Lincolnshire County Council is planning to freeze council tax, and use cash reserves of up to £25 million over the next two years to cover some of the funding cuts from central government.
The authority is expecting a 11.6% fall in council tax yield, meaning some £29 million less than in the previous year, among several other changes to grants and funding lines from the government.
Following the latest budget settlement, the County Council is set to receive £25 million less in grants next year, and £42.5 million less the year after.
Overall, the County Council is proposing to use £13 million from its reserves in 2013/14 to cover the funding shortfall, and a further £12 million in 2014/15. The council has around £95 million earmarked reserves.
The budget proposals will be put before the Council Executive on February 4, and then will go through the Full Council on the 22nd for final approval.
Over the next year, Lincolnshire County Council has to make revenue budget savings of more than £9.2 million.
The details for services affected by the new budget will be announced only later in February, but the council said no front line services will be affected and no significant job losses are expected.
David Forbes, the Assistant Director of Resources and Finance at the County Council, explained that internal borrowing from reserves is a win-win situation in this case.
He said: “We have reduced funding from government for the next two years. We’ve taken the view as to what’s best to do for the taxpayers of Lincolnshire is to freeze the council tax for the next year and use some of our savings — our reserves — to balance the budget for the next two years.
“At the same time, we’ll have another look at service priorities, and the budgets associated with them, because in the long term we know the government funding is going to get squeezed even more.
“The advantage [of capital schemes] is that it’s a temporary measure, so we save paying interest and we are only giving up very low levels of interest at the moment.
“Typically, we could only get about half a percent on money we would lend out, but we could save three to four percent from borrowing, so for a short term that helps. It also reduces the risks of having that money with the institutions that we use — they are top rated institutions, but they could have problems as well.”
David Forbes added: “There are no plans in the immediate future to make any further staffing reductions; using our reserves, we are able to balance the budget for the next two years. Our underlying financial position is relatively secure. The government have cut funding a bit further than we thought but to some extent we were predicting they would do so and we are able to cope. Though in the longer term, we will have to have a more fundamental review about what we do, and how we do it.”