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Increase costs of goods, services and wages may cause in-year budget gap

22 September 2022

Inflation levels rising faster than predicted, plus increased levels of demand and the costs of goods and services to meet it, are leading to a predicted in-year budget overspend of just over £2m, Members of Cambridgeshire’s Strategy and Resources committee will hear next week (Sept 30th)

In June, the Council allocated additional resources to meet expected inflationary pressures this year, which it expected to be driven by rising energy prices and some large contracts linked to national inflation rates. It also created a reserve to meet unexpected inflationary pressures.

But, just as households across the county are feeling the squeeze of increased bills and the cost of living – extra costs faced by the council alongside expected national public sector pay increases expected this year – is leading to the projected in-year gap, which is around 0.5% of the council’s overall budget.

“Predicted energy costs, supplies and services increases- alongside an increase in the levels and complexity of demand as we begin to recover from the effects of COVID, meant we had been prudent and set aside budget to meet these increases,“ said Cllr Lucy Nethsingha – Leader of the Council, and Chair of S&R. “But like residents across the county and the UK we are facing rises far higher than anyone expected.

“In October some of our energy bills looked set to rise by 100% - and we are still assessing the impact from yesterday’s government’s announcement on a scheme which -whether it will help in any way at all - still only lasts until April. In addition, we are having to pay far more now for materials to maintain our highways, to keep our buildings operating and for our staff to travel around the county supporting vulnerable people.”

“Despite our additional costs, we understand the real anxiety of people on the lowest incomes, which is why we are continuing to invest in schemes which target people in most need. This includes free school meal vouchers during holidays, which we are confirming will continue at £15 per child, per week for the October and February half terms as well as the Christmas holiday, and funds to target help to older people.”

“Public sector pay is likely to rise but we need to employ and keep good people and to do that we need to pay them fairly, “ said Cllr Elisa Meschini, deputy leader of the council and vice chair of S&R, “Its no secret that pay levels for public sector staff– who include social workers, highways maintenance teams, trading standards officers, planners, librarians and registrars- which are set nationally, simply hasn’t kept pace with the cost of living.

“We have a commitment to being a good employer and to paying our staff fairly – but we also recognise that in the current climate, this comes at a cost.”

In the report to committee, members will hear that the Council expects to be able to meet the costs of inflation on its revenue budgets this financial year – but is raising significant concerns, in looking ahead to setting its financial plan for the next five years.

This includes uncertainty about local NHS funding levels and activity that may impact on the Council’s costs, particularly as national hospital discharge funding arrangements cease. Also the costs of meeting forthcoming government reforms such as changes to Adult Social Care

Members will hear that as well as looking at ambitious plans to deliver savings to bridge the gap the council is also pro-actively managing large contracts, ensuring value for money, and maximising grant funding where possible from government.

The Council also continues to allocate investment from the Just Transition Fund, funding work designed to deliver improvements in terms of social mobility, flooding and climate change. In June, a further £4.4m was allocated taking the total funding earmarked to nearly £10m.

The meeting which starts at 2pm on September 30th and will be held in the Red Kite Room, in the Council’s headquarters at New Shire Hall in Alconbury, can also be followed online.