Describing finances of local government is extraordinarily complicated. This short page is designed to give a rough impression - the numbers will change all the time, and I am not going to try and keep this accurate and up to date to the last penny. But it is helpful to understand the very rough amounts involved.
Looking at 2023/24 figures, the council spent money in four areas: £63.5m on Children & Young People, £71.8m on Community & Wellbeing, £26.5m on Economy and Environment and £26.3m on Corporate Services. A further £13.9m was spent "centrally". These levels were roughly on budget, except Childrens Services being over by nearly £12m, and central costs being down by nearly £3m. That total spend of £202m is a net figure; in other words what we had to find from council tax and other sources. The gross figures are often a lot bigger - for example the Children & Young People directorate actually spent over £190m, but received around £125m in funding - mainly the Dedicated Schools Grant which is the basis of school funding. There are a few other adjustments, and it quickly becomes very technical and esoteric, but that's the general idea.
On the other side - the council receives money from a variety of sources; mainly council tax (£130m) in 2023/24, but also business rates (£34m), and various government grants (£40m). The government provides about another £200m of grants for services, which explains a lot of the difference between gross and net in the previous paragraph.
Demand Led costs
For a large amount of what the council provides, the council doesn't directly control the demand for it. In particular the C&YP and C&W costs are determined by the number of young people and elderly people respectively who require those services. And if those go up, then we have to find the funding from somewhere
Council Tax
As seen above, Council Tax is only some of the income for the council - roughly a third. We are "expected" by government to increase the standard rate each house pays by 4.99% each year - notionally the maximum (The effect of this on our income is slightly different depending on numbers of house, exemptions, and so on). But even if we just see inflationary costs of 5% (and in some cases we have seen much worse than that) then unless the government funding goes up in line with that inflation, even increasing council tax by the 4.99% is going to leave a big hole.
Government Cuts
The 2023/24 budget was already on track to be overspent when we were elected in 2023. It required a huge amount of effort to pull that back by about £10m.
To balance the initial 2024/25 budget, we not only had to maintain the savings regime we'd introduced, but in late 2024, were hit with two major costs, the widely reported effect of the the National Insurance increase (both of the percentage, but also the amount of salary on which it would be charged) and increased minimum wage. The minimum wage didn't directly affect us, but it did mean that many of our suppliers had major costs that they passed on to us. The government said that they would compensate the NI increase, but only on direct employees, so again we were affected by how that came through our suppliers. Initial estimates were that the effect of this would be about £7m (roughly 5% of council tax revenue; so effectively consuming all of the revenue from the increase).
The other bad news in 2024 was that the government cut grants for Herefordshire (notably the rural services delivery grant, which was designed to recognise the increased costs of providing services in areas of sparse population) again to the tune of about £7m.
The combination of these two hits, and the increasing level of service requirements, meant that in early 2025, the council faced a hole - "pressure" - of £26m. Extensive work was undertaken, alongside increasing the council tax by 5% (raising c £7m), to balance the books, resulting in a 2025/26 budget of £232m.