FINANCE chiefs have revealed Hartlepool Borough Council is facing its most challenging budget cuts ever.
The local authority already needed to save £10m over the next two years. But officers have now released details of a further £5m worth of risks to manage.
Over the past two years, Hartlepool Borough Council has already seen £10m cut from its main revenue grant resulting in the closure of a library and around 130 redundancies.
But the council is facing its “greatest financial challenges” since becoming a unitary authority in 1996 and senior officers admit the worst is yet to come.
Chris Little, the authority’s chief finance officer, said: “This is the most challenging time we have faced.”
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As previously reported, the forecast deficits for the period 2013-14 to 2016-17 are expected to be between £17m and £20m.
The grim financial picture could see the council’s £91m budget slashed by almost a quarter due to national budget cuts.
But now it has been revealed the council is also facing one-off risks worth a total of £5.35m.
Officers have produced a strategy to combat the risks including a review of reserves and in-year budget cuts. It includes:
l Proposed changes to the grant formula from the government in 2013-14 could result in extra cuts worth up to £600,000;
l Changes to the population figures, which are a major factor in determining the level of grant paid to councils, could see an extra grant cut of £250,000. England has seen an overall increase of seven per cent but Hartlepool’s population increase is just two per cent between 2001 and 2011;
l Changes to the business rate collection scheme could mean the council has an income shortfall of £1m, due to the town’s heavy reliance on the power station.
Officers say based on experience over the last five years, the power station may only be fully operational for 90 per cent of the next four years, resulting in the income shortfall;
l Redundancy and early retirement costs up to 2016-17 could cost as much as £9m, £2.5m more than is in place in the existing earmarked reserves;
l Meanwhile, projected shortfalls in income for 2013-14 equates to £500,000 and there is also a risk that some planned savings may be less than forecast or will take longer to achieve,
Therefore, a reserve of £500,000 is recommended to be established, bringing the total one-off risks identified as £5.35m.
The council’s cabinet committee, chaired by Mayor Stuart Drummond, will meet on Monday, September 3 to discuss the latest report.
The proposals are at an early stage and there is no further details in terms of how the budget cuts will affect front-line services or staff.
A report by the council’s corporate management team said: “When account is taken of these additional financial risks and the forecast cuts in the core revenue budget which will be required over the next four years it is clear that the council faces the most challenging financial position it has ever faced.”
Mr Little said a “robust, strategic approach” is required to manage the one-off risks.
The strategy includes a further review of council reserves to generate £2.5m, plus in-year savings worth £3.4m from within the corporate budget, which includes the management of investments and borrowing, and underspends from within council departments.
Cabinet members are asked to approve the strategy.
The report said the proposals were designed to manage the “significant financial challenges” facing the council over a number of years and “protect, as far as is possible in the current financial environment front lines services”.
The cabinet committee is due to be held on Monday, September 3, at the Civic Centre, in Victoria Road, at 9.30am.