Our Budget
Have you ever wondered where the Council gets its money from, or how we spend it across our services? Read our explainer blog post below to find out more about our budget.
Where does the Council get its money from?
The Council is funded from two main sources:
- Council tax, which amounts to 19% of our total funds;
- And a block grant from the Scottish Government, which makes up 80% of our overall budget.
We also used around 1% of our reserve funds to help support our services in 2022/23.
Like all local authorities, we are unable to control the amount of funding that comes from the Scottish Government. This funding is strongly driven by the impact of national policy and commitments, meaning that an increasing portion of Council budgets is ring-fenced to drive national policy initiatives, and for the protection of education and health and social care services.
How is the Council's money allocated?
Every financial year, once we receive our allocation of funds from the Scottish Government, our total budget is split and allocated between all Council services. The Council agrees the amount each service will receive through the annual Budget setting process in March.
Where is the Council's money spent?
We have significant spending commitments for the services that we provide on a day-to-day basis. Much of our total budget spend is on staff costs, with almost 50% of our annual budget being allocated to pay over 4700 employees. These are the people who deliver your essential services and include teaching staff (25% of our workforce), and social care workers (over 16% of our workforce).
By the end of this financial year, Friday 31 March 2023, we will have spent:
- Over £113 million pounds on Educational Services across our early years centres and schools;
- Over £91.5 million pounds on our social care services, including: Home Care, residential home care, and children and families social care;
- Just over £15 million pounds on ensuring our towns and villages are kept clean and tidy through our street cleansing, bin collection and grounds maintenance services;
- Just over £10.5 million pounds on catering, cleaning, and janitorial services in our schools and other council facilities, like our public toilets;
- £8.2 million pounds of investment in our roads, and a further £6 million pounds of capital works in roads reconstruction and improvements;
- Over £6.2 million pounds on our sport and leisure facilities, including our swimming pools and activity centres;
- £3.8 million pounds on our services that support communities and provide guidance on employability for local people.
So overall, we spend hundreds of millions of pounds every year providing the essential services that the people of South Ayrshire use. And each year it is becoming more and more difficult to provide these services with the amount of money we have.
The challenges we face
Just like many families across the country at the moment, the council is dealing with unprecedented rising costs due to high inflation, high interest rates, increasing energy costs and the overall cost-of-living crisis, which is having an impact on everyone.
Our electricity and gas bills alone have gone up this year by almost 50%. This means that we estimate we'll spend £4.8 million this year, compared to £3.2 million last year. We also expect this to go up by a similar amount next year.
Our food costs for providing school meals have gone up significantly, and the cost of fuel we use in our council vehicles has also seen major rises. So essentially, it's costing more for our staff to go about their everyday jobs, providing crucial services to those who need them most.
Almost 50% of our cost is to pay for our staff who provide vital local services, and this year alone we are having to find almost £7.5 million more than we budgeted to spend. This is due to higher than anticipated pay rises being driven by high inflation and the cost-of-living crisis. This is a recuring cost and has a compound effect on the cost of future pay rises as well.
While our costs continue to rise, the 80% of our funding that comes from the Scottish Government is expected to remain static. In reality, this is a real terms cut to our funding. This funding challenge is faced by all councils and has been made even worse by rising inflation.
Is there a budget "gap"?
Our estimated funding shortfall, or "gap", is £37.8 million over the next three years. We don't want to make cuts, however due to the scale of the challenge, we are having to consider making some difficult decisions.
We're legally required to balance our books, and this means that we have no option but to think about significantly changing the services we deliver, and how we deliver them, to try to close the estimated funding gap.
Despite these uncertain times we're living in, we need to plan ahead. We do have a number of options available to meet a range of possible scenarios.
We want you to know that we'll do everything that we can to reduce the impact of service reductions and to delay them for as long as possible.
How can the Council balance the budget?
There are a number of ways that we can close our budget gap. In previous years we've used a combination of some, or all of the measures below to balance the books. Since 2017-18, we've had to make £40 million of savings and used reserves of £13 million.
| Our options | What does this mean? |
| Improving our efficiency | Many of the £40 million of savings delivered since 2017-18 have been achieved through a wide-ranging efficiency drive and a series of service reviews. This has included changing how we provide our current range of services and a digital transformation, offering customers more online services and reducing back-office bureaucracy. Given the level of savings we've already achieved in this area there's probably limited scope to do more of this in future years. |
| Generating more income | Councils can generate more income by increasing fees and charges for the services we provide. The single biggest source of income which our Councillors have control over is Council Tax. For example, every 1% increase in Council Tax in South Ayrshire generates around £650,000 of income to the Council, and this is money that can be used to keep vital services going. Finding new income streams is also an option, and is something that will be part of this and future years' budget considerations. |
Asking for more flexibility on how we spend our funding (Fiscal Flexibilities) | Given the very difficult financial situation, Councils and the Scottish Government have been working together to see what can be done to use funding more flexibly. One of these flexibilities will allow us to account for debt on Private Finance Initiative and Public Private Partnership schemes over a longer period. Detailed work is almost complete to quantify this, and the change in rules could mean an annual saving of £2 million for the Council, which will be put towards reducing our budget gap. We also hope the flexibility will bring us a one-off benefit of £22 million. This money could be used to reduce savings over the next few years, which would help smooth the level of savings we require and allow us to phase in savings. |
| Using reserves | In this financial year, we are using around £3 million of our reserves to delay savings, which would otherwise have been required this year. Thanks to the Fiscal Flexibilities mentioned above, we are considering a similar thing for 2023-24. However, this will not reduce our overall budget gap, though it would allow us to phase in savings, particularly next year when the impact of inflation is expected to be at its highest. |
Reducing levels of service | This would involve cutting the levels of service we provide to local residents and is always a last resort. We've done this in recent years to ensure we keep to our Budget, but it becomes more and more difficult each year to have to further reduce services. Now we have to consider stopping some services altogether, or drastically reduce the services we offer. |
As a result of ongoing reductions in real terms of funding for local government - coupled with rising inflation and energy bills - we will have to make some extremely difficult decisions about what levels of service we can continue to provide over the next three years.
The Scottish Government will notify us about funding for 2023-24 on Thursday 15 December. We'll bring you an update soon about what this means for you as a resident of South Ayrshire.
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