Edinburgh City Council facing £17 million budget black hole

A funding shortfall of more than £17 million is currently being faced by Edinburgh City Council, according to new figures.

From the beginning of April into late September, additional net expenditure pressures resulting from the coronavirus crisis are estimated to be £89.6 million.

Health and social care costs, which are managed by the Edinburgh Integration Joint Board, and costs relating to the re-opening of schools, which are estimated to total more than £14 million, have been discounted from the £89.6 million sum and subsequent funding shortfall estimate.

So far, the council has only secured £61.5 million of funding to offset costs, with a further £11 million potentially coming in too, leaving a funding shortfall of £17.1 million.

This figure has the potential to grow should another lockdown, such as a local lockdown, be initiated, or should city recovery processes slow down.

Though a £17.1 million budget shortfall is £2.6 million lower than was expected last month, the council now faces an “urgent” need to re-assess the content and affordability of its 2020/2023 revenue budget framework and ten-year capital budget strategy.

Discounting health and social care costs, support for council arm’s length organisations (ALEOs), including Lothian Buses, Edinburgh Trams, the Edinburgh International Conference Centre, Capital Theatres and Edinburgh Leisure, has proved to be one of the most costly areas of the pandemic, coming in at an estimated £31 million.

Additional council costs for homelessness services during the pandemic has amounted to an estimated £5.7 million, while extra school meals and community food distribution could cost £3.240 million.

The long-awaited reopening of some public toilets in July came with a price tag of £144,000, while extra costs relating to children’s services could reach £1.195 million.

Loss of income from on-street car parking due to the suspension of city-wide parking charges between March and June totalled around £11.6 million.

Meanwhile, loss in rental income on council owned properties sits at around £9 million.

Council officers have warned that estimated expenditure and loss of income sums could potentially grow if in-year financial pressures and shortfalls in savings delivery are not managed on a sustainable basis in future years.

Also, “due to the wider economic outlook and consequent increase in public expenditure and reduction in taxation revenues, there may be implications for future years’ revenue funding settlements.”

The council says the scale and coverage of the impacts linked to the pandemic will require extensive and continuing engagement with key stakeholders as the city enters recovery phases.

Conservative finance spokesperson, Cllr Andrew Johnston, said: “As the council’s revenue budget update report says, urgent answers are required if this year’s £17m funding gap is to be filled.

“The council failed to make agreed savings last year and as feared, are on course to fall short again this year. As a result, the SNP-Labour administration is burning through council reserves at an alarming rate and with year on year chronic under-funding by the Scottish Government, the problems facing Edinburgh only get worse.

“Only the council leader knows why Finance Secretary Kate Forbes refuses to properly fund Scotland’s capital city.”

A council spokesperson said: “We’re continuing to explore ways of containing costs and an enormous amount of work and good financial management has helped us to close our budget gap even further to £17m.

“Besides maximising cost savings in areas where our current activity is reduced, though, we will continue to make the case for both additional funding and full flexibility in how we apply our existing resources to narrow the gap further.

“This will rely on the virus being contained and further decisions being made, and by necessity remains an ongoing piece of work.”

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