Why is the Council facing a budget shortfall?
Like everyone, we have seen the price of goods and services increase, and the cost of delivering services has increased by £30million. Whilst Welsh Government will provide some additional funding towards these costs (£4million), it is not enough.
There are a number of reasons why the Council is forecasting a £30million shortfall:
Increasing demand for our services
The cost of living crisis and the long term effects of the pandemic mean that the demand for services is increasing.
More and more people are turning to the Council for support. Demand for social services support for vulnerable children has increased significantly, as has the number of individuals and families that are presenting as homeless.
It is only right that the Council supports people in their most difficult times, but it means that the cost of providing these services rises. The additional cost of this extra demand for services is around £6million.
Pay pressures
Teachers, Council employees and care workers employed by our independent providers deliver vital services across the county, and should all be paid fairly.
We therefore need to budget for pay increases that are set nationally. This is expected to be about £17million.
Inflation
Whilst inflation is starting to fall from its peak of 11% last year, it remains high, and the cost of fuel and energy, as well as increases in interest rates, continue to drive up the cost of everything we do.
£6million of our pressures are as a result of price inflation.
North Wales Fire and Rescue Authority
Along with the other five North Wales councils, Conwy provides the funding for the Fire Service, even though it is a separate organisation. The Fire Authority is planning to increase its levy (its bill to each Council) by 10.8% this year because their costs have also increased.
This increased bill from the Fire Authority will add £692,000 to Conwy’s budget pressures.
How is the Council going to address the shortfall?
There are three ways we can address the shortfall:
Service changes
Over the last eleven years, Conwy has tackled £80million of increased costs by changing services and modernising the way we work, to be as efficient as possible. The opportunities to do this are getting increasingly harder to find, but we are committed to protecting vital services that protect our most vulnerable.
So, we are working hard to reduce costs further through the use of technology and by continuing to reduce the number of buildings, as well as making further changes to our services.
Council Tax
Every 1% increase in Council Tax raises around £700,000, therefore it is not possible to close the budget gap using Council Tax alone. Conwy has a long history of keeping Council Tax low, but this is no longer possible.
We are mindful that Conwy residents had a 9.9% increase in Council Tax last year and the Cost of Living Crisis continues. However, given the pressures, demand for services, and the increased levy from the North Wales Fire and Rescue Authority, it is likely that Council Tax will need to rise by at least 5% for 2024/25, and could be higher.
It’s important to note that even with an increase in Council Tax, we will still need to make significant cuts to services. Depending on the increase in Council Tax, based on a Band D dwelling, a 5% increase is equivalent to £1.52 a week. For every 1% increase above this, it would add an additional 30p a week. (A person who receives single person discount or council tax reduction will pay less per week).
Reserves
The Council needs to be very careful when using its reserves (savings) as Conwy does not hold a high level of reserves and many of them are put aside for specific reasons. Reserves are also one off - once they have been used they are gone, so this approach doesn’t address regular year-to-year costs.
The Council also needs to make sure that it holds sufficient reserves for responding to emergencies, e.g. the recent storm Babet.
The Council currently has £4.168million in its general reserves, which represents just 1.5% of the Council budget. Given the Council’s financial position, using reserves is not a solution for setting the 2024/25 budget.