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'Insufficient' reserves warning despite Lancs' improved budget

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Lancashire CC’s financial outlook has improved slightly but senior councillors are still being warned the local authority will have “insufficient” reserves to plug its anticipated £144m funding gap by 2020-21.

LGC reported last week how there are fears Lancashire will not be able to balance its budget in 2020-21. Leader Geoff Driver (Con) called the claims “scaremongering”.

report on the council’s financial outturn for 2017-18, due to go before cabinet next Thursday, outlines a slightly improved financial position at the end of year compared to what had previously been predicted by officers in February. However, it is predicted the county will face a £144m funding gap by 2021-22 (down from the £157m anticipated in January).

The council’s net expenditure of just under £704m was £20.9m less than what had been expected, despite a £6m overspend in children’s social care mainly attributed to agency staffing costs and placement costs. A number of other services underspent, including adults although the report noted the “proportion of the council’s revenue budget spent on adult social care continues to increase and remains a massive challenge as a result of the ageing population and increasing demand”.

On the slightly improved financial outlook, the report said: “A combination of the revenue underspend, a reduced need to draw down from reserves and also some new and significant contributions to reserves (e.g. council tax collection fund surplus) has led to the overall reserves position having improved.

“If the £68.410m forecast 2019-20 funding gap be fully covered from reserves this means that there is now forecast to be £32.296m to support the financial gap in 2020-21.

“It must be noted that this is still insufficient to cover the forecast gap in 2020-21 and additional savings must be identified to be able to achieve a financially sustainable budget in future years.

“In light of the position outlined above work is progressing to identify additional savings aimed at reducing the reserves requirement in 2019-20 and beyond with the aim of achieving a financially sustainable position that is not reliant upon reserve funding.”

While the improved financial position was noted in the report it did acknowledge the 2017-18 budget was “supported significantly by reserves to meet the structural funding gap”.

“The underlying outturn position, excluding the structural application of reserves, was an overspend of c£38m and a forecast funding gap of £144m by 2021-22 remains,” the report said.

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