Council hits back in £10.2 million underspend row

Dale Spridgeon, local democracy reporter

A council has strongly hit back at claims it has been overcharging residents after reporting an underspend for the third year running.

Anglesey County Council’s executive heard on Wednesday that the overall financial position for 2022/23 – including corporate finance and the Council Tax fund – showed a projected underspend of £1.2m.

The Plaid Cymru-led council had faced criticism from political opponents in a scrutiny committee meeting.

Liberal Democrat councillor and opposition group leader Cllr Aled Morris Jones said over three years, underspends had totalled £10.2m, with the £1.2M, added to £4.8 in 2021/22 and £4.2M in 2020/21.

“They have been over charging the people of Ynys Mon for years. They should refund them.” He had said.

But the council has strongly defended its position, citing years of “unprecedented change, demands and uncertainties” impacting its finances.

They included Covid lockdowns, the cost of living crisis and the conflict in Ukraine.

Maintain services

The deputy leader and finance portfolio holder, Cllr Robin Williams said it was only because of the council’s “balanced decisions” that it could maintain services.

Its decisions had put the council in the “best possible position” to meet future and continuing challenges, he claimed.

The row has now prompted the head of Anglesey’s function resources Marc Jones to give a full analysis of the council’s position.

He said the council was “legally obliged” at the start of each financial year to draw up an estimated budget for the following year, funded from Revenue Support Grant from the Welsh Government, the share of the Non Domestic Rates Pool, Council Tax and the use of the Council’s own reserves.

“The process begins around September, in the year preceding the forthcoming financial year and culminates with the Council resolving to accept the budget and the Council Tax charge for the forthcoming financial year in March. The budget then covers the period April 1 to March 31.” He said.

“Prior to Covid, when inflation was low, this process could fairly accurately assess the level of demand and the pay and price inflation for the forthcoming year, and although the Council did under or overspend in these years, the overall difference between the budget and the actual net expenditure for the three years 2017/18 to 2019/20 was £95k from an average budget of around £130m.”

The situation “significantly changed.”

“In 2020/21 , the budget of £142.1m was set prior to the Covid lockdown, with a Council Tax rise of 4.5%. The lockdown significantly changed the Council’s services in that year. ” He said.

“The lockdowns resulted in the closure of schools, leisure centres, libraries, museums, etc. The Council also had to reduce adult and children’s social care services.

“All of these changes impacted on expenditure. In addition the Council received over £8m in additional support funding from the Welsh Government.

“These changes resulted in the Council reporting an underspend of £4.2m (3% below budget) in that financial year, with this funding increasing the level of the Council’s general balances.

“This level of underspending was reflective of the position reported by the other 21 Welsh Authorities.

“In 2021/22, the budget was £147.4m with Council Tax rising by 2.75%. The position at the year-end was an underspend of £4.80m (3.2% below budget).

“The continued impact of Covid resulted in all services reporting a level of underspending, again as a result of reduced activity during the Spring and Summer of 2021. Welsh Government again provided additional Covid grant funding of £6.1m and £1.4m in additional Revenue Support grant .

“The continued impact of Covid and the level of financial support from Welsh Government could not have been foreseen when the budget was set in March 2021.

“Again Anglesey ’s position was similar to the financial outturn reported by the other 21 Welsh Authorities.” he said.

Council tax rise

Describing the picture in 2022/23, he said “the budget was set at £158.4m with Council Tax rising by 2.0%.

“Again setting a budget was difficult, given that coming out of the Covid period was increasing the demand for the Council’s services, which had to be estimated when the budget was set.

“The war in Ukraine and the cost of living crisis was beginning to impact on costs and pay and again these had to be factored into the budget when it was set in March 22, shortly after the war in Ukraine commenced.

“The final reported position was an underspend of £1.2m (0.76%). The level of variance is within the normal expected levels and was as a result of additional grant funding from Welsh Government, increased levels of income which will not be sustained, vacant posts due to recruitment difficulties and the use of earmarked reserves.

He added “The net effect of these three years was to add £10.2m to the Council’s general balances and the level of balances has risen from £7m in April 2020 to their current level of £14m as at March 31, 2023.

“This increase allowed the Council to increase the net revenue budget by 10% to reflect the significant increases in pay and prices but only increased the Council Tax by 5%, having used £3.8m of the Council’s reserves to balance the budget.

“If the reserves had not been available then the Council Tax rise would have been in excess of 10%.

“It should also be noted that Anglesey’s Council Tax for 2023/24 is the sixth lowest in Wales, the lowest in North Wales and is £106 below the Welsh average for a Band D property.

“The Council is facing significant cost increases in 2024/25 and is not anticipating that the Welsh Government funding will be sufficient to meet all of the increase in costs and although it is very early in the budget process, there is a possibility that the Council will again have to use its reserves in order to set a balanced budget.

“In conclusion, the two financial years of 2020/21 and 2021/22 were exceptional years ,and did strengthen the Council’s financial position and allowed the Council to reduce the Council Tax increase in 2023/24 and have this as an option for 2024/25.

“The Council understands the financial difficulties faced by our residents and is trying to ensure that services remain funded whilst not raising the level of Council Tax excessively, which is a significant challenge in the current financial situation.

“The Council does not agree with the Leader of the Opposition’s comments made in the Scrutiny Committee.

Cllr Robin Williams, said: “The last few years have seen unprecedented change, demands and uncertainties.

“These continue. Despite the underspends, we believe that balanced decisions have been taken to maintain service provision and place the Council in the best possible position to respond to current and future challenges.”