Somerset public services face 'very sobering' future as council budget day looms

By Daniel Mumby - Local Democracy Reporter

12th Feb 2024 | Local News

Somerset Council published proposals in early-January to plug a budget gap of around £100m for the 2024/25 financial year
Somerset Council published proposals in early-January to plug a budget gap of around £100m for the 2024/25 financial year

Somerset taxpayers face a "very sobering" future for their public services as their local authority scrambles to avoid effective bankruptcy.

Somerset Council published proposals in early-January to plug a budget gap of around £100m for the 2024/25 financial year – including selling off its commercial investments and many assets, raising council tax and implementing more than £35m of cuts to public services.

After announcing an extra £5m for the council in late-January, the Department for Levelling Up, Housing and Communities (DLUHC) revealed earlier this week that it would not allow the council to raise its share of council tax bills by ten per cent – twice the normal legal limit without holding a referendum.

Without this rise, the council has limited room for manoeuvre left, relying on the sale of assets and devolving services down to town and parish councils in order to balance its books.

If it cannot set its budget by the end of February, it will have little choice but to issue a Section 114 notice, effectively declaring bankruptcy – meaning commissioners appointed by central government will come in to run day-to-day services.

The council's executive committee met in Taunton on Wednesday morning (February 7) to discuss the financial picture – a meeting that was disrupted early on by protesters criticising the ongoing Israel-Hamas conflict.

Here's everything you need to know:

Why is the council in such a mess?

The vast majority of local authorities across the UK are experiencing huge financial difficulties caused by a number of factors.

Brexit and pressures in the job market have made it hard to recruit social workers, carers and other vital staff, forcing the council to pay extra to secure agency staff.

The war in Ukraine and the ensuing rises in inflation has pushed up the cost of construction projects, along with the cost of heating and keeping the lights on at the various council premises.

The coronavirus pandemic has cast a long shadow, with rising numbers of children presenting with complex needs and requiring additional support after missing significant time at mainstream school.

Somerset already has an ageing population, meaning large amounts of the council's funding go towards social care for vulnerable and elderly adults.

But the cost of providing this care has soared following the government's aborted 'open book' exercise, which revealed the cost of providing care in Somerset to many of the major UK-wide providers – giving them a reason to push up their costs.

All of this means that the council is facing a budget gap of £100m for next year – on top of overspending by around £17m of the current financial year.

How will the budget gap be plugged?

The council put forward numerous proposals in early-January to deal with the crisis and deliver a balanced budget by the end of February.

UK councils are currently limited by law from raising council tax by any more than 4.99 per cent in a single year without going to a referendum – with 2.99 per cent for general spending, and two per cent solely for adult social care.

The council had asked the government for permission to raise council tax by ten per cent – something which would raise an additional £17.1m and bring the average (Band D) council tax bill in Somerset to £1,810 a year – still below the unitary average of £1,815.

But DLUHC formally refused this request on Monday (February 5), meaning more money will have to be sought from savings, selling off assets and using existing reserves.

More than £35m of savings were originally proposed – including the closure of five household waste recycling centres (to save £963,000), keeping the Octagon Theatre in Yeovil closed (£174,000), installing no new play equipment for a year (£168,000) and shutting the tourism offices in Taunton and Yeovil (£167,000).

Since these plans were published, town and parish councils – who have no cap on increasing their precepts – have stepped forward to take charge of some local services.

Yeovil Town Council has stepped in to prevent the closure of the Yeovil Recreation Centre (known locally as Mudford Rec) and have committed money in principle to running the Octagon Theatre if the stalled regeneration of the venue comes forward.

Bridgwater Town Council has taken similar steps, committing to running more of the town's green spaces and taking over the Northgate Docks after the completion of regeneration work as part of the Bridgwater town deal.

Taunton Town Council has increased its share of council tax by 200 per cent for the average ratepayer, allowing it to improve the public toilets and keep valued green spaces like Vivary Park in an operational condition.

Other proposals, such as the loss of funding for RNLI lifeguards at Burnham-on-Sea, have been removed from the budget proposals following lobbying from local councillors – or, in that instance, parliamentary candidate Claire Sully.

On top of these savings, the council also intends to use £36m of reserves, and to sell £20m of land, property and other assets by April 2025 – including all the commercial investments inherited from the four district councils.

The government would have to give permission for the proceeds of these capital sales to be used to fund day-to-day spending – known technically as a 'capitalisation direction'.

To prevent further financial issues after April 2025, the council will undergo a transformation programme to reduce its size and staffing numbers.

Council leader Bill Revans described the financial picture on Wednesday morning (February 7) as "very sobering".

