Aberdeenshire Council is forming an action plan to deal with an “unparalleled financial crisis” expected to create a £30 million budget black hole.
Officials have warned the hurt is likely to be sustained and that it will take more than a year to turn things around.
Finance boss Alan Wood has warned that without urgent action the “financial crisis” would eat up the vast majority of the council’s reserves.
He has written a detailed report to go before councillors next week in which he outlines the dire predicament and suggests how the authority might make ends meet.
Mr Wood explains the council has suffered an £8.5 million loss in income since March, and might be on course to lose out on quadruple that sum by the end of the financial year.
His report states: “The detrimental impact on the council’s financial position…has been unparalleled, resulting in a situation which can be classed as a financial crisis.
“This term is not used lightly and must be seen in the context of the current circumstances.
“As this is anticipated to be a sustained position, it will likely take more than one financial year to resolve.
“Without action, this would require the use of 70% of council reserves.”
Local authority leader Jim Gifford has previously warned the region would be in for a financial “day of reckoning” in the aftermath of the pandemic.
But while he said the new report makes “pretty depressing reading”, he has also stressed it is merely the “starting point” on a long road towards economic stability.
Mr Gifford said: “The report going to council shows we’re expecting to have an overspend of £8.5 million by the end of this month.
“If we keep up this spending it will be over £30 million by the end of the current financial year – with knock-on effects for future years.
“The strategy we agreed in March is no longer fit for purpose.
“We have lots of options in front of us to look at – we could keep the existing budget but that would mean substantial changes in budgets.
“Or we could continue as we have and ask for more money to carry on delivery the extra things we’re doing.”
Mr Gifford added: “This is the starting point of what we have to look at.
“The report lays out that the council is in a reasonable position in terms of cash flow but, at some point through the year, that will run out.”
Mr Wood recommends councillors adopt a “medium term financial strategy” as part of the region’s “recovery phase”.
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He added that scores of projects agreed when the budget was set in March have been already been suspended or delayed as a result of the pandemic.
However, Mr Wood is hopeful the council is in a “strong” position to explore options to make ends meet.
Along with other measures, a review of debt – and the possibility of a debt repayment holiday – will be explored.
And Mr Wood’s report reveals the council could use its reserves to set balanced budgets up until March 2022.
The report states: “The council has a positive track record of delivering sustainable services but also understands that, in times of crisis, it is important to react and scale back or stop service delivery.
“Aberdeenshire Council also has a history of working with its communities and this is particularly true during the pandemic.
“Once again, local communities have stepped forward and stepped-up to support each other in a variety of ways, sometimes with support from the council but often on their own through shopping, medicine delivery, contact between neighbours, organising transport and much more.”
More information is available on the council website.
