Published: Friday, 29th August, 2008 9:00am

Watching our step

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THE “financial health” of East Lothian Council is at risk if better budgetary controls are not implemented in vital areas such as community services.

That was the view expressed by council head of corporate finance David Spilsbury in a report on the 2007/08 financial review, discussed by councillors on Tuesday.

It was heard that a “significant overspend” had been accumulated in the council’s community services budget, totalling nearly £1.7 million – in areas such as adult social services (£789,000), homelessness (£469,000), community partnerships (£213,000) and landscape and countryside (£156,000).

Mr Spilsbury wrote that the overspends by this department would “directly impact upon the financial health of the council, and these groups need a great focus on sound financial management so that the agreed 2008/09 budget can be adhered to”.

One of the reasons given for the overspend in adult social care services was the transfer of elderly residents from the now closed Cockenzie House Nursing Home to Greenfield Park Nursing Home in Musselburgh.

By contrast, the council’s corporate budgets reported a “significant underspend” and the environment department finished the financial year within budget.

Delivering the report to the meeting, director of finance Alex McCrorie admitted: “The council has finished quite a challenging year.

“However, it is in a good financial position to face the challenges that lie ahead.”

Council leader, Councillor David Berry said: “This is a good report in so far as we are in a fairly stable and financially sound situation.

“This last fiscal year did have its ups and downs. A lot of the expenditure of this council is to do with the bricks and mortar that we’re building, such as the £50 million of public money we’ve invested in the last year.”

According to opposition leader, Councillor Willie Innes, the local authority’s financial future was encouraging due to the “legacy” of a reserve fund left behind by the previous Labour-led administration.

He said: “Labour’s legacy to the current administration is a balance of over £10 million pounds.

“This is a fantastic resource for East Lothian. The council is in a luxurious position of being awash with money.”

Depute leader, Councillor Stuart Currie (Lib Dem) retorted: “If we listened to Councillor Innes you’d think the streets were paved with gold.

“Frankly the money we receive is far less than the money we need to spend.”

He highlighted increasing housing provision and tackling homelessness as two examples of the council’s spending priorities over the coming year.

A significant overspend in the education and children’s services’ budget, directly linked to a recent cap on savings that prevents schools from carrying forward more than £1.5 per cent of their annual budget to the next financial year, provoked a mixed reaction during the meeting.

Stated Mr Spilsbury’s report: “Education and children’s services directly overspent as a result of the choices made by schools to spend their reserves earmarked for Devolved School Management.”

As a result of this action, a £65,000 pot – the funds carried over by county schools during the 2007/08 that exceeded 1.5 per cent – will now be made accessible to all schools in the county.

Critics of the savings limit have previously claimed that the move will only encourage headteachers to spend their budget needlessly, for fear of losing monies to a general school fund.

Councillor Norman Hampshire said: “There are headteachers throughout East Lothian who had to be able to make huge savings in their budget.

“Now the incentive for the headteacher to do that is not there because any more surplus than 1.5 per cent is lost.”

Education convener, Councillor Peter MacKenzie (SNP) leapt to the defence of the controversial cap.

He said: “I find it difficult to follow the logic of Councillor Hampshire’s explanation.

“They were taking more savings then, but the money was there to be spent on the education of the children of East Lothian.

“This was a huge sum of money left over that could have been spent on the children and families of East Lothian.”

Tory councillor Ludovic Broun-Lindsay echoed Mr Hampshire’s concerns, saying he feared that the cap would impact on schools’ ability to “make sensible fiscal decisions”.