Preston cinema development could force future cost-cutting on council as city says it has 'half the budget’ it should

Papers presented to the authority’s annual budget meeting reveal a potential £1.1m gap in the authority’s coffers from 2025/26. However, Preston City Council has deferred a decision over how to claw back the cash - until it knows for certain whether action will be necessary.

The scale of the financial challenge that may face the town hall hinges on whether the timing of the borrowing needed for the £45m scheme can be delayed and whether interest rates also fall in the meantime - so reducing the impact on the authority’s budget.

Cabinet member for resources Martyn Rawlinson told the meeting that the assumptions made about borrowing costs had been based on “a conservative forecast”.

“But if we get it slightly better than forecast, that deficit will disappear without us really doing anything. So [although] a million pounds a year…[is] a significant amount for this council, there are aspects to our position which show that it's not a grave concern,” Cllr Rawlinson explained.

He also stressed that the 2024/25 budget that councillors were being asked to set was one ”with no service reductions or job losses”.

“In fact, it’s quite the opposite - we’re proposing approximately £450,000 extra spending…for a council tax rise of 2.99 percent, which raises approximately £300,000 a year. So we’re actually giving back more than we’re taking,” said Cllr Rawlinson, who is also the Labour-run authority’s deputy leader.

Conservative opposition finance spokesperson Harry Landless accepted that major schemes like the cinema development - which is due to open early next year and also includes a Hollywood Bowl, games outlet, national restaurant chains and a street food hub - come with “an element of risk in terms of how much it costs to borrow”.

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However, Liberal Democrat group leader John Potter said the only reason his party was not “making a bigger issue” of the potential need for “massive savings” was because he trusted the advice of the council’s finance officers that it would be December before the authority had a full understanding of how interest rates were going to affect the situation.

Preston is set to borrow £23.7m for the Animate project across 2023/34 and 2024/25, in addition to borrowing in previous years. More than £6.5m for the scheme is coming out of the city’s share of the government’s Town Fund and a contribution from the City Deal.

In order to delay the need for what the council papers describe as an “immediate budget savings plan” in the current financial year, the authority is releasing £742,000 from a reserve previously held to cover the risk of increased pension fund contributions, which is no longer deemed to be needed.

The authority also has a long-held and unpublished list of £1.3m in contingency savings which it could make on non-statutory services, if required, to cover any future financial gap - although it stresses that it would first seek efficiencies from its digital transformation programme or by trying to generate additional income.

The budget document acknowledges that interest rates could always increase while finalising the borrowing for Animate, which would force up the cost of the project, rather than reducing it. However, it also notes that if the council receives income from the sale of assets - or additional investment income - it could cut the level of borrowing needed for the scheme.

The budget risk register assesses the likelihood of increased borrowing and construction costs for all city centre regeneration schemes as high, with an equally high impact on the authority if they come to pass.

Separately, there was a warning that the £16m Harris Museum refurbishment could be hit with “potential overspends”, with councillors set to be briefed on the situation in the near future. The price tag for the revamp of the Grade I-listed attraction leapt by £2.5m in 2022 as a result of the spike in inflation that year - with the city council stumping up half of the increase.

The council’s budget working group will begin drawing up plans for the potential £1.1m savings requirement next year, should it prove necessary.

‘PRESTON GETS HALF OF WHAT IT’S DUE’

In setting the scene for the budget, Cllr Rawlinson said Preston City Council would have twice as much money to spend each year as it actually does - if local authority funding had kept pace with inflation since the age of austerity dawned in 2010.

The meeting heard that the authority’s budget that year - when the Conservative and LIberal Democrat coalition came to power - was £30m. In 2024/25, it will be £24m - whereas if the average annual four percent increase in inflation over that 14-year period had been applied to the council’s funding, the city would now have £48m a year at its disposal.

“It’s exactly half of what it should be according to inflation…[and] it just shows you how much money has been taken out of councils. If you add up each year how much we’ve lost, it's over £100m over that period that we haven’t been able to spend on the people of Preston,” said Cllr Rawlinson, who has held the finance portfolio at the authority for over a decade.

“The cash that we’re using for our regeneration schemes is either council taxpayers’ money… borrowing…lottery money, which is public money, or it’s a grant from the government that represents a fraction of what they’ve taken off us since 2010.

“To do all that on our own, effectively…at a time when other councils are going cap in hand to the government [because] they can't balance their budgets, it’s an incredible achievement.”

Investments for the year ahead include the creation of an antisocial behaviour enforcement co-ordinator to tackle what councillors were told is an increase in the problem, particularly in the city centre. The authority will also put cash into assessing the feasibility of potential climate change projects and improving the management of its own performance.

While those moves were broadly welcomed by the opposition parties, both the Conservatives and Liberal Democrats pounced on - and called for the removal of - a £100,000 cash injection for the ruling Labour group’s flagship community wealth building policy. The strategy aims to strengthen the local economy, including by ensuring more public money is spent and retained locally.

Cllr Landless, who is also the deputy Tory group leader, said his party was “not convinced” of the need for the budget commitment and was uncertain “what the money is used for”. Conservative leader Sue Whittam added that there was too much “secrecy” about the broader investment in the policy.

