2019/20 budget setting process gathers pace

On March 5, Elected Members will meet to agree Aberdeen City Council’s budget for the 2019/20 financial year. The budget outlines the spending and savings priorities for the year ahead.

Funding is falling at a time when costs and demand for services are rising and this makes the task of setting a balanced budget, as required by law, very challenging.

In preparation for the council’s budget meeting, senior officers have drawn up a list of potential options for both saving money and generating extra income.

These options were shared last week with the leaders of each of the political groups represented on the Council as part of the budget preparations by those groups and, because they are in draft form, must remain confidential at this stage.

I appreciate that treating these papers as confidential at this point reduces the sense of openness and transparency, but it is necessary.  I can assure you that prior to the March 5 budget meeting in the chamber, a finalised report outlining the options will be published on the Council’s website and available for staff and members of the public to view. The papers are scheduled to be available from late February and I will remind all staff when these papers are publicly available.

Given these papers are being shared with group leaders on a confidential basis, I do not expect to see any public discussion of these papers and the options contained within. It must be stressed that no decisions have been made at this stage and will not be made until March 5 when councillors decide which options they wish to adopt in meeting obligations to set a balanced budget.

The challenge:

So, what is the scale of the challenge we’re facing?  Let’s break that down and begin by looking at our sources of income.

The Council has three main sources of income:

  • An annual funding settlement from the Scottish Government, accounting for 46% of our income (71% of that from Non Domestic Rates and 29% general revenue grant);
  • Council Tax, representing 17% of our income;
  • Local fees and charges which the council can set, making up 37% of our income.

Whilst we have received notification advising us of the scale of reduction in funding we can expect to receive from Scottish Government, the Government still has to get Parliamentary approval for its budget. Parliament is scheduled to consider the Scottish Government budget on 21 February 2019. Until parliament has agreed the budget, there remains uncertainty over our funding. However, based on the figures we have received, Aberdeen City Council will receive a reduction of funding from the Scottish Government of 3.1% on a like for like basis.

What is certain, in terms of income, is that we cannot increase levels of council tax beyond the 3% cap set by the Scottish Government, which has previously capped the level of council tax increase which councils can set and this has continued to be a condition set by it for financial year 2019/20. Whilst not a significant source of income for the council, a 1% increase in council tax can generate in the order of £1.1m of additional income.

In terms of local fees and charges, there are some areas where we do have some discretion over and Council will be asked to consider increasing charges in a number of those. Of course, Council would need to be mindful of the ability of citizens to pay increased fees and charges.

Turning to the challenge we face on the spending side, we are experiencing cost pressures across key areas – so there is an impact of the double whammy of funding reductions and cost pressures.

That means the gap we face will be in excess of the £25m annually we had already been planning for. Final figures will be determined once we have confirmation of the settlement.

Of course, the broad principles will not be a surprise to you, but some of the detail may be.

We anticipated a significant scale of funding pressure and that led, as you know, to management asking Council to approve a new Target Operating Model. Since approval of the TOM in 2017, and the implementation of the associated transformation programme, we’ve been able to produce a balanced budget for 2018/19 by achieving significant savings.

Planning ahead – and a call to action

The plan of attack for the 2019/2020 is to continue to progress our transformation journey, and this will provide savings to enable council to set a balanced budget. It’s important to stress that the funding outlook for us as a sector does not look positive, and therefore we must continue to change and evolve in the years ahead.

We will continue to offer Voluntary Severance and Early Retirement (VSER) as part of that process, with information on those options available by calling 01224 522430 or by email.

Our transformation programme and the work up to this point has positioned us well to respond to the financial challenges of 2019/20 – but I appreciate the scale of the financial challenge may seem daunting and you may well be thinking “what can I do?”

You may complain about the situation we find ourselves in, feel angry or pessimistic about the future. However, that won’t change things. We need to collectively have a strong belief in ourselves and that we have the ability to change our organisation in a way which responds to these challenges. We owe it to all those people in Aberdeen who rely on the Council, to make sure that we can continue to provide the support they need – and that will involve doing things differently in order to live within our financial means.

I need your support and input by:

  1. Identifying where you feel resources, money or efforts are being wasted or where things could be done differently to save money and reduce spend;
  2. Being open to doing things differently as options for doing so come forward;
  3. Making an investment in your future within the Council, by being proactive about shaping the Council’s future.

I’m encouraging everyone to share their ideas, big and small, in addition to those already passed on. The Council has been praised by external auditors for the strength of its financial management, which owes much to this proactive approach which we need everyone to be a part of. We will all need to continue to pull together and you can play your part through the Transformation Zone.

I’m mindful of the impact the budget process, and the difficult options that are considered in public forum, can have on individuals and teams. I will of course provide a further update once the budget report is published and then to advise you of the budget decisions.