East Lothian Council facing £45 million funding gap in next five years

Officials are working on drawing up budget plans ahead of a full council meeting at the end of next month.

Currently, the local authority faces an estimated funding gap in excess of more than £14.4 million for the coming financial year.

Newly revealed projections suggest that will more than treble to a more than £45.5 million deficit in the next five years.

Councillor Norman Hampshire, leader of East Lothian Council, described the scale of the challenge that the local authority faced as having been raised to “a level that we have not experienced in many years”.

National funding revenue currently makes up more than three-quarters of the council’s overall general services revenue funding.

'Highly critical'

A paper presented to the cabinet committee on Tuesday noted that most of the additional funding for councils related to supporting new or existing policy commitments.

Based on the draft settlement received in December, East Lothian Council will receive a total cash increase in national grant funding of £4.92 million, with the core revenue support grant increasing by £1.861m (0.9 per cent).

There is an increase in core capital grant of £98,000, with specific grant funding to support cycling, walking and safer streets and free school meals expansion funding.

Although the settlement is for one year only, East Lothian Council sets multi-year budgets.

In planning ahead, it is assumed there will be a ‘flat cash’ settlement across the period 2023-28, with an estimated council tax increase of five per cent in each year, as set out in the budget approved last March.

Mr Hampshire said: “This report highlights that the significant scale of financial pressures facing the council remains at a highly critical level.

“We have clear priorities aligned to protecting the most vulnerable in our communities and have a good record of delivering commitments within available resources.

"But the scale of the challenges we face has been raised to a level that we have not experienced in many years.

'Difficult decisions'

“Councils have been dealing with very significant external pressures such as rising utility and energy costs, as well as the impact of inflation, interest rate rises and the cost of borrowing.

"Income has not been keeping pace with the cost of delivery services, at a time when East Lothian is one of Scotland’s fastest-growing areas.

“We have already agreed urgent mitigation measures to address the deteriorating financial position affecting local government and to help mitigate an overspend in the current financial year.

"But the current level of reserves which we are drawing on will not be available going forward.

"It is important to know that most of our revenue budget comes from national government, with council tax income from residents only accounting for less than a quarter of our funding.

“It is currently estimated that the council could face a potential funding gap of in excess of £45 million in the next five years.

“Councillors will have difficult decisions to take in setting our budget at the end of February."

The Labour councillor, who represents the Dunbar and East Linton ward, thanked council employees for their "strong track record of innovation and building on improvements to services".

Already, the council has called for an urgent review on how local government is funded.

Leaders of COSLA – the umbrella group for local authorities across the country – unanimously have written to the First Minister reiterating their deep concern about the level of resources allocated to local government.