Lib Dem deputy group leader Neil Darby went further still, accusing Labour of committing “precious funds to pet projects and vanity schemes” like a community bank, which both his party and the Tories have long opposed. He urged the council to “get out now” of the yet-to-be-established North West Mutual - proposed to be formed with other local authorities in the region - and save the £1m it has earmarked for the project.

Cllr Darby said councils elsewhere which are in financial difficulty are in that position not only because of a lack of funding, but also as a result of “overreaching and investing in areas where they have little or no expertise”. To that end, he also called on the city council to hand over the running of the Avenham Park cafe to an organisation that could make it pay, rather than costing the town hall £90,000 a year.

Both opposition groups set out their own alternative budget proposals, with the Tories suggesting the council shift to having ‘all out’ elections once every four years, rather than the current cycle of polls in three out of every four years. They also put forward funding for youth projects in rural areas to the north of the city.

“We have a problem in the outer lying areas of Preston - there is a lack of things to do for young people growing up,” Cllr Landless said. “This has become more evident [frpm] the fact that we have a large amount of new housing development…but there’s no organised activity.”

Meanwhile, the Lib Dems suggested reversing the proposed increase in green waste collection charges, with the annual fee set to increase for the first time in six years next month from £35 to £40. Cllr Darby said the 14 percent hike was higher even than the recent peak in inflation.

The cabinet member for community wealth building, Valerie Wise, mounted a staunch defence of the policy for which she is responsible, citing an academic analysis published last year showing that it was “making a real difference to the people of Preston, particularly…[those] who haven’t got a huge amount of money, who have been suffering from ill health [and] who have had poor mental health".

The former city council leader said the additional investment would be used to propel Preston towards becoming a real living wage city and also to monitor the implementation of its policy of ensuring “social value” was achieved from its procurement decisions over contracts.

Responding to the Tory call for youth funding targeted at the outskirts of the city, Cllr Rawlinson said the authority had carried out “loads of improvement schemes to green spaces in the suburbs and the rural areas”.

Council leader Matthew Brown added that it was “pretty amazing” for Labour to be proposing a budget “where we’re not making a single cut [and] we’re actually spending on parts of the council we want to spend on”.

The opposition groups supported each other’s alternative budgets and voted against the Labour proposal, which was nevertheless approved by a majority.

BALANCING ACT

Preston City Council is planning to use almost £10.4m from its general reserves between 2023/24 and 2027/28 in order to cover shortfalls in its budget over that period and allow for a phased programme of savings to bring the authority into financial balance. That means the general reserve pot will be reduced to £1.3m in three years’ time, just above the £1.1m minimum level required.

Separately, the authority has an earmarked reserve fund, totalling £30.3m as of last March, which is set aside for specific purposes.

The council has a planned programme of capital spending thorough to 2027/28 of £120.8m. That includes the cinema and other Towns Fund and Levelling Up regeneration schemes - like the replacement Old Tram Bridge - as well as investments in the authority’s vehicles and buildings.

Just over a third of that total - £44.5m - will come from borrowing, with external funding, government grants and returns from the sale of assets making up most of the remainder.

BUDGET BREAKDOWNS

Labour (approved)

***Creation of antisocial behaviour enforcement co-ordinator (£46K)

***Community wealth building policy officer - making current temporary post permanent (£50K)

***Development of community wealth building programme (£50K)

***Decarbonisation feasibility studies (£50K)

***Development of graduate trainee programme (£50K)

***Council tax staffing increase to improve collection rates (£66K)

***Develop transformation and performance management programmes, following recommendations made by a Local Government Association peer review (£76K)

***Increase staff capacity in key services, including legal and property (£110K)

Conservative amendment (voted down)

***Extra funding for existing ‘member champion’ councillors - specialising in mental health, women and safeguarding (£8K)

***Youth projects for North Preston and surrounding areas (£42K)

***Move to four-yearly elections (save £133K by 2027/28)

***Reverse plan to make community wealth building policy officer permanent (save £50K from 2025/26)

***Reverse investment in community wealth building programme (save £50K)

***Remove support for community bank (save £1m from capital programme and reduce annual borrowing costs by £100K from 2025/26)

Liberal Democrat amendment (voted down)

***Feasibility study into future of Guild Hall (£50K)

***Tree-planting programme in all wards (£60K)

***Reverse increase in green waste collection charges (£110K)

***Reversal of community wealth building investments and community bank support (as in Conservative amendment, see above for details)

COUNCIL TAX BILLS (2024/25)

Preston City Council’s share of the bill only, excluding the charges levied by Lancashire County Council - which makes up the majority of the total - and parish councils and the police and fire service (increase on 2023/24 rate shown in brackets):

Band A - £235.91 (up £6.84)

Band B - £275.23 (up £7.99)

Band C - £314.55 (up £9.13)

Band D - £353.87 (up £10.27)

Band E - £432.51 (up £12.55)

Band F - £511.15 (up £14.84)

Band G - £589.78 (up £17.11)

Band H - £707.74 (up £20.54)

Source: Preston City Council and Local Democracy Reporting Service