West Somerset DC is on the verge of becoming financially “unviable” and has been advised to seek a review of its boundaries within the year, according to a leaked report seen by LGC.
The small district’s leader Tim Taylor (Con) and chief executive Adrian Dyer met ministers on Tuesday to discuss the findings of an assessment by the LGA, which said the council was “not viable as a unit of local democracy and governance over the longer term”.
The report, delivered to West Somerset on 31 October, forecast a funding gap driven by inflation, pay, contract and property costs of £248k in the council’s finances from 2014-15 - some 4.7% of projected net expenditure. This is expected to grow to more than 26% by 2019-20.
The LGA told the district to seek urgent clarification from ministers on its funding assumptions, in case the gap should open sooner and wider than predicted.
The council has been advised to seek an urgent review of council boundaries in the area, to start next summer and finish before local elections in 2015.
The LGA has also recommended money-saving measures, including ending non-statutory services.
The council’s financial modelling suggests council tax would need to increase by 39% in order to achieve a balanced budget over the next three years. This course of action has not been recommended
The meeting with Mr Lewis comes one day after Torbay MP Adrian Sanders (Lib Dem) warned communities secretary Eric Pickles that smaller unitaries were experiencing “real difficulties” in balancing their budgets.
Unavoidable cost pressures
The LGA was invited by West Somerset to conduct an independent investigation into the council’s financial circumstances during the summer. Last month, LGA executive director Michael Coughlin and District Councils Network chairman Neil Clarke (Con) held meetings with a number of local politicians and senior officers in Somerset to discuss the situation. The results of their assessment were delivered to the council two weeks ago.
The report found the council’s main problem arose from it facing “unavoidable” cost pressures from inflation, pay, contract and property costs of some £150,000 a year – about 3% of costs. With the council only able to raise £39,000 a year through a 2% council tax increase, this creates an ongoing structural deficit of £111,000 each year on an annual budget of just £4.94m.
The council has made a number of assumptions about the funding it will receive from the New Homes Bonus and from the retained business rate finance system which predict a widening funding gap.
The LGA “strongly suggested” the council seek a meeting with ministers to “test” and “clarify” these assumptions “as soon as possible” before making any further budget or financial planning decisions. This meeting, with local government minister Brandon Lewis, took place on Tuesday.
The LGA report claimed the situation the council found itself in was “without precedent” and said there was “no established measure or definition of viability of a council and no process nationally prescribed to deal with such a situation”.
If the council were to make a number of short-term saving measures and strike up shared service agreements with neighbouring councils, it would continue to be able to “provide a viable organisation serving the people” of West Somerset. However, in the long-term, the LGA concluded the council was “not viable as a unit of local democracy and governance” and would be unable to provide statutory services “to a minimum acceptable level” or “ensure an acceptable level of risk to life, health, well-being, property and/or assets”. It would also struggle to recruit and retain “sufficient capable staff to deliver basic services”.
The assessment suggested a number of short-term measures including reviewing staffing levels and structures, raising charges for services such as pre-application planning advice and axing non-statutory services such as pest control.
It also urged the council to explore shared service arrangements with neighbouring districts for services such as building control and environmental health, planning, back-office and customer services, car park fees collection, HR and revenues and benefits.
But the council was also urged to establish the process and timescale for the Boundary Commission to conduct an “urgent review of local authority boundaries and governance arrangements in the area”. The review should start next summer with a view to being completed ahead of local elections in 2015.
To achieve a balanced budget for the three years to March 2016, the council estimated a 39% council tax increase would be necessary. The report said that, while councillors may wish to pursue such an option, “the overriding sense emerging from discussions was that it was very unlikely to generate a result in favour of the level of increase in council tax necessary to address the problem.
The council is understood to have addressed staff and councillors on Wednesday morning.
Cllr Taylor admitted there were questions over the viability of the council in the long term and pledged to explore further the LGA’s recommendations for achieving savings internally and through sharing arrangements.
“We will take the LGA recommendations very seriously indeed,” he said. “Much will still depend on the level of government funding over the following years. We will continue to make the case for West Somerset to receive and annual income per head of its population, which at least matches that of other Somerset district councils, so that we are able to provide services at a similar level to those provided by other Somerset district councils.”