Spending Freeze at Ealing Council Due to £50 million Shortfall
'Tough times ahead' as borough struggles to deal with Covid-19 fallout
Ealing Council is to introduce strict and wide-ranging controls on spending in an attempt to deal with a £50.6 million shortfall in its accounts.
The new controls, which have been approved by the council cabinet, include a recruitment freeze and a stop on any new spending commitments. The council will also be reviewing its contracts with suppliers to see what savings can be made, on top of the £2.3million it had already identified this year as part of its budget cuts programme.
The borough is legally obliged to run a balanced budget and they were already operating at a deficit before the coronavirus outbreak. It blames the existing £12 million shortfall on the need to increase spending for children with special educational needs.
Since the pandemic as begun the deficit has increased by £39 million. The council says that the total cost of Covid-19 to the borough has been £65 million but so far just £29 million in support has been delivered by central government. Although more is promised it is not believed this will be sufficient to cover the black hole in the accounts.
A failure to balance the budget would mean that the council would be forced to issue a s114 notice leading to a ban on all new spending, except for safeguarding vulnerable people and statutory services. This is an action of last resort and is only issued in the most serious of circumstances when the council’s chief financial officer considers the financial position to be unsustainable.
The council says that it is not prepared to use the £23.7million in non-ringfenced financial reserves it currently holds as it wants to keep this money back so that it can deal with emergencies and mitigate against any forecasted risks, such as increases in demand in homelessness. It says that if it was to spend its reserves on part meeting its COVID-19 costs, it will be in a weakened position; unable to respond adequately to situations such as floods and fires, or unforeseen spikes in demand.
Councillor Bassam Mahfouz, cabinet member for finance and leisure, said: “This is a serious situation for local government and we have borne the brunt of more than a decade of cuts to our government funding. In Ealing alone, our government grant has been cut by £143million and now get just one-third of what we were given in 2009.
“Through prudent financial management, and our Future Ealing transformation programme, we have managed to deliver balanced budgets that still deliver vital services year after year. Our residents are central to this and have stepped up to play their part in keeping the borough clean, keeping libraries open and helping their vulnerable neighbours. Unfortunately, the government has left us with a huge COVID bill that we will struggle to pay.
“As well as taking care of residents during the pandemic, we’ve also worked hard to keep local businesses afloat and have paid out upwards of £70million in business grants making us one of the top performers in the country. But, despite our efforts to protect residents and businesses, the critical services that so many rely on are being put at risk.
“Ealing is a responsible and well-managed council so we are putting these controls in place while we continue to ask government to keep their promise and pay their bill, but there will be tough times ahead.”
July 16, 2020