Greenwich (Parliament Politics Magazine) – Greenwich Council projects a £136.8m deficit within four years, with a £45.1m gap expected next year, according to new financial forecasts.
Despite this budget gap, Greenwich Council maintains that it is “in a better position than most” and has attributed the growth in the deficit to inflation, rising demand for its services, and the cost-of-living problem.
The administration has been criticized by the Conservatives in the Labour-run council for “years of dithering and delay” in recognizing “the scale of waste and inefficiency” that must be eliminated from the council’s budget.
One of the reasons for the rise in the budget deficit has also been attributed to a decrease in government financing.
If accepted, the government’s Fair Funding Review 2.0 (FFR 2.0) plans, which were released in June, will fundamentally change the way local governments are compensated. The methodology used to determine each council’s council tax revenue would be updated in FFR 2.0.
London Councils’ study indicates that this reform would significantly cut the amount of money that the capital’s borough councils get. Councils throughout the city are expected to get £700 million less than they would under the present financing arrangements, according to London’s local government collective.
Government funding for Greenwich may decrease by £8.6 million a year starting next year, with a total base funding drop of £24.7 million by 2028–2029, according to London Councils’ projections. If FFR 2.0 is approved as proposed, Greenwich anticipates a possible “cliff edge” since additional financial cuts beyond 2028/29 may be forthcoming.
A council spokesperson said:
“We are working with the government on how they plan to fund local councils, especially those in London. But in the meantime, our priority is finding solutions to deliver the services that matter most.”
Unexpected overspending on adult and child health and social care, temporary housing, and a rise in demand for Education, Health, and Care Plans (EHCPs) are some of the pressures on the council’s budget that have contributed to this year’s deficit. Additionally, according to financial statistics, Greenwich Council is £9.1 million short of its goal of saving £36.1 million this year.
The council can take the following actions to close the budget gap: raising the council tax rate, utilizing its own funds to try to close the deficit, and proposing new savings measures by reducing current service budgets. Without a referendum, the council would not be able to raise council tax over the 5% yearly increase allowed by the government.
A council spokesperson said:
“Nearly every council has financial challenges, but thanks to solid management and tough decisions in recent years, we’re in a better position than most. These challenges are largely down to factors that are outside of our control, like previously high inflation due to 2022’s mini-budget, soaring demand for our services, and the cost-of-living.
People are living longer, our borough is growing, and more people and children need extra support that is more expensive than ever to provide. This, coupled with historic underfunding from previous governments, means that the council has had to do more with less. In order to balance our books and continue to provide the standard of services our residents deserve, we will have to be innovative and creative with how we operate. Residents will be able to feed into this process through our budget consultation later this year.”
The leader of the opposition at Greenwich Council has criticised the authority, calling for the council’s Labour leadership to “get a grip” before finances get worse. Conservative Group Leader Cllr Matt Hartley said:
“After years of dither and delay, Labour councillors have only belatedly woken up to the scale of waste and inefficiency that needs to be removed from the Greenwich Council’s budget.
They’ve been warned about this by the Conservative opposition councillors for years – and instead of doing the right thing, they’ve played partisan politics at every turn. With Greenwich Labour struggling to deliver even the current round of efficiency savings, the council’s leadership needs to urgently get a grip or their financial crisis is only going to escalate.
Now it has been confirmed that the Labour Government is planning to cut £25million from Greenwich Council’s budget in the next three years – and yet the Labour councillors here in Greenwich are silent about it. The truth is they’ve been badly caught out, and it’s council taxpayers across Greenwich who will pay the price for ever higher taxes and reduced services in the future.”
At the Full Council meeting next week, the Conservatives have presented a motion urging Greenwich Council to “use every means available” to persuade the Central Government to modify its FFR 2.0 proposals in order to prevent financial cuts for Greenwich. The Conservatives are also demanding that the Labour government release monthly reports on its progress toward targeted savings and information on how it plans to balance the budget.
How do Greenwich’s per-resident deficits compare across boroughs?
Greenwich Council’s debt and deficit per resident is the second highest in London, and is driven by residential borrowing on housing.
Last financial year, the Council borrowed over £900 per person as the second highest per person increase of debt in the UK. The total debt per person is £2,490. This is mainly attributed to the “Greenwich Builds” program to build new council housing.
In the case of Greenwich, 74% of the debt is related to building new council housing or to avoid use of expensive temporary accommodation like hotels. Greenwich blames its financial troubles on years of underfunding from government, money spent due to events like the Liz Truss mini-budget, an aging population, and increased demand for services, as do most councils.