Scottish Borders Council faces a long and winding road to financial recovery after covid-19
Scottish Borders Council faces a funding gap of £15m due to the coronavirus pandemic, councillors were told this morning, and that recovery process could be “very long and difficult and the repercussions may be felt for several years to come”.
It’s expected that there could be a further shortfall of £7.2m shortfall in council tax.
The council’s chief financial officer David Robertson presented the projected figures to members who joined the first full council meeting since March, using the Microsoft Teams application.
He said: “The council is regularly reviewing the impact of Covid-19.
“The latest projections we have, based on the performance after one month in terms of the council’s finances, is that we have pressures in the current financial year of around £15m, arising from a culmination of loss of income and also service pressures – unplanned expenditure associated with the covid-19 response and delays in the financial plan savings.
“In response to that challenge, the council management team is looking at reducing non-urgent and non-essential expenditure and maximising financial plans, reviewing budgets across the council to ensure we can direct resources to support the challenges that we see arising from covid-19.”
He added: “Very helpfully, the Scottish Government has been providing cashflow support to councils through revenue support grants, but that support is not sufficient to fund the financial pressures we are seeing.
“We are not alone. Highland council has reported this morning an impact of £96m in terms of their finances and Edinburgh is impacted by over £80m in terms of lost income from the likes of trams and buses in the city.”
Mr Robertson then pointed out the slowdown of payment of council tax.
He said: “Very pleasingly, the direct debits which we collect the majority of council tax from have held up very well in April and May, but we have seen a reduction in terms of cash and cheques from the minority of tax payers in the first month in the region of £600,000, which if continued for the remainder of the year could total a cashflow problem for the council of £7.2m, which is in addition to the £15m pressure I have identified already.
“We do think that while that tax may be recoverable in the long term, there will be a cashflow impact.
“In conclusion we are in very difficult and unprecedented territory and our response will be guided by Scottish Government advice in all stages of our recovery.
“There is no clear process map to recovery and it will be a very long and difficult recovery, which may have serious repercussions well beyond 2020/21.”
Executive member for finance, councillor Robin Tatler, said: “I’d like to thank David Robertson and his finance team for the way they have been able to maximise the funding that has been provided by the Scottish Government and manage the responses as well as they have.
“As Mr Robertson said it is too early yet to tell what the final extent of the financial challenge will be, but it will be significant.
“There will be some difficult decisions ahead.”
Councillor Kris Chapman asked if the council was prepared to help people in the event of a second wave of covid-19 infections.
He said: “There may be a second wave, and businesses are already struggling in the first wave.
“What contingency plan has the council got, not just to balance their own books, but also to support our local economy, our businesses and people working in those businesses, that if a second wave does happen we are ready to help as a council?”
Mr Robertson replied: “We hope there won’t be, but are aware that there could be a second wave.
“Obviously in terms of support for businesses our main efforts here has been acting as an agent of government, and processing the business support grants.
“The council will seek to utilise all the resources that we have at our disposal to support communities and businesses in that regard.”
Councillor Stuart Bell, head of the opposition SNP group, was less than impressed by the financial report.
He said: “I don’t know what this paper is trying to achieve,
“It seems muddled to me and it reminds me a little of George Orwell’s double-think.
“He wrote of it in the novel 1984 as the power of holding two contradictory beliefs in one’s mind simultaneously and accepting both of them.
“I read and re-read the paper, and kept thinking it’s fine to say that we are in the middle of a disaster, but things are going well.
“Right now we are in the middle of a muddle of the challenges.
“September may perhaps be a better time to evaluate the totality of SBC finances, but even that may be too early.
“Now is not the time.
“There has indeed been a fabulous response to the corona-crisis from Scottish Borders Council.
“All councillors thank the staff for their efforts, flexibility and commitment.
“But the council has a much wider role than just managing our own affairs.
“Only fleetingly is it mentioned in the report about the dozens of resilient groups that have sprung up spontaneously into action across the Borders to help neighbours in need.
“Hundreds have volunteered to help, setting up their own groups.
“This is pure volunteer effort, not a council-led activity, we have to be praising that.
“Yes these groups have benefited from a small portion of the £1.1m Scottish Government-funded hardship resources that came to this council, but this report says nothing about all the other money that is going to countless other community organisations.
“There are very significant unknowns in this paper.
“We have, understandably, no idea at this time what the changes in income will be as a result of problems with council tax payments.
“There are no good estimates of potential problems with our debtors and bad debt, and no real measure of the size of problems with loss of income from the external operations of SB Contracts.
“Yes, this paper can tell us about extra income to the council, but that is only some of it.
“Yes, it can tell us about savings that are being or can be made, but that is only some of the savings.
“Future loss of income is still guesswork.
“And then the paper says nothing about how we will inevitably finance these problems.
“That’s going to mean looking at council reserves because this current crisis is precisely what those reserves are for.
“We have £30m of unallocated reserves but only some of this we might want to access, alas it will have to be repaid.
“This is what our reserves are for.
“I have great respect for our finance director and his staff and I thank him for presenting this, but I think that too many important things are being unsaid here.”
Mr Robertson replied: “In terms of the paper, it is designed to be read in conjunction with this presentation, and it’s a briefing update to members in terms of our current thinking.
“We do have absolutelyu imperfect information at the moment in terms of our response to covid-19 and therefore this is a position statement very early in the year.
“I respect Councillor Bell’s comments about the incompleteness of some of the information which is contained within the paper.
“It’s very much focused on the work of the council, and it’s to set out for you some of the difficulties we are experiencing as a council and to reassure you the management team remain absolutely focused in terms of the financial stability of the council.
“We will come through this event, but it will be very, very challenging for us.
“Councillor Bell is correct about the level of reserves the council holds.
“However, these are not unallocated reserves, they are usable reserves.
“The majority of them have been allocated previously by council’s decisions to other important initiatives, for example the IT transformation funds, our winter maintenance reserve and other areas of activity.
“Should decisions be taken as to the reappropriation of these reserves then of course they can be used, but the majority are currently earmarked for purposes approved by the council.
“Unallocated reserves are at £7.8m in line with our annual strategy.”