Risk of ‘disastrous’ budget deficit in Cambridgeshire due to coronavirus pandemic

The council had anticipated a deficit of less than £5 million for the 2021/22 financial year, but this could escalate to more than £82 million in a worst case scenario.

By law, councils are not allowed to budget to make a loss but many are suffering from massively increased costs and loss of earnings due to the current crisis.

In February, the county council said its required savings for 2021/22 was “very achievable” and that it was in a “positive financial position” despite suffering years of huge cuts to its government funding.

But that outlook has substantially shifted due to the current “unprecedented” situation, despite the Government providing millions of pounds of Covid-19 support.

According to a report submitted to the council’s Environment and Sustainability Committee: “The ongoing challenges the council face are significant... and have not, as yet, been reflected in the (government’s) financial settlement for the next financial year which could have a disastrous impact on the council’s ability to deliver services to our citizens.”

With a huge amount of uncertainty over the pandemic and how much future support the Government will provide going forward, the report states that the council will “unfortunately have to consider significant, and potentially drastic, actions” going forward to meet its financial obligations.

This could include reducing service levels, disposal of assets and utilising reserves, although the latter is seen as a risky option with the future being so uncertain.

The council said currently at least £32.8 million of savings will now need to be made for its 2021/22 budget even if there is a “relatively swift recovery” from the pandemic, rising to £82.1 million in a worst case scenario.

The council expects that the budget gap will be in the region of £40 million, although this is without any further government support.

Over the next five years, the deficit could range from £75.6 million to £144.2 million without more funding.

The uncertainty is increased by a lack of clarity on how much the authority will be able to raise the levels of council tax from April.

For context, it would require a 15 per cent rise to meet the projected £40 million deficit which the council said would be “unrealistic to pursue”.

It summarised: “Without some short-term assistance from the Government, over and above the funding that has been provided to deal with the immediate impact of the pandemic, the council will be facing an unprecedented financial challenge which will unfortunately involve reductions to services upon which many of our residents have come to rely.

“We will of course do all we can to seek further support from the Government and will use all channels that we have at our disposal.”

Cambridgeshire is historically one of the worst funded county councils by population.