Tory council warns it is ‘not financially sustainable’ without more funding

A Tory heartland council has warned that austerity and rising social care needs mean that it is ‘not financially sustainable’ under current funding levels.

Hampshire County Council’s director of corporate operations, Rob Carr, issued the stark warning in a report tabled at the local authority’s policy and resources select committee this week.

The report warned that council finance managers were experiencing much higher non-pay inflation that was budgeted for, ‘including mounting pressure from contractors who simply can no longer afford to deliver service contracts within the agreed price’– with the situation acute in adult social care and home to school transport.

Mr Carr’s report said additional funding of up to £20m-25m may be needed to ensure the continued provision of services to the most vulnerable residents.

‘By April 2023, we will have been implementing savings for around 13 years and will have taken some £640m out of the budget,’ the report noted. ‘In simple mathematical terms our increases in income and funding do not match the increased costs and growth in services and there are no other options to balance the budget other than reducing spend or increasing charges to users.’

Four years ago, the council’s medium term financial strategy warned it could not maintain financial sustainability without extra government funding.

But this week’s report said: ‘It is clear that nothing has changed other than the fact that social care pressures are getting worse, and that Government funding is not even remotely keeping pace with the general annual inflationary pressures that we face, before taking account of service growth, pressures and the current economic climate.

‘Whilst it seems incomprehensible that the County Council could be considering a scenario where it is unable to balance its budget in the medium term, it is also inevitable that we will reach this position at some point based on the current methodology for funding local government.

‘The primary question at this stage is that assuming a ‘base’ level of deficit of up to £200m, is the County Council able to balance its budget through a range of measures or does it need to consider starting early discussions with Government about its future financial standing?’

Although the government is facing serious financial pressures, the report emphasised the council is not currently at risk of going bankrupt, as Northamptonshire, Croydon and Slough have in recent years.  

‘At the same time however, we must be realistic about what can be achieved and be cognisant of the impact that it will have on services and residents if we start to consider a statutory minimum level of services,’ the report advised. 

Hampshire County Council has been run by the Tories for the last 25 years, and currently all the MPs in the area are Conservative – Portsmouth and Southampton, which have a Labour MP each, are run by separate city councils. 

The council report warned that implementing further cuts to services and adopting more ambitious approaches to commercial income generation brought increased financial risks and said council bosses had been lobbying government officials and MPs.

Mr Carr’s report said, ‘It is clear that under the current funding regime, the County Council is not financially sustainable and even if it were able to balance the budget by 2025/26 then the problem just moves on to the next financial year. 

‘It is not just about being able to balance the budget but about the impact on services and residents as a result of potentially implementing the reductions or increased charges for use.’

Photo by Towfiqu barbhuiya