We understand that there are a lot of questions around the Council's budget, budget overspends, and how we intend to balance the budget going forward.
We have put together answers to frequently asked questions about the budget below. We hope that these provide the information you are looking for and give you a better understanding of our current financial position and the steps we are taking to manage it.
What is the budget position for this year?
We are forecasting that the overspend for the 2024/25 financial year will be £6.723m
This estimated overspend is despite significant recent cost saving measures at the council including a freeze on recruitment and restricting non-essential spend. The cost saving measures follow large reductions in the council’s budget over a number of years
We continue to experience an unprecedented demand for our services, particularly to support the most vulnerable. As well as demand increasing, looking after our vulnerable children and older residents is becoming increasingly expensive and now accounts for around 64% of our total budget overall.
Because we are legally obliged to provide some of our services – including caring for and supporting vulnerable children and older residents – we cannot simply stop spending in these areas.
Work will continue to address this year’s shortfall, and we will need to use our reserves, which are held to support the council in unforeseen circumstances, to balance this year’s budget.
However, this will exhaust our reserves and we will have little scope to deal with unexpected financial commitments and, importantly, we cannot rely on them to make up any shortfalls in future years.
Our budget is similar to a household budget – if we spend more than our income and we have no savings to offset this, we will run out of money to provide services to you.
What about next year?
We must also focus on achieving a balanced budget for next year.
By law, councils must do this each year and the initial proposals for how we will live within our financial means for 2025/26 financial year will be considered by the Cabinet in December.
To balance the budget, we estimate we will need to make savings of around £8.8m and the starting principle is to minimise the effect on both our staff and services to the public.
The details of what we propose to save £8.8m is available on our cost savings proposal page.
The full budget report which will be considered by the Cabinet is available here
Why is there a shortfall in the council’s budget?
We continue to have a steep rise in demand for our services, and this has meant ongoing overspends in a number of areas which we are legally obliged to provide and cannot simply stop funding these services.
We expect the pressures to continue into the next financial year and it is very important that we plan for this.
The biggest pressure on the council budget is an increase in the number of children coming into our care and, more specifically, the complex needs of some of these children.
The Council has a legal and moral duty to keep children in our care safe and provide them with the best possible start in life.
At the end of October, we had 441 children in our care, up from 399 in 2022/23.
Children with complex needs sometimes require specialist care in residential accommodation, which is very expensive.
As of November 2024, there were 72 children accommodated in residential and supported accommodation at an average cost of £330,000 each per year.
The Council’s budget for children in our care residential placements is currently forecast to overspend by £11.9 million in 2024/25.
Our staff are working tremendously hard to reduce this overspend while providing the best possible care and support for our most vulnerable children.
We are also currently advertising for foster families to give children in our care the best possible start in life. Additional foster carers would give vulnerable a supportive and loving home and be more cost-effective than residential placements.
The cost of providing care for vulnerable children is a national one – there are not enough residential care placements to support the number of children coming into care and this has driven up the price of each placement.
The Government launched a review of the children’s social care support system in November 2024. Further details are available here
What are you doing about this issue?
As mentioned, the cost and availability of placements in residential accommodation is a national issue and many councils across the country face the same challenges.
We are working closely with some local suppliers to identify opportunities to increase the provision of locally based placements to bring down the cost of caring for vulnerable children.
We are also finding our own accommodation for children in our care, rather than rely on national suppliers, where some of the places are far more expensive.
This work is coupled with intensive projects to support families and young people to keep families together and avoid children and young people coming into our care.
We will continue to be there for people in need of help and will provide the appropriate care for children to keep them safe and provide them with the best possible start in life.
Why can’t you use your reserves to make up the shortfall next year?
As mentioned above, we will need to use reserves to make up the shortfall in this year’s budget.
However, reserves are like savings in a bank – once the money is spent, it can’t be used again.
We must keep some reserves for unforeseen or emergency circumstances, such as severe damage caused by extreme weather.
By the end of this financial year, we will have exhausted all our usable reserves and we won’t have this option. The only way to balance the budget is to match the amount we spend with the amount we receive.
I have read that the council has had a big increase in core spending power. Why are you proposing to put Council Tax up?
Core spending power is the amount the Government judges is available to councils through its five areas of funding – Government grant, Council Tax, Business Rates, sales, fees and charges for council services and specific grants.
However, in calculating how much money the Council needs, the Government assumes that Council Tax will be increased each year to by the maximum legally allowed.
Any decision not to do that adds to existing budget pressures and potential cuts to services.
The maximum legally allowed last year was a total of 5% – 3% Council Tax and 2% Adult Social Care precept.
Each year, councillors decide whether to increase Council Tax and the Adult Social Care precept.
Last year, Redcar and Cleveland councillors voted to increase by a total of 4.99%.
Even with the level of core spending power assumed by the Government, the cost of providing council services has risen much faster than the income the core spending power provides.
