'Higher than expected' minimum wage rise adds £5m in costs to Nottinghamshire Council budget

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Around £5m in costs have been added to Nottinghamshire Council’s budget after the Government increased the national minimum wage

The minimum wage will increase by more than a pound to £11.44 per hour from April next year.

It is currently £10.42 an hour for workers over the age of 23.

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Coun Richard Jackson (Con), cabinet member for finance at the Conservative-run authority, told the Local Democracy Reporting Service the increase had added around £5m to the 2023-24 budget.

Nottinghamshire Council says the 'higher than expected' minimum wage rise has added £5m to its budget. Photo: SubmittedNottinghamshire Council says the 'higher than expected' minimum wage rise has added £5m to its budget. Photo: Submitted
Nottinghamshire Council says the 'higher than expected' minimum wage rise has added £5m to its budget. Photo: Submitted

The authority had already been anticipating a significant budget shortfall over the next three years.

By 2026-27 it is forecasted to spend £60.2m more than its predicted income.

Inflation and an increase in social care expenses are being blamed for the gap.

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Coun Jackson said: “We are still confident the figure will reduce towards finalising the budget.

“We haven’t done the full calculation, so many bits are changing on it and there are so many different parts to the calculation, but we know the living wage has added about £5m of costs.

“When all the departments look for additional funding for next year, we analyse the business case for additional funding and some of that is reducing, and there is also the biggest unknown which is the local government finance settlement which is probably going to be December 19.

"We expect £60.2m as a high point and, as per previous years, we will push that figure down over the next couple of months.”

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The council said while it faces a budget gap, it was not in a position where a Section 114 notice would need to be issued, as has been the case at Nottingham City Council.

A Section 114 notice is the closest an authority can legally get to declaring bankruptcy.

Numerous councils with social care responsibilities have either been issuing Section 114s, or warning that it is a possibility.

Coun Jackson said the rising costs pose a good argument for an increase in local government funding from central Government.

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Councils typically find out how much funding they will receive in December, in the form of an annual settlement.

The timing has before been criticised as failing to give authorities enough time to plan.

Coun Jackson added: “I think the whole sector has got a good case for increased funding.

“I think county councils and all upper tier local authorities, or anyone with social care functions, have got a very good case for additional funding.

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“There is some additional funding going into the Department for Levelling Up, Housing and Communities, although it is not clear how that is to be carved up.

“That is what we are waiting for really.”

In his Autumn Statement Chancellor Jeremy Hunt said the minimum wage rise will apply to those aged 21 and 22 for the first time, too.

It means a full-time worker aged 23 on the wage would receive a rise worth £1,800 a year, and a 21-year-old would see an effective £2,300 annual rise.

The separate wage for 18-20-year-olds will also increase to £8.60 an hour from £7.49.

In total the above-inflation wage increases will benefit 2.7 million low-paid workers.