Published: 12/12/2017 13:00 - Updated: 12/12/2017 10:04

Bleak forecast as report shows council facing £30 million budget gaps

Written byEmma Crichton

 

Highland Council
More bad financial news is expected at a Highland Council meeting this week.

A £160 million budget black hole faces Highland Council over the next five years, finance chiefs have warned.

Around £30 million has already been slashed in the last two years but the latest grim report forecasts budget gaps of more than £30 million every year until 2023, totalling up to £159.2 million.

The bleak findings, to be reported to a meeting of the full council on Thursday have been blamed on cuts to the Scottish Government’s grant settlement, inflation and an increase in loan charges, paid for money borrowed to cover major projects such as new schools.

The gap could widen to £186.9 million if cuts are worse than expected.

It is not yet known how much the government grant will be cut by this year but an announcement is expected to be made from Holyrood on the same day as the council meeting.

Last year a U-turn saw the Highlands receive around £6 million more than they initially expected, after the government made a deal with the Scottish Greens.

Proposals for how to balance the books have yet to be announced, although in a report for Thursday’s meeting head of corporate finance, Edward Foster, warned that capital projects including new schools and leisure centres will need to be reduced, as the council can no longer afford to pay back the loans.

"Work is currently under way to review the current capital programme and understand what the implications to any changes to that programme on the revenue loans charge budget would be," he said in his report.

"A number of significant pressures requiring capital investment have been identified from our schools to the condition of our buildings, the state of our roads and bridges and requirement to upgrade our ICT infrastructure."

At least £550 million will be required to carry out all necessary capital projects in the next 10 years but the report warned this is not "affordable or sustainable".

"Any increases in the loan charge budget would contribute to the revenue budget gap and require savings or additional income to be generated elsewhere," it said.

"On that basis there is a strong professional view that increasing capital expenditure above a 10-year limit of £550 million is not affordable or sustainable.

"The council will continue to try to spend its capital budget in the most efficient way possible.

"That said, the challenge of balancing capital expenditure against revenue savings to ensure the overall affordability of any programme will require members to make some very difficult decisions."

A capital plan for the next decade will be agreed in February, at the same time as the revenue budget is set.

By December in the last two years voluntary redundancy schemes within the council had been announced but no details of payoffs have been revealed.

This may be due to the local authority’s "dangerously low" reserve funding, which has been used to pay redundancy packages in previous years.

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