The impact of Covid-19 on Highland Council’s finances has turned a positive budget story ready to be announced in March into a looming £100m funding abyss, council bosses said yesterday.
The figure has been revised upwards from an earlier estimate of £80m.
And depending on government funding, a second wave of the virus and winter events, the funding gap could move up or down.
Just before lockdown, the council was about to announce a substantial underspend with continued savings ahead – but that budget has had to be torn up in the light of subsequent events.
The council’s annual outgoings total more than £600m, with many costs, such as staffing at £300m, contractually fixed and difficult to reduce, budget leader Alister Mackinnon said.
“We are confident of funding from the Government but what is extremely challenging and very risky is the income from council tax, potentially up to £5m and charges, potentially more than £40m.
“We have upwards of £25m increased costs in childcare, social care, welfare, construction and new service provision.
Mr Mackinnon said income from planning applications and building warrants had plunged by 63%, and an expected £3m from car parking charges had gone to nil.
Refuse collection costs have ballooned due to social distancing measures, he said, with more vehicles and extra staff trained to deal with this.
“That is only one aspect of our increasing costs.
“Budget savings of £8m planned for this year can no longer be made.”
Mr Mackinnon said ways of tackling the budget gap in the short term include suspending recruitment, agency and overtime spend, restricting non-essential spend, rigorous financial controls, the use of reserves which now stand at £15.5m, and ceasing contracts.
“We are campaigning with our MPs and MSPs to ask the government to write off our loan charges of £57m for a year, which would be of huge benefit and help at this time,” he said.
“For example, a budget gap of £60m equates to more than 2,000 jobs.”
He stressed the council would do whatever it can to protect the well being of the region, save jobs and support communities.
Chief executive Donna Manson said on March 12 the council would have been celebrating a turn-round in its finances to turn at £2.3m overspend in 2018/19 into a £7.6m underspend in 2019/20, delivering £18m savings and raising the critically low reserves from £7.9m to £15.5m.
She said: “The message I’m giving to staff is not to panic.
“We know you can deliver, we have the capacity and track record of success without redundancies, we have better reserves, you have demonstrated your resilience during Covid and that we can take on new services.
“Although it looks like a huge challenge today, my message is we can do this and come through it, working together with our communities and all our partners.”
