A FIVE per cent council tax increase is likely for Isle of Wight residents but it will still not be enough for the council to cover a £22 million funding gap.

Inflationary pressures continue to rise and facing what it terms a lack of government funding, the Isle of Wight Council is trying to set its budget for the next year.

A stark account of the council's finances was given this morning (Monday) to the audit committee by financial director, Chris Ward.

He explained at the start of the financial year, the authority was only expected to find £2m in savings, as part of a multi-year effort to bring its expenditure down by £6m.

However, with a 'significantly different' financial landscape, the cost pressures to the authority were a lot higher than first anticipated with a £2.9m Covid 'hangover' relating to social care and leisure facilities; a high pay award for staff and energy costs more than tripling.

Although officers are at an early stage of preparing the budget, if nothing were to change, the authority would have to find £22m.

The unplanned pressures equate to £20m, of which more than £9m relates to adult social care packages and provider care fees.

Inflation in core contracts, including the Highways PFI and waste disposal, amount to a further £2.1m while energy costs have risen by £1.8 million.

While costs have risen for placements of looked-after children, demand has also increased by 30 per cent, Mr Ward said, so another £1.4 million was needed.

The government's autumn statement allows local authorities to increase council tax by five per cent — with two per cent going towards adult social care.

However, on the Island, a one per cent increase in council tax equates to just over £900,000.

Mr Ward said he thought the council had no other option but to increase the tax by the full five per cent.

The council expects to receive a £6 million increase in funding from the government towards adult social care but the rest of government funding will remain the same.

Mr Ward said, if inflation remains at its current level, it is actually a real-term cut to the funding of 10 per cent.

He said even with additional funding retention of business rates, there would still be a £10.4 million gap.

Using the Covid relief fund set up a couple of years ago, it would take the gap down to £9m but there is still a 'significant way' to go.

Mr Ward said while another £1m is expected to come from government, the authority needs to continue pressing for an increase.

He advised the council it should not be making any new policy decisions that would increase the financial burden.

Reserves have to remain at £7m otherwise the council could face intervention from government.

In the next few weeks, officers will be working out a plan.

The council's final budget will be approved in February by the members.