Haringey Council’s financial situation has been described as “very challenging” as the deadline to balance its next budget looms.

An overview and scrutiny committee discussed the risks facing council finances in a meeting on Tuesday (January 9) amid pressure to close the local authority’s £16.3m budget gap. 

Councillors homed in on “small sections” of the draft budget for 2024/25 as well as the five-year medium-term financial strategy (MTFS) for 2024-29, reviewing areas of overspend.

The council is facing pressure to make up the £16.3m shortfall to balance next year’s budget before a deadline of February 6. Frances Palopoli, head of finance, summarised issues around the draft budget as well as the MTFS. 

Frances said: “It’s been a very challenging financial planning process this year, not just for Haringey but for the local authority sector as a whole.” 

But despite the pressure, she reassured councillors the budget would be balanced by February.

Inflation, high interest rates, the cost-of-living crisis, an increase in the cost of many of the council’s contracts, and the cost of providers supplying key services to the council, were the reasons Frances gave for the financial difficulties.

The council has “built in a £25.5m growth” next year to help reduce pressure for the most in-demand areas. 

Despite this work, Frances acknowledged the £16.3m gap and said finance teams had been working on additional proposals in the run up to February to “make sure” they could set a balanced budget.

Frances also supplied background information on the council’s in-year financial position from the second quarter of 2023/24 to give some context to committee members for their proposals.

In total the council has predicted a £3.6m overspend across key areas responsible for the running of the organisation.

Frances said the “lion’s share” of overspend was in the corporate budget. The council will pay more interest than forecast due to rising rates with a predicted net impact of £2.7m.

Overspend forecast for other services included £0.5m for legal and governance, £0.3m for corporate finance, £0.3m parks and leisure and £0.2m for digital services.

Staff vacancies and the challenge of recruiting has impacted areas, including legal and governance, and corporate finance, leading to additional costs. This can be broken down into the cost of recruitment drives to find “permanent employees” which did not always have success, as well as the “high cost” of agency staff. 

Overview and scrutiny committee chair Matt White asked why increasing interest rates, which were mainly to blame for the corporate budget overspend, had had such a huge impact, given his belief a lot of borrowing was done at fixed rates. 

In response, cabinet member for finance Dana Carlin said because of the “scope” of the council’s borrowing it took “small changes” to the rates to have “quite a big effect”. She said in relation to the corporate budget’s overspend that it was not “a huge amount”. 

Cllr Carlin said: “At the moment if we borrow it’s costing us 7%, which means if we borrow £100m for example, then we’re talking about £7m per a year cost.”

She mentioned the £2.7m overspend figure was also the result of offsetting from “overachievement of income in investments” amounting to £3.8m.

Lourdes Keever, a non-councillor committee member and church representative, asked about how the council planned on tackling its reliance on agency staff. In response Cllr Carlin said the council was “absolutely committed to getting a grip” on this despite difficulties in recruiting permanent staff, and said she met quarterly with directors to discuss how they were reducing the numbers. 

She said directors had been given lists of all agency workers and asked to supply how they planned to wind it down. Cllr Carlin said: “I’m pleased to say in the meetings we’re having thus far, the numbers are reducing quite substantially.” 

She added there would always be fluctuations where agency workers were needed and the council had gaps and said: “The additional cost to agencies, which is an add on cost is a lot of money, we want people who work for Haringey to be committed and embedded in the borough as employers.”