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Sunday, July 21, 2024

​​​​​​​Three-Year Strategy Proposed to Manage £113m Budget Gap 

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A three-year strategy to manage a budget gap of £113m is central to proposals going to Highland Council’s budget setting meeting on 29 February.

Inflation, interest rates, pay increases, wider economic factors and cost pressures in key areas such as adult social care, have had a direct and significant impact on the Council’s financial position.

The recent Scottish Government’s council tax freeze also imposes a limit on the Council’s ability to raise income through this means. 

The budget gap for 2024/25 is £65.6m and is estimated to total £113m over the three year period. 

However, through the financial strategies and savings plans set out in the budget report, the Council can achieve a balanced budget position for 2024/25, and also progress delivery of significant change programmes, underpinned by use of Reserves, to support the Council to a financially sustainable position. 

With the scale of budget gap being faced, a strategic, transformative and multi-year approach is necessary to address the financial challenges. 

The current scale and model of service delivery is not sustainable.   

The Council needs to align its service delivery and operating models to the resources it has available to it. 

This will require significant change to what services the Council delivers, and how it delivers them. 

A key component of addressing the budget gap is the agreement of saving proposals to deliver recurring and sustainable cost reduction, income generation, redesign and efficiency savings. 

A programme of engagement with communities and staff has led to a broad range of suggestions which were taken into consideration by the Administration in the development of savings and income generation proposals.

The initial period of engagement focused on gathering information about priorities, views and suggestions on income generation and being more efficient and how as an organisation the Council could work differently. 

Information was gathered through a Budget Simulator, Budget Survey and staff ideas page.

Responses showed general support for increasing fees and charges, being more efficient and raising income, rather than reducing universal services.

Suggestions were categorised under the following themes: 

  • Being more efficient 
  • Changing how we operate – doing things differently 
  • Making better use of our assets and reducing the number of assets we have 
  • Generating more income – particularly around tourism 

A second phase of engagement focused on understanding the potential impacts of suggestions on individuals and communities.

£26.079m of budget savings proposals have been identified for 2024/25, with further savings in years 2 and 3, totalling £54.634m over the next 3 years.

The savings proposed are based across the following 4 themes.

  • Developing our Operating Model – this includes:
    • Changing how we deliver services such as improving recycling rates
    • Reducing food waste in schools
    •  Delivery of a new trades framework
    • New technology and better use of data for efficiency
    • Insourcing more services such as bus transport
    • Streamlining management structures and reducing management costs
  • Redesigning our Asset Base
    • Reducing the number of buildings we own
    • Reconfiguring school estate
    • Reducing utility costs
    • Reducing fleet
    • Co-locating with partners
  • Being more Efficient
    • Reducing procurement costs
    • Reducing external costs
    • Increase digital opportunities such as in learning and hybrid working
  • Generating Income
    • Increased fees and charges
    • Improving debt management
    • Generation of income through provision of services
    • Introducing more tourist income eg motorhome passport scheme and more visitor experiences
    • Enhanced green energy generation and battery storage

In addition to savings and income generation, a range of fiscal flexibilities have been an important factor in closing the budget gap. 

These include decisions already made by the Council relating to Council Tax on Second Homes and Non-Domestic Rates Empty property relief, and also include future opportunities, such as the Transient Visitor Levy legislation which is progressing through Parliament, and recommendations relating to Schools PPP accounting flexibilities.

The report also recognises the financial challenges faced in relation to Adult Social Care, and re-states within the Joint Strategic Plan for those services, that both the Council and NHS Highland have stated, that continuing to deliver adult services the same way is not sustainable. 

The Council’s budget proposals for Adult Social Care provide £20m of funding from Council reserves to support the Adult Social Care budget, and change and transformation within that budget, and supporting the achievement of a multi-year £12.6m saving target against that budget. 

The budget also includes the pass-through of funding from Scottish Government, to adult social care budgets, estimated at £10.8m in 24/25.

Leader of the Council Raymond Bremner said:

“It has been our priority to protect jobs and services wherever possible, so you will see there is a significant focus on income generation and efficiency.

“Many of these proposals are born out of the suggestions from communities and staff and I am very grateful to everyone who submitted ideas and views and engaged with us over recent months.

“This information has been invaluable to us in preparing our proposals which will have as little impact as possible on essential services and vulnerable groups.

“Many of the proposals would see major improvements, such as generation of green energy and reducing waste, as well as generating more income from tourism.”

Convener Bill Lobban added:

“The budget gap we are facing over the next 3 years presents an enormous challenge.

“The work which has been done to prepare for this will set us on a path of major change and reconfiguration of everything we do.

“Transformation at scale is absolutely necessary to address the financial challenges of this enormity.

“We have listened to what people have been saying to us during this budget process and proposals reflect what communities and staff have told us.

“I commend these proposals to Members for their consideration at our budget setting council meeting next week, and I would also like to thank all Members for their support in the engagement process.”

Recommendations to Council will be made to freeze council tax which would mean the Council accepting an uplift from the Scottish Government of £6.865m which is equivalent to a council tax increase of 4.8%.

A final decision will be made at Council.  

The budget papers will be published on Thursday https://www.highland.gov.uk/budget

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