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Council publishes financial forecast amid national economic challenges

Cheshire East Council has published its first quarter financial review of 2022/23, including financial forecasting for the year ahead.

It illustrates in stark terms that, without further intervention, there is financial pressure of almost £12m above the agreed budget.

National bodies such as the Local Government Association (LGA) and County Council Network (CCN) have made it clear to central government that councils are experiencing unprecedented financial challenges. 

This is being driven by high inflation, alongside rising demands for social care services to meet complex needs. There is still an ongoing impact from Covid-19, which is no longer being funded.

The council’s corporate policy committee is considering a report, which sets out an estimate of impact of these pressures, which are outside the council’s control and some initial plans to try to mitigate them.  

The council agreed a balanced budget in its medium-term financial strategy in February 2022, based on the information and forecasting available at the time. This included reasonable assumptions about inflation known at that time. 

However, since then, the national economic situation has changed dramatically and national inflation rate hit 10.1 per cent in July 2022.
The financial impact of this first quarter review outturn forecast could decrease the council’s balances by £11.7m – with the largest increases in forecast expenditure for the council’s adults and children’s directorates. 

Councillor Amanda Stott, chair of the council’s finance sub-committee, said: “Cheshire East Council has a good record of financial discipline, managing the increasing demand for services over recent years – particularly in social care – without incurring large overspends as seen elsewhere. However, local government and local residents are now facing unprecedented challenges.

“In line with most public sector organisations, we rely on government inflation targets when calculating our budgets. Target inflation remains at two per cent but actual inflation is currently exceeding 10 per cent – significantly higher than what could have been predicted when setting our budget in February this year.

“Of the many financial challenges facing local councils, including this council, adequate funding for adult social care services is perhaps the most significant. The LGA has recently called on national government to deliver the £13 billion pledged to tackle the crisis in adult social care. And the County Councils Network has included ‘reforming adult social care and health services’ as a key point in its recently launched five-point plan.

“The council is already working closely with national government on initiatives to address the financial challenges seen in ‘people’ services – including the Adult Social Care Trailblazer and the Delivering Better Value programme for high needs funding for children’s services. But without significant funding reform, inflationary pressures and increasing demand for these services will mean very difficult choices will have to be taken.

“We will work hard to support residents over the coming months. We are already planning for increased demand for services to support residents who are experiencing financial stress, through the cost-of-living crisis. This includes established support such as Household Support Fund, emergency assistance, housing benefit and council tax support. Residents can find more information here:

our website's cost of living page

“But, at the same time as having increasing demands on our services, we as a council are also facing extreme financial pressures due to rising energy price rises, pay inflation and increased costs to deliver and commission essential services for our residents.

“Councils are required to live within their means. Options to rebalance the forecast for 2022/23 include use of reserves, using the proceeds from the sale of assets, increasing effectiveness of debt recovery, service efficiencies, pausing recruitment and increasing income generation. We must explore a range of options to reduce the local impacts, while continuing to lobby for national solutions necessary to protect vital local services.”

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