Council could overspend by more than £12m

Redcar and Cleveland Council plans to cut in half a year-end overspend forecast of £12m

A local authority is predicting it could overspend on its revenue budget by more than £12m by the end of the financial year unless further measures are taken.

Redcar and Cleveland Council members will consider a report next week which provides a year-end forecast based on figures from the end of 2024/25's first quarter.

It includes an additional £1.3m that was spent on IT costs and renovations to the council’s Seafield House in Redcar to accommodate staff as well as repairs to the Saltburn cliff lift.

The local authority ended the 2023/24 financial year with a £3.3m deficit despite a package of control measures being implemented.

Complex high cost

Managing director John Sampson said cash reserves were used to cover the “residual overspend position” – with councils being legally required to balance the books and ensure income matches expenditure.

A fresh report by Mr Sampson referred to a significant increase in the first few months of the financial year in the number of complex high cost children’s care placements – about 20 in total with the risk that costs could grow further.

It stated that the council continued to be hamstrung by “inequalities” in the local government funding system.

The report also said the regeneration of the Teesworks industrial site could offer some financial respite in terms of increased business rates income but advised “caution”.

'Decisive action'

The Local Democracy Reporting Service understands the council can only begin to levy business rates once enterprises become operational with the SeAH wind factory set to be the first off the rank in terms of full completion, while 50% collected goes to the Tees Valley Combined Authority.

Council leader Alec Brown said he felt the council still had a “massive gap in funding after austerity, Covid and overseas wars”.

Mr Sampson’s report said “decisive action” was needed to ensure the council could sustain itself and fulfil its statutory obligations.

He described a pragmatic approach and said immediate mitigation measures through spending controls, flexible use of capital receipts and corporate contingencies could cut the £12.3m forecast overspend to £6.3m.

Meanwhile, reserves of £7.1m could also be drawn upon.

The council’s financial strategy already envisages savings of £9m having to be made in the next financial year, 2025/26.

A footnote to Mr Sampson’s report revealed the council was writing off more than £68,000 from four separate council tax debts due to the debtors being declared bankrupt with no further action being available to recover the funds.