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Cambridge City Council

Financial report confirms impact of pandemic and reduced funding on council

22 October 2021

CAMBRIDGE City Council has set out plans for how it will respond in the coming years to the financial impact of the coronavirus pandemic and a continued reduction in government funding.

Post-pandemic recovery is a key theme throughout its Medium Term Financial Strategy (MTFS), with the council pledging continued support for businesses, communities and residents to ensure that the city’s economy emerges from COVID relatively unscathed. Councillors will commit to using financial reserves to enable service improvements where necessary.  

The Medium Term Financial Strategy (MTFS), which is part of the annual budget process, identifies the long-range financial pressures that the council is likely to face, and how it will respond to them to ensure it continues to provide excellent services, particularly for the most vulnerable people in the city.  

As forecast earlier this year, the pandemic has had a significant effect on council finances. This was largely due to increased spending on housing and providing accommodation for former rough sleepers, alongside reduced income from car parking, Council Tax and Cambridge Live events.  

At the end of the last financial year on 31 March 2021, the government has covered less than two thirds of these £11.3m additional Covid costs, which has led to a shortfall of £7.2m in the council’s finances.

Councils’ net revenue spending rose by 11.4% in real terms in 2020-21, according to government figures

Government funding for councils has already reduced significantly over recent years. According to the Local Government Association, local authorities in England and Wales face an £8billion funding gap over the next three years. This is equivalent to all council spending on museums, sports facilities, pools, libraries and parks. 

The council’s Medium Term Financial Strategy forecasts a funding gap of £29m over the next five years. This increases from £3.1m in 2022/23 to £7.5m per annum after five years. This funding gap will need to be met from savings, higher income or reserves. 

Other pressures on council finances identified by the MTFS include the possible impact of Brexit, rates of inflation, increases in energy charges and changes to interest rates. However the council remains committed to its core pledges, namely tackling climate change and addressing inequality, building upon the achievements of the last five years 

To tackle the financial challenges, while at the same time modernising the services it delivers, the council is developing an ambitious transformation programme called Our Cambridge, which will ensure the council is fit for purpose for the future, with a clear emphasis on tackling poverty and inequality in Cambridge, and addressing climate change, in partnership with residents and other organisations. 

In order to fund the Our Cambridge programme it is proposed that the council invests £3.9m of reserves it has carefully accrued in recent times. 

Cllr Mike Davey, Executive Councillor for Finance and Resources, said: “The pandemic has accelerated the need for the council to transform the way it operates. The ongoing uncertainty relating to Local Government funding has not helped and I call upon the Chancellor to provide for fairer funding in the Spending Review next week.

“Despite these constraints the council has proved yet again that we can adapt swiftly and innovatively to meet the needs of our residents in a rapidly-changing world.  

“Our strategy sets out a clear and decisive course of action for the council to meet the financial challenges ahead and at the same time ensure the way we work evolves to reflect what our customers should expect from a forward-thinking council and to ensure Cambridge remains ‘one city, fair for all.’” 

The Medium Term Financial Strategy was approved by councillors at the full Council meeting on 21 October.