He added: "The financial challenges we face have not come out of the blue. It was suggested by my predecessor that there was a time bomb and the ticking was getting louder.

"The costs of providing care are increasing faster than the funding being provided, and we need a national solution.

"No-one would design the current council tax system, and no-one I speak to thinks that it is sustainable – but governments of all parties have failed to come up with a solution."

What happens if the council can't balanced its books?

If the council cannot set a balanced budget, it would have little choice but to issue a Section 114 notice – an admission that it is effectively bankrupt.

Unlike businesses, local authorities cannot technically go backrupt – meaning day-to-day services like bin collections and social care would still continue.

However, it would result in the government appointing commissioners to come in and run the council to get its finances in order – taking decisions without any democratic input or accountability.

In addition to swingeing cuts to front-line services, it could result in even sharper rises in council tax in the years to come.

Speaking before the executive meeting, Mr Revans said: "If the government rejects both our council tax and capitalisation requests, then a Section 114 notice will be inevitable.

"This simply means well-paid commissioners would come in and cut all non-statutory services, regardless of impact, impose a more drastic reduction in our staff numbers, while raising council tax and other fees even more than we are proposing.

"We are doing everything we can to minimise the impact on our residents by taking the responsibility here in Somerset."

Is the future looking any brighter?

The short answer is: no.

Even with all the measures being undertaken for the coming year's budget, the cost of providing core services is still set to outstrip the funding provided for them, whether through grants, council tax or other income.

Jason Vaughan, the council's chief financial officer (also known as a Section 151 officer) said: "I am concerned about the 2025/26 budget gap, which has now risen by £85m to £104m. The scale of the problem cannot be overstated."

Ms Leyshon said that urgent action was needed by the government, not only to provide additional short-term funding.

She said: "We are all moving in the same direction, and whoever things they wish to be the next government needs to take this on now and not wait until after the next general election.

"If we look more than two years ahead, we will be in a position where council tax will not be table to fund statutory services – and what happens then? Who decides who gets funding and who doesn't?"

What have Somerset's MPs said about this?

Three of Somerset's MPs debated the council's finances in a special debate held at Westminster Hall on January 30.

Yeovil MP Marcus Fysh – a former county councillor – said that the gradual reduction in central government funding to local authorities had been "a necessity" during the coalition government of 2010-15.

He also claimed Mr Revans and his executive had not properly implemented the business case for the new unitary council – meaning that savings promised by David Fothergill had not materialised.

He said: "The business case at the heart of the plan to move to a unitary authority, which was based on a very good decision by the previous Conservative administration to save money by amalgamating all the councils, has not been pursued by the new Liberal Democrat administration.

"Those savings have therefore not come through, some of the personnel and management rearrangements have not occurred, and many tens of millions of pounds that would otherwise have been saved have not been saved since the savings were to have started, a year or two ago."

Ian Liddell-Grainger (Bridgwater and West Somerset) said that he had "a great deal of respect" for Mr Revans, and warned declaring effective bankruptcy and sending in commissioners would be an unmitigated disaster for Somerset.

He said: "Once, many years ago, I had the commissioners in to West Somerset Council, and it was a complete disaster. We lost our cohesion, and that council disappeared soon after.

"If they come in to Somerset, I can tell you exactly what will happen. They will shut the recycling centres, stop the buses and pull back on the funding for roads, for the most vulnerable and for many others, and the money we give to colleges such as Yeovil, Bridgwater and Taunton, and Strode just will not happen."

Sarah Dyke (Somerton and Frome) criticised the government's record, stating the funding model for children's services and adult social care was "broken" and this was "a national problem that requires a national solution".

Ms Dyke – who also represents the Blackmore Vale division on the council – added: "The previous administration's One Somerset business case stated now that the seemingly meagre £18.4m of savings would be realised after three years, not within nine months of forming a new council.

"The previous administration was guilty of irresponsible fiscal decisions. Six years of council tax freezes from 2010 reduced income from council tax, a move that saw a minimum shortfall of £24m per year and delivered a total cut to services of £150m.

"I urge the government to provide more funding to support councils as a matter of urgency, while allowing them increased powers to deliver for their communities and to reform business rates to boost local economies."

No public statement on the council's finances have been issued by either James Heappey (Wells) or Rebecca Pow (Taunton Deane) – both of whom are government ministers.

What happens next?

The full council will meet in Bridgwater on February 20 at 10am to approve the final budget.

The public are welcome to attend, and the meeting will be live-streamed via the council's website for those unable to be there in person.

The full extent of any in-year overspend – which will have to be plugged with existing reserves – will be known shortly after the end of the current financial year in April.

     

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