The Government announced extra money for councils in the Budget. Why are you asking residents for more at a time when the cost of living remains high?
The Chancellor announced additional money for services we – and other councils – provide.
We won’t find out exactly how much our council will receive from the Government until just before Christmas.
However, although the extra funding is very welcome, we estimate the amount we will receive will still fall some way short of the budget gap we are predicting.
I’ve heard that the business rates from Teesworks will bring millions of pounds into the council. Why don’t you use this to balance the budget.
If the ambition for Teesworks site is fulfilled, the council will receive 50% of Business Rates from the companies which operate from the site.
The regeneration of Teesworks, and other areas associated with the Freeport, could generate additional Business Rates income, with £32.7m forecast over the next three years if large companies move onto the site.
However, when and whether this will happen and how much revenue the council could receive is not yet clear.
The level of Business Rates is set for each company by the Government’s Valuation Office and companies only become liable for Business Rates when they become operational.
Any businesses expected to be operational on the Teesworks site next year and therefore expected to then pay Business Rates have been factored into the council’s budget for next year.
What happens if you do not achieve a balanced budget?
Councils can’t technically go bankrupt, but they can issue what is called a section 114 notice, which effectively means they do not have enough money to fund the services they must provide by law.
The notice means the council in question cannot commit to any new spending and must come back within 21 days with a new budget which balances the books.
This often means severe cuts to frontline services, which has a serious effect on residents. Councils can also be forced to sell off assets, such as buildings, to address their financial deficits; and to implement much larger council tax increases
In some cases, the Government appoints commissioners to run a council.
Between 2000 and 2018, only one section 114 notice was issued, but councils experiencing this level of financial distress has become far more common.
Some were caused by specific reasons, but more councils nationally are now in financial difficulties caused by the cost of providing services.
Alternatively, councils can seek exception financial support from the Government, short of issuing a Section 114 notice. However, this only entails special permission to borrow money to cover shortfalls in budgets whilst measures similar to those described above are implemented to balance the budget.
Any council which does this is usually then monitored by the Government to ensure it successfully balances its budget in future.
To be clear, your council is not in a position where exceptional support from Government is being sought or a section 114 notice is necessary and, instead, is focused on balancing the budget and ensuring financial stability in the years to come in a way that minimises the effect on both our staff and services to the public.
Why do you continue to finance new projects while warning about the threat to day-to-day services?
Specific grants, which make up a large proportion of your council’s funding, are granted for use for a specific service or purpose. Often, these are for building or regeneration projects.
However, by law, these grants cannot be used for anything other than the purpose they were intended – we cannot use them to fund our day-to-day services or to reduce Council Tax.
Examples of grant-funded projects are those funded through the Redcar Town Deal, the Future High Streets Fund in Loftus and investments in Guisborough and Eston.
Details of the projects which are currently under way are available at:
Redcar Town Deal – https://www.redcar-cleveland.gov.uk/developing-the-borough/redcar-town-deal
Future High Streets Fund – https://loftusmasterplan.co.uk/
Where does the council’s money come from?
Your council is funded from five sources:
- Government grant – the amount allocated by the Government each year to help fund services.
- Council Tax – paid by residents. The type of housing in Redcar and Cleveland – a majority of properties in bands A-C – means the council raises less than other councils with more housing in the higher Council Tax bands.
- Business Rates – paid by businesses in the borough. However, small businesses do not pay Business Rates (the council receives a grant in lieu from the Government), so this does not apply to the majority of companies in Redcar and Cleveland. The level of Business Rates is set by the Government and the council has no influence over this.
- Sales, fees and charges for council services – essential services are funded by the sources above, but additional services are charged for, with the fees for some being set by the Government and some set by the council’s Cabinet.
- Specific grants – money provided for specific services or projects. This money is ring-fenced for the specific purpose and cannot be used to fund everyday services.
The amount of funding from the Government has significantly reduced over the past decade.
Your council has significantly less money to spend each year and has many fewer staff than it had.
Where does the council spend its money?
The council provides many services each day, from supporting the vulnerable, to maintaining roads and keeping the borough clean.
Demand for our services means providing social care – supporting and protecting vulnerable children and adults – accounts for more than 60% of our budget. There is no sign of that demand reducing and we expect that percentage to rise next year.
This will mean there is less money to provide all our other services.
What help is available to me during the cost-of-living crisis?
The Council has a number of financial support schemes, such as reductions in Council Tax payments and assistance towards rent payments.
This could include a reduction in Council tax of up to 100% for eligible residents of state pension age and a reduction of up to 82.5% for eligible working age residents.
Residents may also be entitled to Household Support Fund assistance of up to £300, dependent on circumstances.
To find out more about Council Tax support, advice about rent payments, the Household Support Fund and other help with the cost of living, please visit our Cost of Living Support pages.