Council's finances hit harder than expected in yesterday's announcements

Council / 16 Dec 2016

Peterborough City Council learned yesterday how much it will receive in government grants next year and the outcome is worse than anticipated.

Under next year’s settlement the council will see its grants reduced by a further £0.7million, with nine grants still to be announced. This increases the total reduction for 2017/18 from £7.5million to £8.2million.

As a result the council will need to find an additional £0.7million to balance its budget next year.

Savings and efficiencies of £19million for 2017/18 have already been identified which were approved by full council on Wednesday night (14 December). 

In yesterday's announcement the government revealed it will be cutting back on the amount of money it pays in New Homes Bonus. The bonus, which rewards councils for levels of housebuilding, used to be paid for six years but from next year this will be reduced to five.  A minimum level has also been introduced for the number of homes that have to be built before the bonus is received, therefore further reducing the amount of money the city stands to receive. As a result the council will receive £1.5million less next year in New Homes Bonus funding.

The government is using the money it is taking back from the New Homes Bonus to provide councils with additional funding to spend on adult social care. However, the council's additional allocation for adult social care will be £0.8million - leaving the council with a net reduction of £0.7million.

It has also been announced that local councils will be allowed to charge an extra one per cent in council tax to raise additional funds for adult social care services in the next two financial years. This is on top of the two per cent that councils are already able to charge to support these services. If the council chose to levy this, it would generate an additional £600,000.

Reacting to yesterday’s grant settlement, councillor David Seaton, cabinet member for resources, said: “Unfortunately yesterday’s news is no great surprise to us in Peterborough although clearly we have done even worse than expected.  Overall we look at this stage to be £0.7million worse off than we expected to be.

"The government has given to us in one hand through the adult social care grant but they have also taken money away from us and in effect penalised us for being a growing city. For example, the changes to the New Homes Bonus mean that we will now not receive £1.5million next year which we were expecting to.

"I am pleased that the base line grant we were promised as a result of our efficiency strategy, which sets out how we will meet the challenges of further funding reductions, has materialised and that the strategy was worthwhile us producing.

"However, overall we are now in a worse than expected position next year and we will now have to make the difficult choice between making further savings and efficiencies in our phase two budget setting process or increasing council tax by a further one per cent. It provides us with a huge challenge to protect vital services while finding a way to ensure that our great city continues to thrive."