An update from the Leader on Council finances

This week Havering Council published its finance report for Period 4 ahead of October’s Cabinet meeting next week (Wednesday 4 October 2023). 

The report sets out the authority’s latest financial position which will set the context for attempting to set a balanced budget next year.

Unfortunately, we find ourselves in an even worse position than last year which will mean some more difficult and painful decisions to come.

As Leader, I am pleased to lead a well-run and efficient low cost council, as verified by several different independent organisations.

However, we are not complacent and everyone is working hard to do even better.

We are doing all the things you must do to balance the books every year which includes reducing head count, finding better low cost ways of delivering services, increasing income and selling any surplus assets.

We are at the stage now though that whatever we do, it is not enough due to the massive increase in costs of social care and homelessness.

And unlike the NHS, this has been badly funded by the Government and does not take into account individual circumstances of councils like Havering.

For example, we have high council tax, but low government funding due to the way the funding formula works. We also have one of the oldest populations in London, and one of the fastest growing younger populations in the country.

Add to this the Covid 19 pandemic. which impacted us immensely especially around young people needing mental health care support along with more long-term conditions as a result of elderly care.

More people moving in to the borough means more strain on housing too, especially homelessness.

Government legislation has also made it more onerous on private landlords and the number of private sector leasing properties available to us has dramatically reduced too.

The policy on benefits caps also impacts what people can afford.

All of this means we just can’t keep up with demand.

When looking at our budget position we have £48m in reserves, but with a projected overspend through big jumps in Social Care and Housing costs in 2023/24 of £23m, you can see at this rate how we will potentially be insolvent.

Next year we have a potential gap of £14 million rising to £51.8m over a four-year period to 2028.

Over the coming months, we will continue to work hard to find savings. This includes an immediate stop on recruitment and non-essential spending within the Council.

We will also ramp up our ongoing lobbying to both the current government and any future Government – calling on an urgent review on the funding formula to give Havering its fair share along with a change so we can keep 100% of business rates over the next five years.

This would help us plug our funding gap and stop the burden being pushed back on residents through higher council tax – which I appreciate is already much steeper than in other areas of London.  

I’m afraid I can’t shy away from the fact that the situation is desperate. We are now at the point where bankruptcy (by the issuing of what is known as a Section 114 notice) could happen in the next six to twelve months.

This will mean we will only deliver statutory services, sell off assets, increase charges and be forced to find other savings and efficiencies. None of us want this and we will continue to do all we can to prevent it. 

This will mean some very tough decisions over the coming months.

But just as we did last year we want to ensure that we engage with residents throughout the process to hear their views and to help us make these difficult decisions we will need to take in order to deliver a balanced budget and to avert the risk of going broke.

Cllr Ray Morgon
Leader, Havering Council