The £153m black hole in Manchester City Council’s finances

Cash shortfall Cash shortfall
Cash shortfall

Manchester City Council is facing a £153m budget shortfall over the next three years, councillors have heard.

A meeting of the resources and governance scrutiny committee heard that although the city’s central government funding settlement for 2022/23 was ‘less bad’ than anticipated, analysis suggested the ‘very frightening’ slashing of public spending in future years.

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The council is preparing for cuts of around £40m per year to deal with the financial black hole, with another £51m of reserves used to mitigate the shortfall.

Councillors were presented with a paper titled ‘spending review and budget update’ following the chancellor’s budget announcements late last month.

It stated: “Following the spending review announcements and other updates the council is forecasting an estimated shortfall of £4m in 2022/23, £64m in 2023/24 and £85m by 2024/25.

“Officers have identified options to balance the budget in 2022/23 which are subject to approval.

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” A longer-term strategy to close the budget gap is being prepared with an estimated requirement to find budget cuts and savings in the region of £40m per year for 2023/24 and 2024/25.

“In addition, £50.6m of risk-based reserves have been identified as available to manage risk and timing differences.”

Councillors heard that the 2022/23 spending review was a bit better than anticipated, with some additional funding allocated from a three per cent increase in spending power announced nationally.

However, the report stated that did not address longer term funding for social care and other pressures as the increase was ‘front-loaded’.

What is the council saying about it?

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Leader elect of the council, Bev Craig, said: “In the last 10 years this council has lost £419m of funding.

“Even if Manchester had seen funding cuts in line with an average council we would have £85m a year more in funding than we currently have.

“And then of course there is the impact of Covid that we have seen in this city and the financial losses we’ve experienced.

“We find ourselves in a circumstance where a ‘less bad’ spending review is seen as positive amid the background of a decade of austerity.”

Coun Bev Craig, who has been appointed the new leader of Manchester City CouncilCoun Bev Craig, who has been appointed the new leader of Manchester City Council
Coun Bev Craig, who has been appointed the new leader of Manchester City Council
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She added that there would be a more detailed budget update early in the new year once the government settlement had been fully announced.

Chairing the committee, Coun Sarah Russell, said: “Reading these papers there seems to be a government assumption that public spending will drop from 7.9% of GDP this year, be halved to 3.3% the following year, then to 2.4% the year after, 1.7% for the next two years and after that to 1.5%.

“If you look at how that pans out, if the Conservatives manage to win the next election they plan to slash, absolutely slash, public spending.

“The largesses of this year is very, very temporary. How this pans out going forward is quite frightening.

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“This year it’s not as bad as we’re used to, but for how long?

“It’s flagrant electioneering in a very irresponsible way.”

The Budget and Spending Review document published on 27 October stated the ‘government’s plans to build back better over the rest of the Parliament’.

It said it will do so by ‘investing in strong public services, driving economic growth, leading the transition to net zero, and supporting people and businesses’.

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