Richmond Council challenges government funding cuts, warns of £70 million budget gap

Richmond Council challenges government funding cuts, warns of £70 million budget gap

Richmond upon Thames Council has unanimously passed a motion urging the government to reconsider substantial financial cuts, warning of a projected budget gap of nearly £70 million over the next few years. The council faces an annual reduction of around £29 million in core funding by 2028/29, a cut described as 58% of its core funding, as a result of the government's 'Fair Funding Review 2.0'.

Councillor Jim Millard, who moved the motion, stated, We are not asking the government to exempt us from reform. We are not saying that difficult decisions are not necessary or will not be taken. But government is asking us to change faster than a responsible council can safely change while demand is rising at the same time. He urged the government to measure twice, cut once, advocating for more time to make informed decisions.

Councillor Michael Wilson criticised the government for leaving the council £29 million worse off, questioning the fairness of a system that appears to penalise well-managed councils. Councillor Gareth Roberts also criticised the one-size-fits-all approach, stating that it punishes those hard-working councils that have got good practices in place in order to fix the problems for those councils who do not operate to our standards. Councillor Jim Millard added that the government's formula don't fully see the vulnerable people affected by the cuts and that fair funding has to be about checking that the formula keeps reflecting reality and is not driving perverse outcomes that impact the most vulnerable in our community.

Councillor Sarah Kahn highlighted the human impact of potential funding reductions by noting that the council currently supports 8,328 households under the Council Tax Reduction Scheme. The £70 million budget gap is projected to impact vulnerable residents and those who rely on council services the most. Specifically, Councillor Millard mentioned the plight of the older person who needs care. It is the child whose family has been torn apart and needs to be looked after. It is the family facing homelessness. It is the teenager with additional needs who requires specialist support. It is the unpaid carer, already giving 50 hours a week to look after someone they love. It is those people that the government's formulae don't fully see.

The council also acknowledged its precarious financial situation, with a projected cumulative budget gap of nearly £70 million by 2030/31, even after assuming maximum council tax increases and ambitious savings. Councillor Jim Millard described the situation as the most significant financial challenge in its history.

The Medium-Term Financial Strategy (MTFS) report elaborates on the rising demand for services, noting escalating demand and rising costs for statutory services continue to exert pressure on the budget, in particular social care and homelessness services. It further specifies significant demand growth in relation to care packages in social care and homelessness arisings. The report also mentions increasing demand and the complexity of need in adult and children's social care, and increasing numbers of homelessness admissions with insufficient government grant support relative to the scale of these pressures. The MTFS also details projected deficits of at least £12 million across 2026/27 and 2027/28 for the Dedicated Schools Budget (DSB).

The council has found almost £60 million of savings annually since 2018 and is driving almost £40 million in savings through its transformation programme. The MTFS report states that this programme aims to improve financial sustainability and at the same time deliver improved outcomes for residents and is projected to deliver £8.2m in 2026/27 with the potential £39.2m of ongoing revenue savings for Richmond across the whole of the programme.

The government's funding models assume maximum council tax increases of 4.99% annually up to 2028/29. Councillor Jim Millard stated that Richmond has a sensible level of council tax, and that some residents would like that level of council tax to be lower, indeed I would, too. Councillor Gareth Roberts also noted that If money is going to go to boroughs, then they should at least have a parity of council tax with the higher level. The MTFS report indicates that Every 1% increase in Council Tax generates £1.8m of additional income. It also states that assuming the 4.99% increase, there is a projected funding gap of £19.3 million in 2027/28. Councillor Payne stated that a so-called 'mansion tax' or the so-called council tax surcharge would impact around 4,300 additional properties if the qualifying threshold was lowered to £1.5 million, increasing the total affected properties to around 9,200 homes. He also expressed concern that this unjustified tax would impact on a number of residents and could really seriously impact people who are on pensions and are struggling to afford the rising cost of living, rising inflation.