09/07/21

Cardiff Council will need to find £21.3m to balance the books in the 2022/23 financial year and £80.8m by 2026 as fallout from the pandemic sees demand for key services grow a new report has revealed.

The council's Cabinet will receive the 2022/23 Budget Strategy Report at its next meeting on Thursday, July 15, where it will consider initial, high-level plans to bridge the gap.

Cabinet Member for Finance, Performance and Modernisation, Cllr Chris Weaver, said: "As we come out of lockdown and begin to deal with the fallout from the pandemic we are starting to see an increase in demand for many of our key services. There are residents who have lost their jobs and their homes, vulnerable people who need more help to get by, and an ever-rising caseload in social services. It all points towards people needing more and more help and the forecasts we are seeing on unemployment potentially rising once furlough ends to around 6.5%, means we are having to prepare for a huge increase in demand for our services just as we face financial uncertainty too. COVID had a massive impact on this council's ability to generate income. Since lockdown began we have lost £38.2m in income and we can't be sure how much of that money will return once things get back to normal.

"Right now around two thirds of our budget is spent on schools and social services and these costs are increasing every year. All the other services our residents need have to be met with the remainder. Services which are becoming even more important as we come out of lockdown and face the bill for COVID, set against the realities of our struggling retail and hospitality sectors and higher unemployment, with all the additional stresses that brings into people's lives.

"This council has ambitious plans to help kick-start Cardiff's recovery from the pandemic. We will be bringing jobs to the city through our major council-homes building scheme, the largest in Wales, and through our big developments like the Indoor Arena and Cardiff Bay Masterplan, as well as our exciting plans for the International Sports Village. Big projects like these, alongside our multi-million spend on our 21^stCentury Schools programme, and the work we are doing with Welsh Government on the metro, improving public transport and active travel options like cycling across the city, will all help to make a difference, bringing jobs and creating a cleaner and a greener city, but we can't get away from the fact the council will have to make big savings within our budget at a time when it needs to spend to aid the recovery."

Cardiff Council's COVID-recovery plans include:

• Leading the city's economic recovery;
• Investing in schools and education;
• Tackling the city's housing crisis, delivering 2000 new council homes;
• Rebuilding Cardiff's cultural scene;
• Reducing congestion and air pollution;
• Keeping our streets and communities clean;
• Using the One Planet Cardiff strategy to deliver a green recovery for the city.

Decisions on the budget are not made until next Spring. The provisional, high-level, budget assumptions for 2022/23 which could potentially bridge the £21.3m funding gap include:

• £15m in efficiency savings;
• A Council Tax increase to help balance the books. This is currently modelled asa 4% increase (which would be equivalent to £1 a week on a Band D home), which raises over £6m.

The final decision on the shape of the budget will be made after public consultation, before the end of this financial year. Residents will be also able to answer some budget questions in the summer if they take part in the annual Ask Cardiff Survey.

Cllr Weaver, added: "Most of the money the Council receives comes from grants from Welsh Government. Only about 28% comes from Council Tax. The majority of our budget - around 70%- is spent on running schools and social services. Without council tax many of the other important services we deliver could be lost or face severe cuts. Last year we also modelled a 4% increase in the summer, but were able to bring that down to 3.5% by the time we proposed our budget. We will strive to do everything we can to keep any increase low, whilst knowing we do need to maintain and invest in the services our citizens rely on as we plan for a better future.

"Since the first lockdown back in late March 2020, this council has worked hard for our residents. Not only have we maintained and adapted our key services to deliver them safely, we have also delivered thousands of food parcels to people shielding; housed the city's rough sleepers in suitable accommodation, and provided free school meals and laptops to children from low income families to help with their home schooling.

"We have also provided financial support and PPE to care homes and care providers to help them operate safely during the pandemic, and we have accessed and delivered grants for thousands of businesses who were forced to shut down during the outbreak.

"Of course most of this wasn't budgeted for. Nobody could have expected the huge spend and huge financial losses we would face because of the pandemic. Cardiff Council spent £51m alone to combat the effects of COVID and lost £38.2m in income.

"I welcome the fact the Welsh Government has covered a great deal of this expense, but the long-term financial impact of the COVID-19 crisis is not yet fully understood, so it remains difficult to predict the course of the pandemic and its impact on services, and on council finances, over the year ahead. Although we can be sure it will of course have a financial cost to the council, especially if we are to maintain our services at the current level."

Cardiff Council has identified over £200m in savings over the past ten years and has seen a reduction of over 1,600 full time equivalent (FTE) posts (in services other than schools). For a number of years during the 2010's, no funding increases were available to meet increasing demand and price pressures. These pressures, which were rising in Social Services and Schools, were predominantly met by savings in other directorates. Over time, this has had a significant impact on the shape of the Council's budget. In 2021/22, capital financing, Schools and Social Services account for over 70% of the Council's net budget.

Income loss directly associated with the pandemic reflected the closure of the Council's cultural and sporting venues, including theatres, Cardiff Castle and Cardiff International White Water. There was also a reduction in activity in other income generating areas including planning, parking, moving traffic offences, trade waste and school catering.

The Council took action to mitigate income losses including the furlough of up to 677 staff members. The Council has only placed staff on furlough, and claimed against the Job Retention Scheme where individuals' posts are funded by income that could not be generated due to the pandemic.

For the financial year 2020/21, the Council's accepted and pending hardship fund claims total £47.7 million in respect of expenditure, and £38.2 million in respect of income. It is anticipated that Hardship Fund support will continue to be available for the first six months of 2021/22. However, the position beyond that is currently uncertain. To date during 2021/22, the Council's submitted expenditure claims total £4.031 million, with the first claim for income loss due at the end of July.

Cllr Weaver added: "Whilst vaccine roll-out offers hope for recovery, the situation remains challenging and there are a number of key risks that it will be critical to monitor closely over the rest of this year as we prepare for our budget next Spring."

A frequently asked questions guide to Cardiff Council's Budget Strategy is available to view here.