Green Party Councillor Sarah Hopewell, East Herts District Council Executive Member for Wellbeing, talks about the huge financial challenges facing East Herts District Council and how tough choices will have to be made.
Nationally, many councils are financially stretched, with one in five expected to declare effective bankruptcy over the next three years. All councils have faced huge budget reductions from central government since 2010. In East Herts, the District Council is also paying the price of hefty borrowing decisions made by the previous administration. The stated aim was to future-proof key facilities – but how much has the future-proofing cost, and has it been worth the price?
Since the Green/Lib Dem administration took over running East Herts District Council in May 2023, we’ve received lots of questions about District Council funding, how much money the District Council has, and where the money is going.
Where does my council tax go?
Although you pay your council tax bill to East Herts District Council, about 75% of it then goes to Hertfordshire County Council. The next biggest chunk, about 11% goes to the Police and Crime Commissioner. Only about 9% (or £200 per year for a band D property) goes to East Herts District Council, and the rest (about 4 – 5%) goes to your town or parish council.
There are around 62,000 households in East Herts, and this year (financial year 2024/25), the District Council received £12.6m in council tax. This equates to around £3.76 per week for a typical band D household.
Does East Herts District Council get any other money?
Along with council tax, the District Council receives money from government grants, business rates, and New Homes Bonus grants – although this is due to end. The District Council also gets money from Hartham and Grange Paddocks leisure facilities, from parking charges, from renting out space (e.g. for activities like Oktoberfest), and in the future from BEAM.
With all income combined, the District Council expects to receive about £22.6m for the financial year 24/25.
In addition to the above, there are other pots of money that the District Council receives ad-hoc, but these are pretty much all ringfenced, and can only be spent on specific projects or in certain areas. Examples of this include Section 106 money from new developments, and the UK Shared Prosperity Fund.
What does the District Council spend its money on?
The District Council’s biggest expense is Waste management. This includes household waste collection, street cleaning, dealing with fly tipping, dealing with dead animals, and dealing with dog-waste bins.
Other big costs include planning and planning enforcement, environmental health (dealing with food standards, noise complaints, licensing, air quality monitoring, asbestos removal), grounds maintenance (verge cutting, maintaining parks & open spaces, managing playgrounds), housing (responding to housing and homelessness applications, funding temporary accommodation), dealing with housing and council tax benefit claims, and providing IT systems to enable much to be done online.
For the financial year 2024/25, the cost of all provision combined was budgeted to be £22.9m.
It looks like the books roughly balance then – so what’s the problem?
Yes, the figures above are roughly balanced. This is because all councils must, by law, show that their expected spending won’t be higher than their expected income. If it is higher, the council must issue what’s called a Section 114 notice, which means the government steps in and tells the council what to cut.
The problem is, for many years now, central government has given councils less and less money. They’ve also limited how much councils can increase council tax. In years where there is significant inflation, councils cannot increase tax to reflect this. Yet the cost of all services has gone up. The combined impact means that East Herts District Council now has 40% less income in real terms compared to 10 years ago.
East Herts District Council isn’t just suffering from cuts in government funding though. There is a second problem: the cost of interest on borrowing.
As the previous administration themselves has been keen to emphasise, in their final six years or so, the then Conservative-led council made some hefty spending decisions, including spending on Grange Paddocks, Hartham Leisure Centre, and BEAM. Unfortunately, these projects, along with Northgate End car park, resulted in significant borrowing. While interest rates were less than 0.5% back in 2019/2020 when the borrowing took place, they have since increased dramatically, reaching 5% when the Green/Lib Dem administration took over. The impact is significant. For the financial year 2024/25, interest on loans is expected to be nearly £3m.
To make the books ‘balance’ for 2024/25, only a few months after taking over, the Green/LibDem administration had to find over £1m in savings.
If you’re interested in seeing the detail, the most recent 24/25 details are all available here.
What did you do last time to reduce costs by £1m?
Many services provided by the District Council are statutory – meaning they must be provided by law, and so cannot easily be cut. In the recent financial year, cuts to achieve this “balanced budget” included cuts to grounds maintenance, cuts to aspects of economic development, and various internal changes to cut staff costs. There were also suggested cuts that the Green/Lib Dem administration did not approve, including cuts to grants, cuts to Citizen’s Advice, cuts to planning enforcement, and cuts to the blue badge scheme. Details are available here.
