Difficult choices could be on the horizon at Nottingham City Council after soaring inflation added at least £15m onto the authority’s financial planning.
The Labour-led council, which is already being monitored by a Government-appointed Improvement and Assurance Board (IAB), is currently trying to put together a balanced four-year budget to fend off further intervention.
It is attempting to prove ‘prudence’ to ministers after a series of financial blunders – including the £38m collapse of Robin Hood Energy and nearly £40m in misspent housing cash – led to serious, long-term concerns.
Last month, Councillor David Mellen (Lab), the authority’s leader, warned the current 10.1 per cent inflation rate is the “biggest challenge” in proving it can balance the books.
Now the cash-strapped council has revealed the current inflation rate has added a further £15m to its existing contracts that had not previously been forecast.
The city authority is not alone in facing a growing gap – the figures show tens of millions of pounds needs to be saved across several councils.
A spokesperson for the city council said inflation is also causing higher rates of pay, energy and materials, as well as increased demand for social care and housing services fuelled by the cost of living crisis.
This includes a £1,925 pay award for all council employees in England – proposed to help staff cope with rising household bills – which the authority says will add a further £6.9m to staffing costs in this financial year alone.
The council is “considering its options” on how to ensure its budget is balanced next year, including potential savings and income generation such as council tax rises.
A consultation will launch on December 20 and the authority says it is “leaving no stone unturned” in balancing the books.
But it comes amidst warnings by the Local Government Association and the County Councils Network that authorities could be forced to “shrink” service provisions if further Whitehall help is not forthcoming.
Speaking on the inflationary difficulties, deputy leader Cllr Adele Williams (Lab), who is also portfolio holder for finance, echoed concerns about the impact it could have on services.
She said: “We are living with inflation rates that many citizens of Nottingham will not have experienced in their lifetimes.
“Like local households, councils are facing impossible choices and the County Council Network and Local Government Association have both said many councils will be forced to shrink back to only the most rudimentary services.
“After a Government budget that was supposed to fuel growth, we have only seen growth in council budget gaps, the yawning gaps in household finances and queues at the food banks.”
The Government opted not to send in commissioners to run part of the council last month but the improvement board, chaired by Sir Tony Redmond, had its powers strengthened ahead of another review in the new year.
The authority had previously been ‘guided’ by the board but, after evading commissioners in September, it can now ‘direct’ the council in making improvements.
It is expected to lead to “significant progress” over the next two months before Sir Tony again reports back to ministers.
Doubts over whether the council can evade intervention were cast further last week when Michael Gove returned to his role as Secretary of State for Levelling Up, Housing and Communities.
Mr Gove was in charge of the Government department in June when it was revealed he was “minded to” send commissioners into Loxley House to take further control.
But the turmoil surrounding the collapse of Boris Johnson’s Government meant Mr Gove was sacked from his role, while his junior minister Kemi Badenoch also left the department.
His successor Greg Clark opted not to send in the commissioners and gave the authority more time to prove it is managing its finances better.
Last week, Cllr Andrew Rule, leader of the Conservative Group, said he was “not sure” if the authority has the “full confidence” of ministers.
But he did warn Mr Gove will “get to grips” with the detail and said he thinks the Government will want “consistency” from the council.
A Government spokesperson said: “We are working closely with councils to understand the impact of inflation on their budgets and have already taken action to provide a discount on energy bills inflated by the global energy crisis.
“This year we have also made an additional £3.7bn available to ensure councils have the resources they need to deliver vital public services.
“We stand ready to speak to any council that has concerns about balancing their budget.”