Luton council facing £6.52million overspend - but says a recovery plan is under way

A “robust deficit recovery plan” is under way to stem a predicted £6.52m overspend arising from Luton Borough Council’s £156.8m revenue budget, a meeting heard.

The finances for 2023/24 continue to be complex, challenging and difficult to predict, according to finance portfolio holder and Labour Northwell councillor Rob Roche.

“The quarter one report already indicates the council faces a significant overspend at the end of the financial year,” he warned the executive.

“Luton faces unprecedented fiscal challenges,” he said. “These include increasing demand for services, the impact of inflation and high interest rates, a rise in special education needs transport costs, and greater use of hotel and nightly let accommodation at higher rates because of the scarcity of privately rented rooms.

“The town’s residents aren’t immune from the cost of living crisis and ultimately it’s expected this will have a knock-on effect on debt levels and demand for discretionary services.

“LBC is forecasting a £6.52m overspend against its £156.8m budget. The general fund level of reserves held may not be sufficient to address the current budget deficit, if no action is taken bring it back to a balanced position.”

There are a number of risks associated with the level of income generated and increasing expenditure because of several factors, he explained.

“These include income reduction from commercial properties, potential increases in the housing benefit subsidy loss, difficulty in recruiting, asylum impact, and legislation changes in adults and children.

“At this point, it’s advisable not to allocate any contingencies until marked improvements are made and the financial position for 2023/24 becomes clearer.

“The deficit recovery plan approved by LBC is proving challenging to deliver and amounts to £8.7m, excluding any underspends.

“The council will have to plan to deliver further debt recovery during the next two years, while the gross core underlying deficit amounts to £11.45m.”

LBC has been trying to make savings in recent years, such as in areas of special educational needs transport, homelessness, shortfall in income and its spend on agency staff.

“We’ve embarked on a transformation programme to deliver ongoing cashable savings to address the current budget deficit, and LBC’s long-term sustainability and financial resilience,” added councillor Roche.

“This has to be delivered at pace and scale to deal with the level of overspend. These savings led by departments have to be met and don’t require any transformational initiatives.

“The multiple challenges we face are clear and will be difficult to fully overcome without a robust deficit recovery plan in place to keep the associated costs from soaring out of control.

“Actions are needed now to improve the forecast for the current year and the prospect for next year’s budget, which will require a close and ongoing review, monitoring and reporting.

“The most notable variant on the capital programme expenditure is The Stage major project, which had an allocated £67m budget this year. Management has stated this project will begin later than expected.”

The executive agreed several recommendations with one “to implement urgent actions, which include restricting non-essential expenditures”.