THE Isle of Wight Council is facing a £6 million black hole in 2021/2022, its Deputy Leader has told the County Press, after the government announced millions of pounds would not be awarded this year in a ‘fair funding review.’

The money had been expected in April, but has now been put off until 2021. 

Isle of Wight Council’s cabinet member for finance, Cllr Stuart Hutchinson said: “The fair funding review takes account of changed demographics and our high proportion of elderly people. We thought it would be particularly beneficial for the Island. We’d identified we were likely to benefit by £2.5 million. That has been deferred for a year. It means when we’re setting the budget for next year, we’re £2.5 million light.”

"It means when we’re setting the budget for next year, we’re £2.5 million light.”

Councillor Hutchinson, said that the loss is combined with an already acknowledged £3.5 million funding gap. It means the local authority now has a huge financial headache.

Meanwhile, a separate financial blow has been dealt to the Isle of Wight Council’s investment plan. It had previously borrowed £30 million from a government scheme and had invested in property. It has been netting the council around £750,000 per year.

Read more: Isle of Wight Council spends £35m playing the property market — buying industrial units in Southampton and Salford (#LDR)

The authority planned to borrow up to a further £70 million, but that fund is no longer available from the government. It means County Hall can’t use it to push up its returns.

The news comes just days after a report to the Isle of Wight Council’s corporate scrutiny committee revealed the local authority is around £10 million short on this year’s budget, due to the impact of coronavirus. Things like lost parking charges, floating bridge fees and other levies have caused the problem.

Read more: Isle of Wight Council's coronavirus cash (and where it's all gone) (#LDR)

Read more: Isle of Wight Council nearly £10 million short after coronavirus 

Despite that, the authority says it will not dip into its reserves of £7 million. The rainy-day cash limit is assessed and set locally, by the local authority’s treasurer. It is different for every council, but all are required to have a pot of money for sudden emergencies and if there is not enough cash stashed away, the consequences can be severe.

"The Isle of Wight Council can’t run an overdraft."

Cllr Hutchinson insisted it was vital to save the cash for an emergency - to avoid being regulated if it ran short: “If something unforeseen occurs and we have to spend money, that is our last bit of cash. The Isle of Wight Council can’t run an overdraft. We will reduce the reserve to the minimum level. We don’t want to reduce it further because draconian things come into play.

“We have to keep statutory services going and make sure there is enough funding. To do that, we will look at every single scrap of existing funding and we will be using any bits of flexibility to support services and prevent cuts.”

Cllr Hutchinson says investments in agile working, such as laptops for staff, have allowed employees to work from home. It wasn’t planned, but it proved fortuitous when coronavirus hit.

What about the long promised Island Deal?

Around £3.5 million has long been expected, following a promise from Prime Minister Boris Johnson to Isle of Wight MP Bob Seely.

Cllr Hutchinson said the cost of being an Island is rising and talks are still ongoing: “The Island Deal is to cover the cost of running services distanced from the mainland. With inflation, it’s somewhere over £7 million. We’re still talking to government about when we might get it.” 

Read more: Isle of Wight MP Bob Seely asks Boris Johnson to deliver Island Deal — £17 million for services, £5 cap on patient travel and help tackling ferry companies

Cllr Hutchinson, who hopes the Isle of Wight’s high profile pilot of the coronavirus test and trace app will keep us visible, says he is confident the authority will find a way to balance the budget and protect stautory services.

He said: “As a local  authority, the Island has done better than most. That’s reflected in things like our ‘R’ number. In the words of our director of adult social care, Carol Tozer, the Island has got a tremendous amount of 'social capital'. We work together, we all know each other, we pull together.”