Facing the Future - background and financial context

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Foreword - Councillor Louise Gittins, Leader of Cheshire West and Chester Council

Following the biggest public health emergency of our lifetimes, we continue to live in uncertain times. But we must always face the future with hope and confidence - addressing challenges head on. Your Council, working alongside you, is playing an active role in supporting the recovery of our borough. We are determined to build a stronger, greener and fairer future.

Hard decisions on our budget are vital to turning these aspirations into reality. £831 million is spent by the Council on services for local people that range from social care to street cleaning. These services have a massive impact on all our lives and our futures. Responsible choices around where we invest, what we prioritise and how we balance the books cannot be taken lightly. Government and the Council have provided funding to support our COVID-19 response on a temporary basis which was much needed. Investment has provided vital support for businesses, test and trace, support to our care homes and help for our most vulnerable residents.

However, at the time of writing, it is unlikely that Government will fund all these costs on a long-term basis and even before COVID-19, councils faced a financial challenge. While we have managed the financial position carefully, longstanding pressures on Adult Social Care, Children’s Services, homelessness and our economy mean we could face a funding gap of around £60m over the next three years. After business rates and council tax are accounted for, alongside existing savings proposals that we have already consulted on, the gap remains around £18m.

We hope to receive clarity on the funding we receive for the next few years from Government in December. This is vital to give us the certainty to plan for at least the next three years. In the meantime, combined with existing proposals we have already consulted on, we have worked hard to develop additional options that will help meet the challenges. We would like your input on whether these are the right choices.

We may receive less money from Government than anticipated or face further cost pressures. This would mean we would need further proposals to save money or raise income. We would welcome your thoughts on this challenge. Your views will be considered by Councillors when they set the budget on 17 February 2022. Your feedback will help inform decisions and I can assure you that your ideas are highly valued.


Background

We want to hear your views on how the Council can set a balanced budget in line with your priorities.

A series of proposals for each Council department is provided alongside early ideas for the future. The budget will be considered by all Councillors on 17 February next year. Depending on your feedback and more clarity on any funding we receive from Government, we may have choices on whether we need to deliver these proposals but also on when they could be achieved.

We may also need to find further savings over and above those in this document so we are also asking for your ideas on other ways we could raise income or save money.

We plan to close this listening exercise on 12 December 2021. The results will be published on our website in February 2022 so that you can see how your views have influenced decisions. We will then bring forward proposals to be voted on by our full Council meeting, scheduled for 17 February 2022.


Financial position

Since 2010 we have faced increasing pressures on services with more people with complex needs requiring support. The funding that we receive from Government has not kept pace with this increasing demand. We have always met our financial challenges and planned ahead although this has meant difficult decisions about our services. Overall, in cash terms we have had to make savings of more than £466m to balance the Council’s budget.

It was welcome that Government provided funding to help meet the challenges associated with COVID-19 but this was temporary in nature and is not in place to meet day-to-day service costs.

At the time of writing central Government has delivered its Comprehensive Spending Review, which is designed to provide clarity on the public money available for the next three years. However, we won’t know in detail what this means for the Council until December. Announcements have also been made around Government funding for adult social care but at the time of writing it is uncertain how much of this funding will be needed to pay for new costs to support people to pay for their care as a result of the reforms. It is unclear whether this money will therefore be sufficient to meet current pressures.

We believe we face a funding gap of around £60 million over the next three years. After business rates and council tax are accounted for, alongside existing savings proposals that we have already consulted on, the gap remains around £18 million, with a £6 million gap next year. The proposals in this document largely meet the gap for next year and include early ideas for future years for your feedback. A full list of proposals are available in Appendix A. Proposals totalling £7 million that are more technical in nature are not included in the sections below to enable a greater focus on areas which have more of an impact on services and residents.


How our budget is funded and spent

The money we spend on services ultimately comes from the public. This includes a mixture of local sources, including council tax, business rates and fees for services and grants from central government, mainly for specific purposes.

Since 2010 central government funding has been cut and councils are increasingly reliant on locally generated income. Councils set council tax levels and retain all monies collected, but they do not set the level of local business rates and only keep a proportion of the local rates collected to encourage economic growth. The Council retains about 40% of business rates and must give about £90 million to central government.



Where the money comes from:

  • 29% comes from dedicated school grants and other school related grants
  • 20% comes from council tax
  • 20% comes from government grants
  • 7% comes from business rates
  • 7% comes from fees and charges
  • 3% comes from housing revenue account
  • 14% comes from other sources.


