West Berkshire Council says it is facing significant pressures on recruiting and retaining staff in certain services, especially in adult and children’s social care.
The additional agency costs required to cover vacant posts are described as “substantial” and an estimate of £3m has been identified as a worst case additional cost in the first half of 2022-23.
Interest costs have more than doubled during 2022-23; when the budget was set, and Public Works Loans Board – where the council borrows money to invest in West Berkshire infrastructure – rates were approximately two per cent, but are now in excess of four per cent.
This means that for the same revenue costs, the council will be able to afford half of the total council funded capital projects, although it says it remains committed to the full refit of the Newbury Lido.
The proposed expenditure on the capital programme over the ten year period amounts to investment of £392.7 million.
A total of £185.2 million of debt financing has been earmarked to support delivery of the capital programme over the life of the strategy.
That means currently the council is allocating £196.4 million in support of ensuring its vulnerable residents achieve better life outcomes and reach their full potential.
Further investment is planned enabling enhancement of existing educational facilities, provision of new school places in response to new housing developments across the district, enhancing accessibility to existing provision and investment in adult social care services.
Roads get £140.5 million, including bridges, flood alleviation, drainage and cycle paths.
And £12.3 million goes in support of the development of a leisure strategy for the district. Investment includes redevelopment of the Northcroft Leisure Centre (both dry side facilities and the lido), Kennet Leisure Centre and various modernisation projects across the district’s current leisure provision offering.
The report before the council’s executive committee does not include the Monks Lane Sports Hub investment.
A further £27 million is in support of the council’s environment strategy in response to the climate emergency, acknowledging the council’s role in facilitating a move to more environmentally sustainable lifestyles and business models across the district.
The report says there remain a lot of unknowns for local government finance in the future.
The macro economy has seen some major changes during 2022-23 that will impact the future financial position of the council, not least the increase to interest rates at which the council can borrow to finance capital expenditure.
The local government finance settlement (LGFS) was only for a one year period, 2023-24.
The council says the absence of a longer term financial envelope for local government does mean that there remains significant uncertainty over the financial position from 2024-25.
The Mid Term Financial Strategy (MTFS) looks to a four year horizon and for the next three years there are a variety of themes included which form the basis of the future savings areas.
The MTFS also includes information on financing the capital strategy and how the scale and profile of this strategy has an impact on the overall financial position of the council.
The report from the council’s finance team says the longer term outlook is dominated by a range of factors; firstly, the macro-economic recovery from the Covid-19 pandemic and the impact that this has had, and will have on the UK economy including inflation and interest rates; secondly the impact on Government reform in adult social care and other services such as planning policy which will alter financial planning assumptions, and thirdly, the longawaited fair funding review and proposed further business rates retention proposals for 2025-26 – beyond which should have a significant impact on the council’s finances and hopefully provide some longer term financial planning certainty.
The capital strategy is set against an uncertain economic backdrop.
The ongoing impact on the UK from the war in Ukraine, together with high inflation and higher interest rates have contributed to deteriorating economic outlook.
Historically the Public Works and Loan Board (PWLB), rates have been low with average borrowing for a 25 year annuity to fund capital expenditure at between 1–2 per cent.
The rate is currently 4.8 per cent.