Manchester city council’s £20m funding gap plea to new Prime Minister

Manchester city council has made a plea to the new Prime Minister to help plug a £20m budget gap caused by ‘severe and unprecedented’ financial pressures.

The town hall has blamed the ‘significant’ overspend on Covid and inflation.

The total cost of inflation to the council’s coffers is currently expected to be £38m more than it would be in a ‘normal’ year, according to town hall chiefs.

This includes a nationally-negotiated pay rise for local government staff which is expected to cost Manchester council £9.5m more than it had budgeted for.

Speaking to councillors at a scrutiny committee meeting on Tuesday (6 September), city treasurer Carol Culley said the situation is ‘unprecedented’.

However, she said how the new Prime Minister responds is the ‘big unknown’.

She said: “Your guess is probably as good as mine in terms of what it might mean in terms of support for residents and recognition of inflation pressures.”

The council’s deputy chief executive explained that, unlike in previous years, the overspend in the budget is not driven by an increase in demand for statutory services such as children’s or adults’ social care and homelessness.

She said that the £20m budget gap relates to the ‘hangover’ impact of Covid on the council’s income such as from parking and, predominantly, inflation.

In a normal year, the council would budget around £8m to cover rising costs, but responding to forecasts of high inflation, a further £21m was set aside.

But because inflation was projected to peak at around 5 pc when the budget was set earlier this year, this figure was £7m short of what is now required.

The town hall had also budgeted £7m to put towards pay rises, but as the current offer stands at around 7 pc on average, another £9.5m is needed.

Deputy city treasurer Tom Wilkinson said the council thought it was being ‘prudent’ at the time, but it will now face extra staff costs of at least £16.5m.

The town hall chiefs said that this will also put pressure on budgets for future years because there will be less ‘flexibility’ than there has previously been.

Labour councillor Rabnawaz Akbar, who is the executive member for finance and resources at Manchester council, made a plea to the new Prime Minister.

He said: “We are a financially well-run council.

“But we’re finding it practically impossible to absorb all the inflationary pressures.

“And this is at a time when the impact of Covid and the cost of living crisis is still being felt on the income that’s coming into the council.

“So when the new Prime Minister actually enters Downing Street, we want her and her cabinet to recognise the severe and unprecedented pressures that local authorities are facing and whenever this emergency budget happens, to actually commit to extra funding to mitigate against the soaring inflation.

“It’s absolutely right that households should be helped, but it’s just as important that essential services that are provided by councils are supported through this crisis as well.”

Manchester council leader Bev Craig will be writing to the government calling for extra urgent support to help cope with these rising costs.