Robust and timely action is being taken to ensure Middlesbrough Council recovers an £11.5m forecast overspend against its budget.
The projected overspend is significant at around 9% of the Council’s 2023-24 budget and must be addressed to avoid exhausting the Council’s limited revenue reserves by the end of the year.
Savings measures totalling £2.5m have been identified so far, leaving a further £9m to be found.
Failure to manage within the budget could trigger the need for further intervention and possible financial support being required through the Department for Levelling Up Homes and Communities (DLUHC) to prevent the need for the Council’s Chief Finance Officer to issue a Section 114 Notice to the Council as required by law.
Council officers are in regular communication with both DLUHC and the External Auditor in relation to the Council’s financial position and measures to address it.
A balanced budget was set by full Council in February this year as is required by law, but a combination of factors have thrown the authority’s finances off course.
These are mainly related to pressures facing manly local authorities in the current economic climate.
They include continuing inflationary pressures upon the cost of delivering all services, combined with increasing demand for children’s and adult social care, home to school transport services and homelessness provision.
The former Chief Finance Officer identified in a report to Council at the time of budget setting that robust cost control would be necessary this year to manage within the budget to protect and start to rebuild the critically low level of revenue reserves held by the Council.
This view has been endorsed by the current Chief Finance Officer.
Plans are also being developed in order to meet a further potential budget gap of around £14 million in the Council’s 2024-25 budget rising to £24.5m by 2026/27 as part of the Medium Term Financial Planning process.
Councillor Nicky Walker, Middlesbrough Council’s Executive member for Finance & Governance, said: “This is a very critical position, and there was very little left in the tank from last year in terms of the funds available to us.
“Other local authorities are dealing with the impact of Government cuts and rising costs and Middlesbrough is not alone in this, but this is the second year running where the Council has had to deal with a large overspend in the first few months of the financial year.
“We’ve identified emerging pressures earlier this year and are putting stringent measures in place to recover the financial position.
“That inevitably means reducing spending substantially as quickly as we can this year.
“Executive members will continue to work very closely with officers to ensure we get back on track as soon as possible.
“We’re all this together and all Councillors also have a role to play in helping to restore our financial resilience.”
Middlesbrough Mayor Chris Cooke added: “This is a really serious position for the Council.
“The simple fact is due to the overspending and depletion of reserves in the last few years if we want to keep the Council going we need to reduce our expenditure and look at delivering services in a different way – if we don’t do that, someone will come in and do it for us.
“It isn’t impossible, but it is going to be tough.
“Throughout that process our focus will be on maintaining front-line services wherever we can.”
The reports will be considered at a meeting of Middlesbrough Council’s Executive on Wednesday, August 23.