However, despite hefty cuts agreed in March 2024, costs have continued to rise. In addition, new legislation has increased council costs nationally. Waste management is one of the biggest expenses the District Council has and food waste collection will soon become mandatory, meaning a significant extra cost. To try and offset some of this extra cost, when the new contract starts in April 2025, general waste collection will be reduced from two weeks (in most areas) to three. It will be a big change for lots of residents, but it will mean fewer service cuts elsewhere.
And how about for next year?
It was clear when preparing the 2024/25 budget, that 2025/26 was going to be very challenging. The new waste contract will be significantly more expensive than the previous one, and as borrowing has continued to increase, interest payments have continued to rise. To try to ensure the District Council could produce a balanced budget in 2025/26, a further £3m of savings were identified. However, even this is not expected to be enough to produce a balanced budget in 2025/26, with further savings of at least £2m needed.
And remember, the District Council must by law, balance its books.
As the Green/Lib Dem administration, to achieve the legally required “balanced budget”, we have two options: increase the District Council’s income, or make even more decisions on what to cut – or in reality, most likely do both.
How does the District Council increase income?
This is a good question, and ways to increase income are often quite limited. There are some options however, although most are not popular. Here are the key ones:
- A council tax referendum: this is where we ask residents if they’d like to pay more council tax. A referendum would cost at least £100,000 to run, and it doesn’t take much imagination to guess the likely outcome(!)
- Selling assets to plug the gap: the administration has already explored this in detail, with several assets earmarked for sale. However, there are assets that people don’t want to see sold, and assets that will not make much money even when they are sold at best price. Most assets also earn money, so whilst selling them is a way of escaping a crisis, to do so will reduce income in the longer term.
- Increasing parking charges: our engagement to date tells us that residents, whilst recognising the need, take a very dim view of paying more to park, but it will likely be a necessity.
- Increasing charges for garden waste collection: again, unlikely to be popular, and likely to be met with criticism, but again, likely to be a necessity.
- Renting office space: ideally the administration would be keen to do this. However, it requires people wanting to rent, and Covid-19 has reduced demand for office space.
- Maximising income on existing assets: this was the stated reason for the then-Conservative administration to redevelop Hertford Theatre and create BEAM. However, it’s early days, people have less disposable income, and Covid-19 changed how many people manage their money and time. We are also looking at options for increasing revenue on District Council green spaces (e.g. renting out for events), but again, this is not necessarily popular, especially for neighbouring residents.
This then leaves options for cuts. It wouldn’t take a big leap to imagine that areas we refused to cut last time will be put back on the table, along with many others. Yet services are already cut to the bone, and are largely ones that the District Council must, by law, deliver.
Over the next few months, councillors will have to look at potential cuts to pretty much all services to achieve a legally required “balanced budget”. Likely most services will end up getting worse as a result, because there will not be sufficient staff or money to achieve the standard we’d all like to see.
But the District Council just spent loads of money on BEAM!
Yes, over the last six or so years, millions and millions of pounds were spent to redevelop Hartham, Grange Paddocks, BEAM (formerly Hertford Theatre), and to build Northgate End car park in Bishops Stortford. These projects were not the current administration’s decisions, and indeed, many who were in opposition at the time strongly opposed running multiple capital projects at once, for the exact reason of affordability. When we arrived in May 2023, BEAM was essentially 80% complete, and it was too late to redesign it to reduce the costs. If we didn’t agree to spend the amount needed to get it finished, it would’ve been mothballed, would not make any income at all, and yet would still require loan repayments. The only option by that point was to get it finished so it could start paying for itself.
However, the fact remains that as a result of these capital projects, combined with increases in interest rates, the District Council now has even less money for services. By way of comparison, interest on debt in 2020/21 was around £400,000. It now sits at nearly £3m.
What’s the solution?
This is the question that many councillors in the Green/LibDem administration have been grappling with. None of us became councillors to simply sit and oversee the demise of services. Of course, there are ways of innovatively achieving both cuts and ambitions – wildflower areas, for example, achieve both improving biodiversity and plant life, and reducing costs from maintenance. Imaginative use of new technologies can reduce some costs while not overly affecting services. But in the end, until councils have certainty of funding, it is difficult to really plan meaningfully for the longer-term.
However, despite the challenges, there are many things we can still achieve that do not come at a cost. As an administration, we were keen to engage with residents and be transparent about decisions. This is something we remain determined to do, and we welcome all ideas for generating income, improving our district, engaging with residents, or anything else that you’d like to share.