‘No bankruptcy risk’ for Lancashire County Council - but higher-than-expected bills pose a problem

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Lancashire County Council does not face anywhere near the same financial challenges as other local authorities that have effectively declared bankruptcy, the authority has insisted.

A report presented to a County Hall cabinet meeting last week stressed that it was not in the “territory” of those councils that are unable to cover their costs.

However, members were warned that there was no room for complacency - and that an overspend of £7.6m was currently predicted beyond the authority’s more than £1bn budget for 2023/24.

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That gap has opened up in just the first quarter of the financial year and has been attributed to issues including rocketing bills for staff wages and school transport, as well as the perennial challenges posed by demand for - and costs of - adult and children’s social care.

The financial pressure is on at Lancashire County Council, but not as much as many other local authoritiesThe financial pressure is on at Lancashire County Council, but not as much as many other local authorities
The financial pressure is on at Lancashire County Council, but not as much as many other local authorities

Deputy county council leader - and finance portfolio holder - Alan Vincent told cabinet colleagues that stubbornly high inflation and interest rate rises had also played a part.

The predicted overspend - which equates to only 0.73 percent of the total cash available between April this year and March 2024 - has already been cut from an earlier estimate of nearly £18m.

Measures taken to reduce the figure include using the authority’s transitional reserve to cover the cost of a proposed nationwide council staff pay settlement - of an additional £1,925 for most workers and a 3.88 percent increase for the highest paid. A deal on the proposal has not yet been reached, but, of accepted, it would add £6m to the wage bill that County Hall budgeted for at the start of the year.

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Remaining Covid grant funding of £2m has also been used to address the ongoing impact of the pandemic on health inequalities.

However, a variety of challenges remain - including a £5m spike in home-to-school transport costs for children with special education needs and disabilities (SEND). That has arisen as a result of what the authority says are “significant increases in passenger numbers and journey distances” in order to comply with guidance about how the maximum time a child should have to travel - no more than 45 minutes for primary and 75 minutes for secondary school children.

A raft of councils have issued so-called “section 114" notices in recent years - five since 2021 - meaning that they cannot meet their financial commitments and sometimes seeing them cease all spending except on services they are obliged to deliver. Birmingham City Council issued such a notice last month amid a forecast £87m black hole in its books this year.

County Cllr Vincent said that he was “’happy to be able to reassure the people of Lancashire that we are not in the financial mess that many other councils, regrettably are in - and nor do we intend to be”.

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He also thanked staff and cabinet members for managing to drive down last year’s County Hall overspend to just £750,000 - when it had started out at similar level to this year’s initial £18m forecast - and said that he was “optimistic” that the same could be done this time around.

The authority also has £37m of savings to deliver before next March - a combination of those carried over from 2022/23 and others agreed at this year’s budget in February.

Cabinet members were told that whilst the total number of children in care in the county council area fell from 2,133 to 1,853 between September 2020 and June this year, the cost of agency placements has “increased significantly” because of the “extremely complex needs” of those children requiring care.

Meanwhile, Labour opposition group leader Azhar Ali asked what risk was posed to the county council's resources of the increasing costs of providing services for SEND children, specifically.

County Cllr Vicnent said that while Lancashire was no more affected than other parts of the country, it was “an issue which could do with some extra government support, in reality”.