Council has 'serious financial problems'

COUNCIL chiefs in Cornwall have admitted the authority is facing "serious financial problems" and that "belts will have to be tightened" if it is not to run out of money.

A Financial Health Check Report commissioned by the new Conservative administration elected in June has been released showing that the council faces massive overspending and needs to take drastic action if it is not to use up all its reserves of cash.

Adult social care and the department of children, schools and families are the worst offenders, with budget overspends of £5 million and £1.7 million respectively out of a total forecast overspend of £8.791 million.

The damning report, released to the Press late yesterday, states: "There is no doubt that the council is severely financially challenged and tough service delivery choices will have to be made in the later part of 2009/10 and for 2010/11 if the budget is to be balanced."

Council leader Alec Robertson was not available for interview, but said in a statement: "We need to tighten our belts and ensure that we spend every single penny of council tax payers' money wisely."

In April, Cornwall County Council and the six district councils were swept away to make way for the new unitary authority. The new Cornwall Council inherited an amalgamated debt from the seven councils of £20.4 million.

The report was drawn up to highlight where savings could be made.

It says: "The 2009-10 Budget is under a significant amount of pressure with a number of potentially serious overspends and a number of initiatives where funding has yet to be identified.

"Although action plans are being identified and implemented, these not only need to be delivered but they also need to be sustainable to prevent the problem recurring next year.

"If all the potential overspends are not dealt with within the year, then the potential impact on (cash) reserves could well leave the authority with a level of reserves which is not sustainable and ongoing financial pressures for 2010/11."

The document says the council currently has a "healthy balance of reserves, mostly earmarked, although caution needs to be taken over future use with reserves only being used to temporarily fund invest to save or income generation schemes where payback can be achieved."

Mr Robertson's statement said: "This report shows that the council has serious financial problems. We are facing huge challenges in the second half of this year and we need to take strong action to avoid another large budget deficit."

Four "key objectives" had been identified – managing the 2009/10 budget, containing reserves and limiting borrowing, controlling capital projects through robust challenge and exploiting opportunities for improvement.

"We must stop the habit of looking at reserves or borrowing as an easy option. All services should be financially responsible for their own expenditures."