The council is in a “difficult financial position” because of increased pressure on services, according to a report by the institute, commissioned by the leader and chief executive of the council.
“As things stand, the council will not have sufficient reserves to meet its expected budget gap in 2019-20 unless it acts now,” the report released yesterday said.
“Surrey County Council will need to reform fundamentally how it provides services to its communities.”
Cost-cutting measures and receiving “additional central government funding” had not been enough to avoid financial problems, CIPFA noted in the document.
The institute does say how much the “additional central government funding” was. PF has contacted the council about this.
Labour accused the government of handing the council a ‘sweetheart deal’ last year after it rowed back on its plans to hold a referendum to increase council tax by 15%.
The council had said it needed to increase council tax because of increased pressure on social services but denied a ‘sweetheart deal’ had been done. It said it changed its plans for a council tax hike because the government had “listened”.
CIPFA has estimated the council’s gross expenditure is expected to increase by 6.5% by 2020-21 but gross funding will only rise by 2.4% over the same period.
This will result in a funding gap of £36m in 2018-19 rising to £86m by March 2020, and £94m by march 2021, the institute concluded.
Council leader David Hodge said: “It is well known that local government budgets across the country are under severe pressure.
“However we have a duty to ensure the council remains as financially sound as possible in these unprecedented times and that’s why we asked CIPFA to do this review.”
Hodge said that despite achieving a balanced budget and small underspend in the past eight years, the council wanted its finances to be “independently challenged”.
The Institute for Fiscal Studies suggested in a report last month councils such as Surrey could gain from the fair funding review, which is looking at updating the allocations of money from central government to councils.
This is because areas high tax rates and low assessed spending needs were likely to benefit, the IFS found. Surrey’s council tax now stands at 4.99%.
Although, Dave Phillips, associate director at IFS, told PF: “It seems likely they would have a higher assessed need - but that’s not guaranteed.”
Surrey’s woes come at a time when several councils have been higlighted in the news because they are struggling financially, such as Somerset and East Sussex County Council.
Most notably, Northamptonshire County Council, which has issued two section 114 notice – meaning it is effectively bankrupt – and has an estimated funding gap of £70m for this financial year.
