Councils under ‘immense financial pressure’ due to UK economic turmoil

Photo of Councillor Stephen Holt

Eastbourne Borough Council has joined local authorities across the country in warning of an ‘alarming’ outlook for its finances as a result of the UK’s economic crisis.

Soaring inflation coupled with increased demand for services due to the cost-of-living crisis, supply and demand issues caused by the war in Ukraine, additional energy costs and ‘uncertainties caused by government decision-making' are putting an enormous strain on council budgets. 

While some UK councils are essentially bankrupt with budget deficits running to hundreds of millions of pounds, a widescale savings and efficiencies programme in Eastbourne to cope with the devastating impact of the pandemic on income and costs brought a return to stability this year.

But now the council faces a fresh set of financial challenges, says Councillor Stephen Holt, Cabinet member for Finance. 

“The key driver of this immense financial pressure is inflation which is currently at a 40-year high but was relatively low when we projected our budgets last year," he added.

“This and other factors outside of our control, not least the uncertainties caused by government decision-making, have blown these projections out of the water and despite a significant improvement in our financial resilience over the past year, the outlook is frankly alarming. 

“With national policy U-turns and rapid changes made over recent weeks, our finance team have had an immense task to distill what this means for our council and I thank them for their hard work.” 

The medium term financial strategy (MTFS), which sets the financial direction for the council and forms a framework for fiscal planning, is due to be debated by Cabinet next week (November 2). 

Local government is facing a funding gap of £3.4bn in 2023-2024 and £4.5bn in 2024-2025, according to the Local Government Association. Meanwhile, the new Chancellor has announced that more spending cuts will be needed and local authorities are bracing themselves for further details on these.

Councillor David Tutt, Leader of the Council, said: “We shouldn’t forget that our situation in Eastbourne pales into insignificance compared to some councils where their entire existence is in doubt. Thurrock Council, for example, has been taken over by the government due to its financial risk and is having to borrow £836m to repay its huge debts while Slough Borough Council declared bankruptcy last year after finding it was £760m in borrowing debt and has a £479m budget blackhole.

“We achieved great successes in identifying savings and efficiencies through our recovery and stabilisation programme over the past two years but are now hit with a financial challenge that is greater than ever.

“It is our top priority to address how we will meet the scale of this challenge over the months ahead, as it will be in other local authorities the length and breadth of the country.”