Financial Forecast Reported To Highland Council

1st November 2024

A revised financial forecast for the Highland Council, taking account of already agreed savings and other measures, suggests a remaining budget gap of £38m-£54m over the coming three years, 2025/26 to 2027/28.

As part of the Council's Medium-Term Financial Plan, agreed in February 2024, Council agreed a package of £54.6m of budget savings, and the use of a range of financial flexibilities and use of reserves, to address the projected £113m gap over a 3-year period 2024/25 - 2026/27.

A revised forecast, before taking account of agreed savings and other measures, and factoring in financial assumptions, is a budget gap over the next three years (2025/26 to 2027/28) ranging from £116m-£132m.

After allowing for budget savings and other decisions already made by the Council, and other assumptions, these scenarios suggest the figure of a residual budget gap of £38m-£54m over the three years.

It is clear that there are significant and additional financial pressures and challenges facing Governmental budgets in the current and next year, with it being expected these will ultimately translate to a potentially more challenging budget settlement and financial outlook for Scottish Local Authorities. There remains uncertainty regarding the impact of national decisions, which may in turn impact the scenarios reported to Members.

While inflation and cost pressure estimates are expected to exceed the likely level of funding that may be available to the Council, there is an inevitable need to plan for further additional savings.

Convener of the Highland Council, Bill Lobban said: "Decisions already made by the Council in February 2024 provide a very solid foundation to the Council's financial planning. It is essential the Council continues to apply a multi-year, strategic approach to its financial planning and financial sustainability, and makes the necessary decisions to ensure expenditure plans are in line with funding levels.

Leader, Raymond Bremner said: "We will do everything we can to mitigate the impact on our residents in our decision making. At the same time as making savings, and making best use of public funds, we have been able to plan supporting our ambitious Highland Investment Plan through our revenue budget decisions, which could see £2bn of capital investment across the Highlands over the next 20 years and which will leave a valuable legacy for communities well into the future.

"Public and staff engagement in the lead up to our last budget was extremely helpful in shaping our thinking and decisions. The Operational Delivery Plan also provides a helpful mechanism for monitoring progress with the delivery of agreed savings and this will continue to be useful moving forward as part of our financial planning process."

Chair of the Council's Resources Committee, Cllr Derek Louden commented: “The important thing for us to remember this is a very early stage in budget setting, with a great deal of uncertainty at this time. Looking at the direction of travel and considering income generation, budget reduction and use of reserves in line with the Council’s strategy for the coming years will be part of our planning for budget setting in March 2025."

A further report will be brought to the Council meeting in December.

Comment
The Scottish Government will set it budget on 4 December so many public bodies including the council will need to wait to see what the settlement is. Extra money is coming to the Scottish Government following the UK budget decisions but with Scottish Government finances already struggling it remains to be seen how much councils can expect. The huge change in national insurance charges affects big and small entities and as public bodies amply large number of staff the bill are going to be huge. It will be impossible to meet the new charge without affecting services and probably staff reductions over the next year or two.

In Caithness the biggest employers are the council, NHS Highland (NHS is exempt form the new charges) and Dounreay complex. With increases in NIC of over £800 per annum per employee budgets will be scrutinised like never before. Private providers working within NHS are not exempt