Council facing £100m five-year budget gap amid soaring inflation

Local authority’s financial position described as ‘very challenging’, reports Simon Allin, Local Democracy Reporter

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Enfield Council’s five-year budget gap is forecast to balloon to almost £100million thanks to spiralling inflation.

The local authority faces a “very challenging financial position” and will bring forward a raft of savings proposals to help plug the £96.9m hole in its finances, according to a cabinet report.

The report reveals that inflation, which hit 10% in the year to July, accounts for the majority of the budget gap and is due to cost the council an estimated £63.8m up to 2027/28. During the 2023/24 year alone it is forecast to cost the authority nearly £20m – more than double the estimate for a normal year.

By law, councils must set a balanced budget. Most of their income comes from government grants, council tax and business rates. But local authorities are unable to raise council tax beyond 2.99% without holding a referendum, and the report states that ministerial changes in government mean there is “greater uncertainty around the potential timing of major funding reforms”.

The report, which was presented to a cabinet meeting on Wednesday, states that the council is being affected by levels of inflation not seen for 40 years, alongside a residual impact from the Covid-19 pandemic. It also faces increased demand on adults’ and children’s social services, partly as a result of the lingering effects of the pandemic.

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Around £20m of savings have so far been identified over the five-year period, on top of £200m-worth of already-achieved savings following the introduction of austerity measures by the government in 2010. The council will look to find further savings to ensure it is able to balance the books next year before the official budget is set in February.

Cabinet member for finance Tim Leaver said the government had done “very little” to support councils either by providing financial support or giving “any indication of what they are going to do to fund us fairly”. He blamed inflation, the cost-of-living crisis, increased demand and the “staggering” increase in interest rates for the budget pressures.

A row over the cost-of-living crisis and the government’s handling of the economy dominated the second part of the full council meeting on Wednesday evening. Members of the Labour administration backed an urgent motion tabled by council leader Nesil Caliskan calling on ministers to tackle the cost-of-living crisis.

Claiming the government had “lost control of the economy”, the motion stated that increasing energy bills, tax rises on working people and soaring inflation had “devastated living standards for Enfield residents” who are also facing higher rents and mortgage rates.

It called on the government to tax oil and gas giants to pay for an energy price gap freeze and ensure the minimum wage is set at a level that reflects the cost of living. It also urged Chancellor Kwasi Kwarteng to “take immediate action to stabilise the economic situation”.

The motion followed a “mini-budget” unveiled by the chancellor last month, which contained a raft of tax cuts and extra borrowing. The budget was followed by an immediate fall in the value of the pound, fuelling inflation, and subsequent hikes in mortgage rates.

Members of the Conservative opposition abstained on Cllr Caliskan’s motion, dismissing claims the economic crisis had been “self-inflicted by Liz Truss and her government” and arguing global factors were to blame. They said tax cuts would help residents to keep more of their money and lead to future economic growth. The Conservatives said they supported measures being taken by the council to help residents deal with the cost-of-living crisis.

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