Cost of Living Crisis: Inflation and pay offers for striking staff put council over budget as the local authority's eye-watering debt hit £1.1 billion
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In Brief:
- Highland Council is anticipated to go over budget by £9.6 million this year
- Majority of that comes from five per cent pay offer to unions
- Service overspends account for more than £3 million too
- Debt rose from £963.5 million to just over £1 billion
- Loan charges alone totalled almost £82 million a year
Pay disputes with staff will cost the council more than £5 million this year and put it over budget while the local authority’s debt has shot up to an eye-watering £1.1 billion.
The corporate resources committee was told that a significant element of a “best estimate” overspend of £9.6 million is down to the recent pay offer which increased from a budgeted two per cent to a potential five per cent.
It was also confirmed that the council’s external debt at the end of the financial year rose from £963.5 million to just over £1 billion – the majority of that coming from the Public Works Loan Board – with loan charges totalling almost £82 million a year.
Despite that enormous sum, the most immediate worry is if unions reject the current pay offer and if the Scottish Government is unwilling to step-in and provide additional funding support.
However, members were generally upbeat about the council’s position and though no plan was laid out there were calls from the committee chairman Councillor Derek Louden for “collaborative working” to tackle the issues.
Inflation begins to bite
Some of the causes of the council going over budget read like items from a household budget and are well known to the public such as inflation and the increased cost in fuel.
The bulk of that is made up of unbudgeted costs stemming from strikes and inflation as the pay offer to avert further industrial action will cost the council £5 million while inflation for utility costs a further £1 million.
But the net service expenditure is also expected to go over budget by £3.6 million largely from the Communities and Place, Education and Learning, Infrastructure, Environment and Economy; and the Property and Housing directorates.
There was some positive news in that there was a net surplus for Council Tax collection – up by £300,000 compared to what had been budgeted – but If that cannot be made-up then the local authority will have to use its reserves.
Better position than many councils
The £9.6 million would be hard enough to overcome without swinging cuts but it comes in the context of having to deliver a budget which incorporates savings of £17.7 million which need to be delivered.
Cllr Louden acknowledged that overspend and rising debt is a blow but that they came amid a wider economic context.
“We had Brexit, we had Covid, and now just as the sunshine was appearing, we have rampant inflation. Some of us barely remember the 1970s, which is the last time that inflation was so high,” he said.
“It is very challenging for the council but we must think as much as possible about the people, businesses and charities having to deal with this. We must help as much as we can.”
Convener Bill Lobban agreed the current cost of living crisis was an unpredictable blow when the current budget was being developed.
He said: “There is no doubt about it that during the interminable meetings that Councillor Alasdair Christie led during the last budget process no one could ever have imagined the situation that we find ourselves in today.
“But the simple fact is that due to prudent financial management in the past this council is probably in a better position to weather this storm than many others councils.
“Hopefully by working together and working through this there will be a positive response for the people of the Highlands and our staff who are also members of our Highland community.”
