Highland Council Considers Planning For 3-year Budget Gap

7th September 2018

The Highland Council has agreed to plan for a potential budget gap of £66.7 million over the next three years.

It was agreed by Members in June to develop plans for a multi-year budget for the next 3 financial years (2019-22) to meet the challenge of a potential funding gap dependent on a wide range of variables.

The budget assumptions are based on two key variables, namely the level of revenue grant funding received from the Scottish Government and the annual staff pay award. The budget gap could range from £34.1m to £124.9m, because the Council has no certainty on either of these variables. Having such a wide potential range for the budget gap, makes planning work incredibly difficult, and so it has been decided that the budget planning will focus on a scenario of a 1% annual reduction in government grant funding and an annual 3% pay award. Setting the variables at this level assumes a budget gap of £66.7m over the 3 year period.

Over the period 2013/14 to 2018/19 the Highland Council has already had to approve budget savings of £102.1 million as well as agree Council tax rises of 3% in each of the last two years in order to deliver a balanced budget.

Budget Leader Councillor Alister Mackinnon said: "In Scotland, local government has probably been the hardest hit of the wider public sector in terms of real terms reductions in funding. This Council has seen a cut in real terms over the past 5 years and the outlook continues to look grim.

"The future is by no means certain, but by assuming a budget gap of £66.7m, this allows us to prepare a plan which we can adapt as new information arises. This way, by starting our planning early, we can prioritise and accelerate proposals or defer certain options if we can.

"Work is already well advanced in developing information to inform the budget process. This involves taking a close look at services and identifying where there are opportunities for becoming more efficient and commercial and ensuring there is best value for every penny spent."

He continued: "It has not been easy in the past budgets and it will not be easy to find even more savings on top of those we have already made. Income generation, commercialisation and efficiencies become even more vital in this context in order to protect essential services and we do not have the luxury of the significant reserves we once had to give us any wriggle room. It is undoubtedly the case that there will be very hard decisions to make and we all need to work across the chamber to do the best we can for the people of the Highlands."

A recently produced report by SPICe highlights that between 2013/14 and 2017/18 there was a 7.1% fall in the local government revenue settlement in real terms. Over that same period the Scottish Government revenue budget decreased by 1.8% in real terms. The same SPICe report identifies that over the period 2013/14 to 2018/19 Highland Council has seen a reduction in funding per head of population of £172, the fourth highest of all mainland authorities.