Council finances remain 'very volatile' as Luton copes under strain of second lockdown

An emergency budget was approved in July because of "the systemic and fundamental impact" of coronavirus on the council's financial position, according to Labour High Town councillor Andy Malcolm.

"Our finances will have to be closely and continuously monitored over future months to ensure everything remains in line with where it needs to be," he told the committee.

The forecast for quarter two "indicates a potential overspend of around £1.8m for general fund services", he explained during an update to the committee.

"This is an improvement of just under £1m from the position in quarter one.

"But we're entering second lockdown and that means council officers will need to prioritise responding to the virus in our community, which may limit the amount of focus that can be put on making savings.

"Fundamentally the situation everyone's in remains very volatile," he warned.

"The position on our income sources is of more concern than it was because of a forecast for quarter two indicating losses of £3.8m more than the original estimate when we wrote the emergency budget.

"So to date there are £8.7m total losses from income, although these are offset by £2m savings in those sectors because of services not needing to be delivered.

"The grant we get only partially reimburses for this and also excludes specific areas relating to trading and commercial activity, which has limited the amount of support we can have.

"Beyond that income loss from airport dividend, our wholly-owned airport company hasn't been covered at all.

"It's too late to protect some of the front line services, on which we had to make emergency budget decisions in July that we're now delivering on."

Budget savings have increased to £16.9m this year, going up to £22m by March 2022.

"These savings are falling behind schedule to an extent as officers are having to prioritise the work needed to support the community through the current crisis," he said.

"We're reporting a gross shortfall of around £7.8m against this year's target which is £16.4m.

"But the impact of this is reduced because there's £4.1m of savings.

"Across the wider accounts, both the Housing Revenue Account and the schools budget are forecasting an underspend of about £0.9m, up from £0.7m in quarter one.

"On capital expenditure we postponed a number of significant projects to achieve a reduction in borrowing costs for this financial year, with an accumulative drop in spending of £66m this year.

"All group leaders and the MPs from the town wrote to the Secretary of State in the summer," added councillor Malcolm, who's the portfolio holder for finance.

More than 100 councils are having conversations with the Ministry of Housing, Communities and Local Government about their financial position.

"There's unlikely to be any significant bridging cash," he said. "Given we've got that open door, we're continuing those talks."

The executive agreed to note the report with "the continued work of officers to manage the pandemic and to achieve financial stability as far as possible".