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14/10/08 : Budget pressures for RBC:
Statement by Jo Lovelock, Leader of Reading Council
Since the budget for the current year was approved a number of factors have emerged
which make the predictions for next year's budget making process far less certain
than was expected.
In particular the international economic situation is impacting on the council's
budgets and increases the pressures on income and expenditure. This obviously includes
the increase in fuel, energy and food prices, which we are all experiencing.
"Demographic factors are creating unavoidable pressures. These include the increase
in the number of older residents who need care and the inward migration into Reading
from across the rest of Britain and Europe, which has, in particular, seen a sharp
rise in the number of births and children needing school places.
The Council has managed both its cashflows and its capital financing (e.g. for capital
projects, such as new school buildings) well over many years. Ensuring beneficial
interest rates for both borrowing and loans has always contributed to keeping council
tax increases down. In these unprecedented days of international crisis in the world
banking systems, it will be much more difficult to guarantee that.
Inflation is also difficult to predict, given all the above factors are affecting
everyone, and we are still unsure where negotiations on the local government pay
award will end. 2% had been allowed for, but that seems likely to be higher.
Earlier in the year it was predicted that there would be £6.1 million of balances
which would have been a cushion against some of the pressures, but for the first
time for some years there is likely to be an overspend on the current year's
budgets, particularly in the demand led services, such as care for the elderly.
Together with the planned use of balances agreed when the current year's Budget
was set, the level of balances is likely to be reduced to £3.5 million on current
predictions and contingency funds will also be less certain because of the banking
crisis.
It is also likely that the economic situation will mean less income from services
such as Leisure Centres as families tighten their belts and use them less.
Obviously work is ongoing to keep to budget, but in these unprecedented times, it
is inevitable that considerable savings will need to be made to both protect vital
services and to keep the council tax increase as low as possible, recognising as we do
that household budgets are under the same pressures. It is far too early to predict
what the increase will be, although all Councils are in any case capped at 5%.
One of the likely areas for reduced expenditure is the capital projects we had been
hoping to progress and a review of that is under way, with only urgent health and
safety measures continuing to be a priority at the moment. It is likely that some
of the planned projects will have to wait as it would be unwise to borrow money in
these uncertain times, and it is not a good time to sell property surplus to requirements.
In the past capital receipts have helped to fund the capital programme, but many sales are
just not going to happen, or be worthwhile, in the near future.
We all hope that the measures that our own and other Governments are putting into place will
take the banking crisis into calmer waters, but it is likely that the pressures will continue
to impact on all of us for some time.
"The Labour Group remains committed to the set of policies which we put to the Council
and were approved in June, which build on what we have delivered for Reading over the
years. We are asking officers to look at a range of possible savings which protect
these vital services, minimise the council tax increase and only take account of unavoidable
pressures, but we do not pretend that is going to be easy.
We hope that the other two political groups will take a constructive approach to this
process and that we can all pull together for the benefit of all Reading residents who
both rely on our services and pay their council tax. We also intend to have an open dialogue
with the Trade Unions as we have in recent years.
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