertaken by London Councils, this overhaul would dramatically reduce the amount of funding borough councils in the capital receive. London’s local government collective predicts that councils across the city will receive £700m less than they would under current funding arrangements.
Based on the London Councils modelling, government funding for Greenwich could reduce annually by £8.6m from next year, with a cumulative base funding reduction of £24.7m by 2028/29. Greenwich predicts a potential “cliff edge” is on the horizon if FFR 2.0 is approved as tabled, as there could be further funding reductions beyond 2028/29.
A council spokesperson said: “We are working with the government on how they plan to fund local councils, especially those in London. But in the meantime, our priority is finding solutions to deliver the services that matter most.”
Where is the council overspending?
Pressures on the council’s budget that have increased the deficit this year include unforeseen overspending on adult and children’s health and social care, temporary accommodation and an increased demand for Education, Health and Care Plans (EHCPs). Greenwich Council also confirmed in financial reports that it is £9.1m behind its target of making £36.1m in savings this year.
Actions the council has at its disposal to reduce the budget gap include making new savings proposals by cutting existing budgets for its services, using its own reserves to try and reduce the deficit, and increasing the rate of council tax. However, the council would not be able to increase council tax beyond the annual 5% uplift permitted by Government without holding a referendum.
The council has not yet decided exactly how it will use these methods to reduce the budget gap over the coming years. Ideally, Greenwich Council hopes that the Government will revise its FFR 2.0 plans in order to secure more Central Government funding over the next few years.
A council spokesperson said: “Nearly every council has financial challenges, but thanks to solid management and tough decisions in recent years, we’re in a better position than most. These challenges are largely down to factors that are outside of our control, like previously high inflation due to 2022’s mini-budget, soaring demand for our services, and the cost-of-living.
“People are living longer, our borough is growing, and more people and children need extra support that is more expensive than ever to provide. This, coupled with historic underfunding from previous governments, means that the council has had to do more with less. In order to balance our books and continue to provide the standard of services our residents deserve, we will have to be innovative and creative with how we operate. Residents will be able to feed into this process through our budget consultation later this year.”
Tories tell Labour to ‘get a grip’ of council’s finances
The leader of the opposition at Greenwich Council has criticised the authority, calling for the council’s Labour leadership to “get a grip” before finances get worse. Conservative Group Leader Cllr Matt Hartley said: “After years of dither and delay, Labour councillors have only belatedly woken up to the scale of waste and inefficiency that needs to be removed from the Greenwich Council’s budget.
“They’ve been warned about this by the Conservative opposition councillors for years – and instead of doing the right thing, they’ve played partisan politics at every turn. With Greenwich Labour struggling to deliver even the current round of efficiency savings, the council’s leadership needs to urgently get a grip or their financial crisis is only going to escalate.
“Now it has been confirmed that the Labour Government is planning to cut £25million from Greenwich Council’s budget in the next three years – and yet the Labour councillors here in Greenwich are silent about it. The truth is they’ve been badly caught out, and it’s council taxpayers across Greenwich who will pay the price for ever higher taxes and reduced services in the future.”
The Conservatives have submitted a motion to next week’s Full Council meeting calling upon Greenwich Council to “use every means available” to lobby Central Government to adjust its FFR 2.0 proposals so that Greenwich’s funding is not cut. The Tories are also calling for the Labour administration to publish details on how it intends to balance the budget, and monthly summaries as to how it is delivering planned savings.