Spending

This year we will spend £831 million on our services. This includes the funding we distribute directly to schools (£246 million Dedicated Schools Grant and other school related grants). Schools aside, the Council’s biggest area of expenditure is the £188 million that we spend on supporting vulnerable adults who need social care, and a further £70 million that goes towards supporting children and young people. The average cost of the services that this expenditure funds is increasing significantly. Since 2013-14 the annual cost of a child being in care has increased from £26,000 to £43,000 a year; the weekly cost of an adult care at home package has increased from £110 to £256.

The chart below shows how the Council’s resources are currently distributed against each of our departments, as well as the money which goes directly to schools:



Where the Council is spending its budget in 2021-22

  • 31% is being spent on Health and Wellbeing, which includes Adult Social Care, Public Health, Education, Children’s Social Services and Early Help and Prevention Services
  • 30% is being spent on Schools, which covers funding allocated to schools to provide education and support to schools
  • 17% is being spent on Communities, Environment and Economy, which includes Highways, Transport, Street Care, Libraries, Strategic Housing, Economic Growth, Leisure, Culture and Heritage
  • 22% is being spent on Council-wide services, which includes Council-wide budgets that support all services and support services such as Customer Relations, Democratic Services, Legal Services, Finance, Human Resources, Communications, Research, Change and Technology. This also includes the payment of Housing Benefits.


Capital Investment

Despite the pressures on our day-to-day spending, we have the opportunity to invest in assets that deliver an economic or social return into the future.

We can fund one-off projects to build and develop assets like leisure centres and roads for regeneration programmes, or technology and equipment.

Capital investment is raised:

  • from dedicated Government grants, some of which are automatically allocated and some for which we must compete with other organisations
  • from private sector investment
  • from other borrowing which is repaid over a period of years
  • from the Housing Revenue Account which is financed by, and allocated towards, council housing
  • through setting aside some of our revenue budget to fund future finance costs
  • through selling assets such as buildings or land that we no longer require to reinvest into public infrastructure

Our programme of capital investment is likely to cost over £331 million between 2022 and 2026 requiring approximately £98 million of Council borrowing, with the remainder financed through other sources. We borrow this money, similar to a mortgage, and it costs around £21 million a year to meet this borrowing cost.

Whilst capital funding sums may appear significant, spending must be affordable (i.e. capital financing costs are less than 10% of net budget) and must be done within Government guidelines.

We are developing a longer-term programme of capital investment on which we will conduct a public consultation in the future to get your views.


Foreword - Councillor Louise Gittins, Leader of Cheshire West and Chester Council

Following the biggest public health emergency of our lifetimes, we continue to live in uncertain times. But we must always face the future with hope and confidence - addressing challenges head on. Your Council, working alongside you, is playing an active role in supporting the recovery of our borough. We are determined to build a stronger, greener and fairer future.

Hard decisions on our budget are vital to turning these aspirations into reality. £831 million is spent by the Council on services for local people that range from social care to street cleaning. These services have a massive impact on all our lives and our futures. Responsible choices around where we invest, what we prioritise and how we balance the books cannot be taken lightly. Government and the Council have provided funding to support our COVID-19 response on a temporary basis which was much needed. Investment has provided vital support for businesses, test and trace, support to our care homes and help for our most vulnerable residents.

However, at the time of writing, it is unlikely that Government will fund all these costs on a long-term basis and even before COVID-19, councils faced a financial challenge. While we have managed the financial position carefully, longstanding pressures on Adult Social Care, Children’s Services, homelessness and our economy mean we could face a funding gap of around £60m over the next three years. After business rates and council tax are accounted for, alongside existing savings proposals that we have already consulted on, the gap remains around £18m.

We hope to receive clarity on the funding we receive for the next few years from Government in December. This is vital to give us the certainty to plan for at least the next three years. In the meantime, combined with existing proposals we have already consulted on, we have worked hard to develop additional options that will help meet the challenges. We would like your input on whether these are the right choices.

We may receive less money from Government than anticipated or face further cost pressures. This would mean we would need further proposals to save money or raise income. We would welcome your thoughts on this challenge. Your views will be considered by Councillors when they set the budget on 17 February 2022. Your feedback will help inform decisions and I can assure you that your ideas are highly valued.


Background

We want to hear your views on how the Council can set a balanced budget in line with your priorities.

A series of proposals for each Council department is provided alongside early ideas for the future. The budget will be considered by all Councillors on 17 February next year. Depending on your feedback and more clarity on any funding we receive from Government, we may have choices on whether we need to deliver these proposals but also on when they could be achieved.

We may also need to find further savings over and above those in this document so we are also asking for your ideas on other ways we could raise income or save money.

