Maximum Council Tax Rise Leaves North Yorkshire £30m Short

Council Tax in North Yorkshire will rise by 4.99 percent in April.

It's the maximum increase allowed under government rules, but with inflation running at over 10 percent the council says it will have to use £30m pounds of its reserves to balance the books next year.

In announcing the increase, County Council leader Carl Les, said he was acutely aware of the financial pressures on local households.

Members of the county council this week approved the budget for the next financial year which will be adopted by a new authority to cover the whole of North Yorkshire.

The new North Yorkshire Council will be established in five weeks time, and it is facing a predicted shortfall of more than £30 million in the first year of its operation amid massive pressures on finances for the public sector across the country.

The budget for the new council will see a rise of council tax of 4.99 per cent in North Yorkshire to counter the financial challenges, equating to an increase of £83.64 for an average Band D property.

County Councillor Andy Brown is concerned.

Cllr Les added: “We are facing unprecedented financial challenges in North Yorkshire, and this is without question the toughest budget that I have known in more than 20 years that I have been a member of the county council.

“As a council, we are committed to helping anyone who finds themselves in financial difficulties, and this is even more important while the country is experiencing such high levels of inflation.

“The increase in council tax bills, though, is necessary to ensure that frontline services can continue to be provided. It is an extremely tough decision to increase bills at the current time, but unfortunately it is a choice that we have had to make.”

The new council will be launched on April 1 when North Yorkshire County Council and the existing seven district and borough authorities merge in the biggest shake-up of local government since 1974 to pave the way for a devolution deal.

The multi-million pound deficit in the new council’s budget will have to be covered through the one-off use of reserves, after some additional savings have also been made. In the longer term, the financial gap is expected to widen and will need to be met by additional savings.

A masterplan will now be drawn up maximise millions of pounds in savings across North Yorkshire Council to help counter the unprecedented financial challenges.

The plan to introduce the savings needs to be set out by this time next year to ensure that the new authority does not have to continue to rely on cash reserves to balance its books.

The county council’s deputy leader, Cllr Gareth Dadd, who is also the executive member for finance, said:

“There will be tough financial decisions ahead, but we are committed to making sure that North Yorkshire’s taxpayers see the greatest benefits possible with the launch of the new council.

“By making this change now to a single authority for North Yorkshire, we will be in a much stronger position to manage the rising costs and increased demand for services.”

The shortfall in the new council’s budget has been caused by a series of factors, such as the highest rate of inflation since the early 1980s, issues surrounding supply chains and rising staffing costs as well as the aftershock of the Covid-19 pandemic.

For instance, inflationary pressures, including pay awards, previously accounted for an increase of about £19 million a year across the eight North Yorkshire councils.

However, the dramatic rise in inflation to more than 10 per cent a year has seen £66 million having to be allocated to the next financial year’s budget to cope with the increase. This equates to a rise of about £47 million compared to previous years.

During the second year of the new council’s operation, it is estimated that there will be a further shortfall of £30 million, with another annual deficit of £45 million predicted in the third year, leading to a total of £105 million over three years.

The county council says there are adequate financial resources to cover this predicted deficit through careful long-term financial planning that has seen North Yorkshire County Council’s reserves built up over more than 20 years.

However, Cllr Les stressed that reserves are a one-off resource – once they are used, they are gone. The new council will therefore be working on the detailed plan for a major strategy to balance the authority’s books, and avoid using £105 million of reserves, although the financial challenges come in the wake of a decade of austerity measures from the Government.

There are already significant financial pressures being reported in each of the county council’s service directorates. The health and adult services directorate alone is being faced with increased demand, especially for adult social care as well as inflation, and its existing £7.9 million in contingency funding has already been allocated.

The council says that the opportunity to streamline the way in which key services ranging from waste and recycling to education, highways and planning are delivered to nearly 33,000 businesses and the 615,000 residents in North Yorkshire is seen as essential to helping to tackle the growing demands on the new council’s finances.

The authority says that by joining up services and maximising spending power, North Yorkshire Council is set to recoup between £30 million and £70 million, which will become annual savings.

The scale of the new council’s operations will see it have an overall spend of about £1.4 billion, including £343 million on schools.