North Yorkshire Council Issues Warning over Multi-Million Pound Shortfall in Budget

The council's deputy leader says the authority is extremely disappointed with the financial settlement they have been awarded by the Government.

The deputy council leader has warned.that support for rural communities in the county is being sacrificed as the Government

"diverts funding towards towns and cities nationally to leave a multi-million pound deficit to pay for the county’s vital services"

Following Chancellor Rachel Reeves’ Budget, North Yorkshire Council has found itself with an additional shortfall in funding of nearly £6.5 million after local government funding settlements were announced today (Wednesday, December 18) for the next financial year.

The deepening financial deficit comes amid increases in employer’s National Insurance costs and the axing of rural grants worth £14.3m per year in North Yorkshire.

The council’s deputy leader, Cllr Gareth Dadd, whose responsibilities include the authority’s finances, has warned that the settlements confirmed by the Government will leave many councils covering rural areas in a far more perilous financial state when compared to urban local authorities.

Ministers have pledged to carry out a spending review for the way in which councils are funded, but they have indicated that deprivation will be a key driver for where money will be allocated.

The council says that the new local government settlements have seen more funding being diverted to towns and cities, leaving councils covering rural parts of the country with major financial shortfalls in their budgets.

Cllr Dadd said:

“We are extremely disappointed with the financial settlement which we have been awarded by the Government.

“It seems that rural councils are being left at a distinct disadvantage to their counterparts in more urban areas as Ministers have taken the decision to target more funding towards towns and cities.

“We simply cannot let this financial divide between rural and urban councils grow, as there needs to be a fair approach for local government funding across the whole country.

“We are committed to providing the best value that we possibly can for North Yorkshire’s taxpayers, but we are now faced with some very difficult choices for our budget for the next financial year following the Government’s funding announcement.”

The biggest funding pressures in North Yorkshire for the new financial year have come about because of the loss of the rural services delivery grant as well as the rising costs of National Insurance contributions.

North Yorkshire Council received the greatest share nationally of the rural services delivery grant with £14.3 million in funding each year.

The £110 million package of funding for councils covering rural parts of England was a recognition from Westminster of the challenges of providing services across countryside communities.

The Chancellor announced in the Budget in October that the rate that employers pay in National Insurance contributions will rise from 13.8 per cent to 15 per cent on workers’ earnings from April next year.

The decision has left North Yorkshire Council facing an estimated £7 million shortfall, even with an estimated £5 million grant from the Government to cover the rising cost of National Insurance contributions.

Once all aspects of the local government settlement are taken into account with some funding increases in specific grants, North Yorkshire Council has been left with an additional overspend of nearly £6.5 million.

The council says the shortfall has been compounded by the "unrelenting demand" for care of older people, working age adults, and children and young people.

It says that the county’s sparsely populated communities have compounded the challenges of providing services to the public, as economies of scale are far diminished when compared to more urban areas of the country.

The council spends more than £50 million each year on home to school transport and the policy has had to be revised after costs have more than doubled since 2018/19 when it was last reviewed.

The costs to the authority per pupil for home to school transport is more than three times as high as the average for other English councils due to vast rural areas of the county and the distances travelled.

Each hour of social care in North Yorkshire’s rural communities can cost £5 more than in other parts of the country because of the travel costs and the longer journey times between clients. North Yorkshire Council purchases more than two million hours of care for people in their homes each year.

Following the launch of North Yorkshire Council in April last year, a plan has been drawn up to achieve more than £40 million in savings – although this has still left a predicted £58 million annual deficit by March 31, 2028.