A north-east council has said it will be reviewing all of its services in order to deal with the current “unparalleled financial crisis”.
Aberdeenshire Council said it is potentially facing a £30 million budget black hole this year, which could increase to between £55 and £60 million in the next 20 months.
Councillors heard reports from the chief executive of Aberdeenshire Council Jim Savege, as well as finance boss Alan Wood at a meeting of full council, held virtually online.
In the first quarter of this financial year alone, the local authority is predicting an £8.5 million loss in income, with a predicted £30m loss in income and increased costs over the year.
It has said without taking any actions, the council would have to use 70% of its current reserves.
The financial position is being reviewed on a weekly basis by the strategic leadership team, with regular reports to be given to councillors.
Chief executive Jim Savege said: “It’s hard to overstate the significance of the effect covid-19 has had on all of our lives. This has required the council to respond significantly, adjusting and changing how we have worked including the cessation of a range of services and the adaptation of others.
“There has been a consequential impact on the council’s finances. In quarter one, we’re seeing a £8.5 million loss, which is made up of a loss of income, unrealised savings and additional costs that we have occurred. Overall we’re projecting a £30m plus impact in terms of our £605m revenue budget.
“I would also anticipate there’s going to be significant interruption to our main HRA and capital programmes as a result of Covid-19.
“We have been taking immediate actions, having a firm focus on cashflow, keeping a steady hand on our contracts and also on our liabilities as an organisation.
“We intend to set our to review each and every one of our services, in part already forced by Covid-19 anyway, where we need to understand what the scope and standard of need in the future is.
“We’re looking to manage our budget over a 20-month period from August through to March 2022, with a range of interventions that may be used by council subject to further advice. We intend to bring a further paper back to council in September at the latest with an update in some of the progress in terms of our new and revised medium-term financial strategy.”
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Looking at a budget for 20-months is unusual, however it is hoped a balanced budget will be able to be met by this time.
Head of finance Alan Wood added: “This is the second paper to council this financial year and that alone is significant in terms of the way we report on our financial performance.
“To report twice within the first quarter is an indication of the importance of the topic and the situation that we face as we transition from our current medium-term financial strategy through to the new one.
“I’m classing this as a financial crisis for a number of reasons. It’s important that at this stage we’re seeing the figures as a scale. It’s highly unlikely we will resolve this within the financial year. With no action, we would need to use approximately 70% of our reserves.
“At the moment we are in a cost-controlled mode of operation and therefore reviewing each and every item of our expenditure.
“If the position maintains across the first quarter and the end of the financial year, we’re looking at an excess of £30m. We currently have a £22m deficit for the following financial year, over the next 20 months we’re in potentially between £55 and £60m of an issue, hence the position we’re setting out.”
Councillors approved officers recommendations, agreeing to develop a revised medium-term financial strategy through measures outlined by the council including reviewing services, and also to receive regular updates on the position.