Councillor Shaun Macdonald, Leader of Surrey Heath Borough Council, and Leanne MacIntyre, Executive Member for Finance, provide an update on the council’s financial position.
“Council finances have been in the spotlight recently, and Surrey Heath is no exception,” comments Cllr Macdonald.
“The reality is that most councils are facing substantial financial pressures. Rising inflation, wage demands, and increasing demand for services, along with more complex needs, have created a projected funding gap in the sector of £6.2 billion over the next two years.
“Surrey Heath enjoys relative affluence due to its proximity to London, with vibrant businesses driving economic activity. At the same time, motivated community partners provide essential support to those in need and encourage health and wellbeing through various activities. Our area benefits from strong village communities surrounded by open spaces, making it a great place to live and work. Furthermore, I am proud to say that the council continues to provide high quality services despite increasing economic pressure.
“However, the council is not immune to the recent challenges faced by residents, including high inflation and interest rates. Demand for critical services, such as affordable housing, homelessness support, and aid for vulnerable groups, has risen significantly, leading to increased direct service costs.
“Additionally, contracted services like waste collection and park maintenance have also seen direct service costs rise substantially (see graph). For over a decade, government funding has not kept pace with the rising demand and costs, widening the ‘gap’ between council income and expenditure.”
Cllr MacIntyre, Portfolio Holder for Finance and Performance continues: “In 2016, the council invested heavily in property, particularly in Camberley retail sites, taking on substantial debt, currently around £170 million.
“The council secured long-term borrowings at fixed rates through Public Works Loan Board (Government) and other financial institutions. The remaining £80 million was financed with short-term, variable-rate loans reflecting the Bank of England Base Rate over time. As shown in the graph, interest rate increases in recent years have led to a considerable rise in indirect service costs linked to our debt interest.
“Simultaneously, footfall in Camberley town centre has not recovered to pre-pandemic levels, as more and more people shop online nationally, exacerbating the financial strain due to reduced income from the council’s retail properties (shown as an increase in direct service costs).
“The combination of government funding decisions, high inflation and interest rates, and changing retail trends has made the ‘gap’, in council income and expenditure, unsustainable within 2-3 years. Year on year more debt will need to be taken on as the council converts internal borrowing, known as Usable Reserves, into external debt from government related financial markets, weakening and reducing our financial resilience to future events and risks (see graph).
“Despite these challenges, the council remains committed to delivering essential services, including waste collection, park maintenance, housing support, planning, and community safety, with the 11% of your council tax retained locally (89% goes to other bodies like Surrey County Council, Surrey Police and in some cases local Parish Councils).
“Protecting core services for all residents and sustaining additional support for those who need it most, will require accelerated transformation of the council. In pursuit of long-term financial sustainability, the council will continue to evolve its operations, prioritising cost reduction, income generation, and optimising its property assets.
“Though difficult choices lie ahead, the council is prepared to face them. We are dedicated to transparent communication with our residents, community partners, and our dedicated staff, who continue to work tirelessly on behalf of our community.”
The Council Strategy 2024-2028, “Delivering for you and a fairer society”, sets a clear direction and overall priorities for the organisation over the next four years.
One of the priorities identified in this strategy is to ‘Deliver Effective Services with Sustainable Finances’, and close budget monitoring is key in helping to achieve this, allowing timely action where necessary to align spending with strategic objectives. With monthly reviews conducted alongside budget managers and formal quarterly reports provided to councillors, this regular oversight helps to maintain control over the council’s finances.
This proactive attitude reflects our ongoing efforts to maintain fiscal responsibility while navigating emerging financial challenges, providing a clear picture of the year’s financial outlook and ensuring the council remains well-prepared for the months and years ahead.
Cllr Macdonald finishes up with: “We are proud to be serving the people of Surrey Heath and determined to continue to provide the best services possible in a financially responsible way, while focusing on residents’ priorities, including Protecting our Environment, Promoting Healthier and More Inclusive Communities, and Supporting a Strong Economy and Creating More Homes.
“In areas where we are not the lead authority, we will continue to campaign strongly for residents, and their interests, and we are determined to protect what makes Surrey Heath such a special place to live and work, keeping it at the heart of all future decisions.”