Savings from Derbyshire Councils restructure have all but disappeared, officials have warned

Potential savings from the scrapping, merging and creation of new Derbyshire councils have all but disappeared, officials have warned.

A joint letter on behalf of the 10 chief executives for Derby and Derbyshire’s councils, seen by the Local Democracy Reporting Service, says the situation for planned new authorities has “deteriorated” and “worsened”.

This comes in the final days before Government is due to announce its decisions on how Derbyshire councils will be scrapped and merged into new authorities – either one or two down from 10 – ahead of the July 16th Parliament recess.

The letter, written by Karen Hanson, Bolsover District Council chief executive, urges central Government for more engagement and support, including potential financial aid to help early-years budget gaps for the new authorities to protect their vulnerable viability.

Derbyshire councils submitted a total of five different proposals for Local Government Reorganisation (LGR), which would see the current districts, boroughs, city and county councils scrapped in March 2028 and replaced with new councils.

Four of the pitches are for a north/south split into two new councils, with Amber Valley either falling in the north, south or being cut in half.

Meanwhile, one pitch, from Derbyshire County Council, is for one new council for the whole county and city.

Ms Hanson said: “The financial position is worsening regardless of structure. The deterioration is system-wide and funding-driven, not caused by LGR.

“Reorganisation provides greater resilience than the status quo.

“Derbyshire councils remain committed to delivering LGR and working constructively with Government.

“However, the scale and pace of financial change since submission (in November last year) means there is now a greater level of risk for both successful reorganisation and the long-term sustainability of the new councils than was anticipated in the original submissions.

“LGR remains the more resilient option for Derbyshire, but the overall funding challenge remains significant.

“Early engagement with Government would therefore be helpful in supporting implementation against a more challenging financial backdrop.”

The Government’s fair funding review for councils in December and February, followed by all 10 authorities setting their annual budgets and forecast spending in January, has changed the picture for Derbyshire councils, its chief executives say.

Ms Hanson’s letter, on behalf of the non-political leaders, says that by year three of the new councils – if two were chosen – they had been due to have a £42 million shortfall, but that this has now worsened to £78 million black hole deficit per year.

Meanwhile, a one-council plan was to see a £37 million deficit by year three, she writes, but that this has worsened to a £73 million annual shortfall.

However, this continues to be better than the current trajectory under the 10-council system, Ms Hanson writes, which is heading for a £90 million annual deficit.

This is due to one-year grants for district councils, who face a financial “cliff-edge” from 2027 in their final year in existence, with “further significant financial pressure” expected from 2029 when new Government funding settlements end.

In addition, she says the overall resources available at each council are due to fall by £16 per head across Derbyshire.

She writes that the expected £44 million to £45 million in expected savings per year set out in the November submissions have now effectively evaporated, detailing these sums “now effectively only enable the councils to maintain their current financial position, rather than improving on the anticipated outlook”.

Ms Hanson said it had been assumed that existing reserves held by the 10 councils would be enough to support them until the creation of new authorities  and provide a “stable” opening position.

However, she said: “Reserves have reduced, and are likely to reduce further before vesting day as they are increasingly required to support business-as-usual pressures and funding gaps driven by funding reform.

“Reserves remain sufficient to fund implementation costs but are no longer sufficient to fully support early year deficits for the new councils.

“The financial assumptions underpinning both LGR submissions have weakened.

“There is a risk that the opening financial position of any new authority will be worse than anticipated.”