Council 'facing decades' of significant debt

A council has warned that its spiralling financial situation could leave residents paying off hundreds of millions of pounds worth of debt for decades to come.

A report to be discussed next week by leaders at Shropshire Council shows it may have to borrow almost £800m over the next five years to pay for increasing annual funding gaps.

The Liberal Democrat administration has also said the authority will not have enough money to deliver "a bare minimum" level of service in future.

Leader Heather Kidd has criticised the government for making the situation worse by reducing its funding and forcing authorities to rely more and more on council tax as an income.

If no action is taken to generate money and reduce spending, the council predicts the annual gap between its income and expenditure would rise from £130m in 2026/27 to £195m by 2030/31.

The deficit would need to be met by Exceptional Financial Support (EFS), which is awarded to struggling local authorities by the government.

The authority has claimed borrowing would cost about £12m in interest each year for at least two decades and exceed the money it would generate by increasing council tax by the 5% maximum each April.

Some capital investments are also being paused or stopped all together, unless they can improve the council's financial position or be paid for without the need to borrow.

Kidd said: "While we know we will need to fundamentally change the way we do things, including considering what the role of the council should be in delivering, enabling or influencing priority outcomes for the county and its residents, there is a structural financial deficit.

"EFS is not the solution to our problems, but it will give us the time we need to develop our plans for both short term financial stability and longer term sustainability, while continuing to work with our MPs and Rural Services Network to lobby the government for change."

According to the government's provisional funding settlement, which was published before Christmas, Shropshire Council will be £26m worse off over the next three years.

Ministers said its Fairer Funding formula for distributing money to local authorities had prioritised areas with higher deprivation.

But Kidd said it has not properly taken into account rural deprivation and the higher cost of delivering services in sparsely populated counties with older populations.

The authority applied for EFS last month to "financially survive" this financial year, worth up to £71.4m.

The government is expected to make a decision in February.

Without a loan to pay for an unfunded overspend, Shropshire Council will have to effectively declare itself bankrupt.

Work is under way to strip the authority back to the bare minimum so it will only provide the services that it legally has to in future, such as adult and children's social care, road maintenance, education and bin collections.

Other services, including some street cleaning, CCTV and the School Library Service will be cut to find savings and reduce the cost of borrowing.

Council leaders will discuss the authority's Draft Financial Strategy at a Cabinet meeting on Wednesday 21 January.

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