Plymouth City Council is welcoming the announcement that the Government is minded to agree its request for a capitalisation direction and is now set to agree a balanced 2024/5 budget next week.
The Council requested a capitalisation direction from the Department for Levelling Up, Housing and Communities (DLUHC) to resolve issues related to a transaction made to save public money in 2019/20 and the Minister for Local Government has now confirmed he is minded to grant it.
Plymouth has not needed to request any additional money from this capitalisation direction but the reason it is asking for it is to enable a different accounting treatment to be used for the transaction, which involved capital borrowing to significantly reduce the ongoing cost of a pension deficit to Council’s revenue budget.
This enabled the Council to make more than £9 million savings to its revenue budget because paying the interest on the loan was cheaper than paying the deficit every year.
Councillor Tudor Evans, Leader of the Council, said: “We welcome the Government’s confirmation that it is minded to grant our request for a capitalisation direction and are also very comfortable with an independent team reviewing the transaction.
“We have always been transparent about the transaction, which was made with the best intentions as it helped address severe pressures on our revenue budget, which supports hundreds of day-to-day services for Plymouth residents.
“We knew that the transaction was novel in local government, but we were doing our best to think outside the box to ensure we didn’t need to make cuts to local services as our funding continues to reduce. It has enabled us to save more than £9 million of public money for local services.
“Our auditors have already reviewed the way the transaction was made and while they acknowledged it had not been ‘detrimental to the public purse’, said it was very unusual in local government and had some concerns regarding the process the Council went through. They made a number of recommendations about our governance arrangements, which we have already implemented.
“We are happy to work with an independent team to review the whole process and ensure everyone can learn from this.
“We are also pleased that next week we will be recommending to full council a balanced budget that protects local services and enables us to continue delivering the priorities for Plymouth.”
Notes to editors
The matter has been reported to the Council’s Audit and Governance Committee on a number of occasions, more recently on 28 November 2023.
The City Council is due to set is budget for 2024/25 at the full council meeting on Friday 8 March.
Despite facing ongoing increases in costs and demand pressures in social care and homelessness services, the Council is proposing a 2024/25 budget that offsets costs increases with additional resources, contingencies and savings, avoiding the need for reductions in critical services or the introduction of new charges for services.
The proposed budget will enable the Council to deliver its objectives for the city and ensure that services to children and vulnerable adults, the provision of affordable housing and help for those affected by homelessness continue to be key priorities.
The budget acknowledges the ongoing impact of the cost of living crisis on the people of Plymouth and does not propose reductions to critical services or introduce any new charges for services. It also ensures there is adequate funding to repair potholes and allocates additional funding to the grass cutting service, both ensuring a better living environment for the city.