Plan to be established to help ensure millions of pounds in savings

This story was published 24 January 2023

A detailed plan is being drawn up to maximise millions of pounds in savings across the new North Yorkshire Council to help counter unprecedented financial challenges.

A landscape photo of North Yorkshire with a dry stone wall

A masterplan to introduce the savings needs to be set out by this time next year to ensure that the new authority, which launches on 1 April to cover the whole of North Yorkshire, does not have to continue to rely on cash reserves to balance its books.

The creation of the new council has coincided with massive pressures on finances for the public sector across the country, and it is facing a predicted shortfall of more than £30 million in its budget for the first year of its operation.

The multi-million pound deficit in the proposed budget will have to be covered through the one-off use of reserves, after some additional savings have also been proposed. In the longer term, the financial gap is expected to widen and will need to be met by additional savings.

Council leader, Cllr Carl Les, said that the review of services is vital to ensure that financial reserves are not relied on in the coming years, and taxpayers’ money is employed effectively.

Cllr Les, who will become the leader of the new North Yorkshire Council, said: “The financial pressures we are facing in North Yorkshire are without question the most challenging which I have ever known in more than 20 years since I was elected to the county council.

“People may think that they have heard this all before, but just because we are once again facing the most difficult budget ever does not diminish that statement.

“It really is the case, but we are committed to making sure that the money of North Yorkshire’s taxpayers is used wisely, and we provide the best value possible for the services that will be overseen by the new council.

“We are fortunate to have the opportunities provided by reorganising local democracy in the county and merging the current eight councils into a single organisation.

“It will mean that tens of millions of pounds can be saved through bringing services together and maximising spending power, making sure that every pound of taxpayers’ money is used as effectively as possible.” 

The new council will be launched when North Yorkshire County Council and the existing seven district and borough authorities merge in the biggest shake-up of local government since 1974 to pave the way for a devolution deal.

The predicted shortfall in the new council’s budget has been caused by a series of factors, such as the highest rate of inflation since the early 1980s, issues surrounding supply chains and rising staffing costs as well as the aftershock of the Covid-19 pandemic.

For instance, inflationary pressures, including pay awards, previously accounted for an increase of about £19 million a year across the eight North Yorkshire councils.

However, the dramatic rise in inflation to more than 10 per cent a year has seen £66 million having to be allocated to next year’s proposed budget to cope with the increase. This equates to a rise of about £47 million compared to previous years.

Energy costs are among the most demanding issues and have seen a five-fold increase in the space of just two years. Energy bills for North Yorkshire’s current eight councils stood at about £6 million in 2021/22, rising to £15.5 million for the current financial year. They are predicted to rise to £31 million for the forthcoming financial year from April 1, when the new North Yorkshire Council launches.

During the second year of the new council’s operation, it is estimated that there will be a further shortfall of £30 million, with another annual deficit of £45 million predicted in the third year, leading to a total of £105 million over three years.

There are adequate financial resources to cover this predicted deficit through careful long-term financial planning that has seen North Yorkshire County Council’s reserves built up over more than 20 years.

However, Cllr Les stressed that reserves are a one-off resource – once they are used, they are gone. The new council will therefore be working on the detailed plan for a major strategy to balance the authority’s books, and avoid using £105m of reserves, although the financial challenges come in the wake of a decade of austerity measures from the Government.

The opportunity to streamline the way in which key services ranging from waste and recycling to education, highways and planning are delivered to nearly 33,000 businesses and the 615,000 residents in North Yorkshire is seen as essential to helping to tackle the growing demands on the new council’s finances.

By joining up services and maximising spending power, North Yorkshire Council is set to recoup between £30 million and £70 million, which will become annual savings.

Among the areas which have caused particular financial pressures is adult social care, accentuated by the fact that North Yorkshire has a higher average age of its residents than other parts of the country.

According to the 2021 Census, a quarter of North Yorkshire’s 615,000 residents are aged 65 and over, compared to a national average of 18.4 per cent.

There are already significant financial pressures being reported in each of the county council’s service directorates. The health and adult services directorate is being faced with increased demand, especially for adult social care as well as inflation, and its existing £7.9 million in contingency funding has already been allocated.

The scale of the new North Yorkshire Council’s operations will see it have an overall spend of about £1.4 billion, including £343 million on schools.

The proposed budget for the new council would see a rise of council tax of 4.99 per cent in North Yorkshire to counter the financial challenges, equating to an increase of £83.64 for an average Band D property. Chancellor Jeremy Hunt announced in his Autumn Statement in November last year that councils will be given the power to increase council tax by up to five per cent, including additional social care funds.

Members of our executive met today (Tuesday, 24 January) when they unanimously endorsed the proposed budget. It will be considered at a full council meeting next month (February), before it is adopted for the new North Yorkshire Council.