Council predicts £4 million overspend

Bruce Sinclair Local Democracy Reporter

A Welsh council is facing a predicted overspend in its annual budget of nearly £4m, with a moratorium on all non-essential expenditure still in force, a report before senior councillors next week says.

Members of Pembrokeshire County Council’s Cabinet, meeting on November 4, will receive a report on the quarter two figures for the 2024-25 budget, highlighting an expected overspend of £3.9m by the end of the financial year.

The budget for 2024-25 was approved by council on March 7. This is the second budget monitoring report for 2024-25.

The predicted overspend is up from £2.9m in the quarter one figures; a year ago, the q2 overspend – for the 2023-’24 budget – was £3.6m.

Report

A report for members says the £303.5m revenue net expenditure budget for 2024-25 is £303.5m, “set against a backdrop of increased level of demand, complexity and cost of packages within our School ALN provision, Children’s Services, Adult Services and Homelessness”.

It adds: “This increase in demand, complexity and cost of packages has continued into 2024-25 with material projected overspends within social care & housing totalling £8.8m. Although work is being undertaken to try to reduce the cost of packages, it should be noted that these demand levels are projected to continue into 2025-26 and future years, creating further additional permanent budget pressures that will either need to be met through additional budget savings, income generation or increased council tax.

“The projected outturn at Q2 2024-25 is £307.1m, representing a projected overspend of £3.6m.  There is also a projected shortfall in 2024-25 council tax collection which will result in a £0.3m reduction in funding received.  The resulting £3.9m shortfall will need to be funded from reserves in 2024-25.”

“Worrying”

In the report, Director of Resources Jon Haswell said: “It is worrying that the projected overspend for 2024-25 has increased to £3.9m, which will have to be funded from reserves at the year end, reducing further the limited reserve balances.  The projected overspend is due to Social Care (Children’s Services and Adult Services) projecting to overspend by £8.6m in 2024-25.”

He added: “Social Services must take immediate action in order to address the projected overspend accepting that this is likely to have an adverse impact on service provision.

“It is extremely unlikely that the projected outturn for 2024-25 will return to a balanced budget position, therefore the moratorium on non-essential expenditure will have to remain in place for the remainder of the financial year.

“In order to reduce the projected overspend during Quarters 3 and 4, consideration will have to be given to delaying or ceasing the appointment of essential posts, accepting how challenging this will be on services.”

In the report he says the funding gap for 2025-’26 will be exacerbated by the October 17 decision to cut the second homes council tax premium from 200 to 150 per cent, leading to a base funding reduction of £2.697m.

As 85 per cent of Second Homes premium is used to fund elements of the council budget relating to affordable housing and enhancing the sustainability of local communities this will result in a base pressure of £2.292m to the council budget for 2025-26.

Members are recommended to note the report and that if the projected overspend of £3.9m is not recovered during the financial year it will be funded from reserves.