We plan to close this listening exercise on 12 December 2021. The results will be published on our website in February 2022 so that you can see how your views have influenced decisions. We will then bring forward proposals to be voted on by our full Council meeting, scheduled for 17 February 2022.


Financial position

Since 2010 we have faced increasing pressures on services with more people with complex needs requiring support. The funding that we receive from Government has not kept pace with this increasing demand. We have always met our financial challenges and planned ahead although this has meant difficult decisions about our services. Overall, in cash terms we have had to make savings of more than £466m to balance the Council’s budget.

It was welcome that Government provided funding to help meet the challenges associated with COVID-19 but this was temporary in nature and is not in place to meet day-to-day service costs.

At the time of writing central Government has delivered its Comprehensive Spending Review, which is designed to provide clarity on the public money available for the next three years. However, we won’t know in detail what this means for the Council until December. Announcements have also been made around Government funding for adult social care but at the time of writing it is uncertain how much of this funding will be needed to pay for new costs to support people to pay for their care as a result of the reforms. It is unclear whether this money will therefore be sufficient to meet current pressures.

We believe we face a funding gap of around £60 million over the next three years. After business rates and council tax are accounted for, alongside existing savings proposals that we have already consulted on, the gap remains around £18 million, with a £6 million gap next year. The proposals in this document largely meet the gap for next year and include early ideas for future years for your feedback. A full list of proposals are available in Appendix A. Proposals totalling £7 million that are more technical in nature are not included in the sections below to enable a greater focus on areas which have more of an impact on services and residents.


How our budget is funded and spent

The money we spend on services ultimately comes from the public. This includes a mixture of local sources, including council tax, business rates and fees for services and grants from central government, mainly for specific purposes.

Since 2010 central government funding has been cut and councils are increasingly reliant on locally generated income. Councils set council tax levels and retain all monies collected, but they do not set the level of local business rates and only keep a proportion of the local rates collected to encourage economic growth. The Council retains about 40% of business rates and must give about £90 million to central government.



Where the money comes from:

  • 29% comes from dedicated school grants and other school related grants
  • 20% comes from council tax
  • 20% comes from government grants
  • 7% comes from business rates
  • 7% comes from fees and charges
  • 3% comes from housing revenue account
  • 14% comes from other sources.


Spending

This year we will spend £831 million on our services. This includes the funding we distribute directly to schools (£246 million Dedicated Schools Grant and other school related grants). Schools aside, the Council’s biggest area of expenditure is the £188 million that we spend on supporting vulnerable adults who need social care, and a further £70 million that goes towards supporting children and young people. The average cost of the services that this expenditure funds is increasing significantly. Since 2013-14 the annual cost of a child being in care has increased from £26,000 to £43,000 a year; the weekly cost of an adult care at home package has increased from £110 to £256.

The chart below shows how the Council’s resources are currently distributed against each of our departments, as well as the money which goes directly to schools:



Where the Council is spending its budget in 2021-22

  • 31% is being spent on Health and Wellbeing, which includes Adult Social Care, Public Health, Education, Children’s Social Services and Early Help and Prevention Services
  • 30% is being spent on Schools, which covers funding allocated to schools to provide education and support to schools
  • 17% is being spent on Communities, Environment and Economy, which includes Highways, Transport, Street Care, Libraries, Strategic Housing, Economic Growth, Leisure, Culture and Heritage
  • 22% is being spent on Council-wide services, which includes Council-wide budgets that support all services and support services such as Customer Relations, Democratic Services, Legal Services, Finance, Human Resources, Communications, Research, Change and Technology. This also includes the payment of Housing Benefits.


Capital Investment

Despite the pressures on our day-to-day spending, we have the opportunity to invest in assets that deliver an economic or social return into the future.

We can fund one-off projects to build and develop assets like leisure centres and roads for regeneration programmes, or technology and equipment.

Capital investment is raised:

  • from dedicated Government grants, some of which are automatically allocated and some for which we must compete with other organisations
  • from private sector investment
  • from other borrowing which is repaid over a period of years
  • from the Housing Revenue Account which is financed by, and allocated towards, council housing
  • through setting aside some of our revenue budget to fund future finance costs
  • through selling assets such as buildings or land that we no longer require to reinvest into public infrastructure

Our programme of capital investment is likely to cost over £331 million between 2022 and 2026 requiring approximately £98 million of Council borrowing, with the remainder financed through other sources. We borrow this money, similar to a mortgage, and it costs around £21 million a year to meet this borrowing cost.

Whilst capital funding sums may appear significant, spending must be affordable (i.e. capital financing costs are less than 10% of net budget) and must be done within Government guidelines.

We are developing a longer-term programme of capital investment on which we will conduct a public consultation in the future to get your views.