Luton council budget overspend could be more than £15million says councillor

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Overspend almost double official figure, if contingencies and reserves set aside, he said

A current end of financial year budget overspend by Luton Borough Council is nearly double the headline £7.8m figure, a councillor has claimed.

Liberal Democrat opposition group leader on the local authority and Barnfield councillor David Franks suggested the amount is £15.5m when contingencies and reserves are set aside.

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At a meeting of the council’s scrutiny finance review group, he blamed the shortfall on “unrealistic budgeting”.

Luton CouncilLuton Council
Luton Council

LBC’s director of finance, revenues and benefits Dev Gopal told the group: “The forecast for the end of the year is a net overspend in the general fund of £7.8m.

“The big increase was the pay award at £3.8m,” he explained. “That wasn’t budgeted because at the time the assumption was two per cent based on the Office for Budget Responsibility (OBR) forecast of inflation.

“In quarter one, we decided to release a contingency because things such as the pay award would be agreed around six per cent. A significant number of capital projects have been reprofiled.

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“There’s a shortfall in the savings delivery programme of £1.3m. We’re monitoring that. And there’s an income shortfall from the pandemic.

“There’ve been staff pressures. We’ve struggled to recruit. There are key posts in finance we’re trying our best to fill. There’s also a £2.4m overspend on temporary accommodation.

“Adult social care is more or less breaking even. There was a capital programme outturn of £176m last year. The quarter two monitoring forecast is a reduction in spend of £43m this year.

“As for the key risks on delivering a balanced budget, we need to monitor the savings delivery programme, cost pressures, price and pay inflation, and the coronavirus impact on parking and licensing.”

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Councillor Franks said: “The budgeted overspend is in fact £15.5m because you need to add in the contributions from reserves and contingency. That comes to £4.5m.

“The pension fund reserve which is no longer required because of a revaluation of the assets is £3m. A good deal of it is unrealistic budgeting last year.

“Who could have expected salary increases to come to two per cent? It’s roughly six per cent overall, which adds £4m to the overspend on its own.”

“There’s more than £250,000 on failure to recover aged debt, which is difficult to get back. In plenty of cases the people who owed the money have moved away or in some cases died.

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“To overestimate the recovery by a quarter of a million pounds was an error in putting the budget together.

“And surely we know how much would be charged for the complicated job of actuary costs around the pension fund. To underestimate that by about £500,000 is unacceptable.”

Mr Gopal said: “It’s not an exact science. It’s difficult to predict. There might be areas in our assumptions where we get it wrong.

“On employee costs, the budget was put together in December. At that time inflation was predicted to come down and the government was expecting around two per cent.”

Councillors agreed to thank officers for a comprehensive report on a complicated and constantly changing financial situation.