Finance officers have told a cross-party group of councillors that the past year has been particularly “volatile”, with rising costs creating a challenging environment for the Labour-controlled council to deliver on its “Fairer Westminster” priorities when setting its budget for 2023 to 2024.
Inflation has doubled since Westminster Council last set its budget in March 2022, when it was Conservative-controlled, causing an overspend on its projected expenditure. However, this has been slightly offset by an increased income from investments due to the Bank of England raising interest rates. “A net overspend of £5million is predicted this year,” states a council report.
Since the exit from Covid restrictions, many income streams to the council have returned to normal but income from parking charges and major planning applications has not reached previous levels.
The “cost of living crisis” is expected to persist well into the 2023-2024 financial year with an estimated 31,000 households in Westminster “especially impacted” as they spend a greater share of their income on fuel and food.
An increase in the schools’ grant from government remains significantly below current inflation and schools will continue to face financial challenges.
Council officers have now produced a draft financial plan which proposes a number of savings and investments to produce a balanced budget for 2023-2024. But the medium term financial plan warns that there will be a budget gap of £57m by 2027, which will need to be addressed in future budget plans.
Finance officers have proposed a package of more than £15m in cost savings, and using nearly £6m from reserves to address the predicted budget gap for the forthcoming financial year. This use of reserves would have to be paid back over the following three years.
The remaining budget gap of £1.3m for 2023-2024 would have to be met by using additional reserves or increasing council tax, the latter being something that council leader Adam Hug says he is reluctant to do.
Raising council tax by five percent, the maximum allowed by government, would yield around £3m.
A seven percent rent rise for council tenants is proposed to balance the books of the housing revenue account, while additional housing officers and new housing estate offices will “improve the presence and availability of council staff to support tenants and leaseholders”.
The most significant individual pressure faced within the council as a whole is the cost of managing temporary accommodation. There has been a sharp increase in the cost of leasing property over the past year and the demand for temporary accommodation “is expected to increase as the impacts of various social issues hit”, states a budget report.
The homelessness prevention grant from government will increase by only one percent for 2023-24 and 2024-25. This grant is also used for rough sleeping and will therefore not keep pace with the pressures arising from increased demand and inflation.
Changing part of its waste removal and street cleaning fleet of vehicles is estimated to save the council nearly £6m in running costs as well as tackling air pollution and climate change.
A number of measures are proposed to increase income from fees and charges for council services. There will be a public consultation on some of these increases.
Cross-party Budget Scrutiny Task Groups chaired by Cllr Paul Fisher (West End ward) reviewed the revenue proposals over two meetings in January, and a previous meeting reviewed the capital strategy.
The Task Groups will submit comments which will inform the final budget proposals for consideration by the Cabinet on 13 February, with the Full Council due to approve a balanced budget on 8 March.