Chelmsford Council says it faces a cumulative budget shortfall of almost £2.5 million over the next five years.

The most significant factor contributing to the shortfall over the last few years has been the reduction in Government grant which will have fallen by £8m between 2011 and 2020.

The council has not set out how it intends to address this shortfall, but has various powers at its disposal – including raising council taxes.

Councillor John Galley, cabinet member for finance at Chelmsford City Council, said: “The forecast deficit for the next five years is set at £2.4 million.

“Chelmsford is not alone nationally.

“Local authorities are experiencing increasing demands on services while resources continue to decline.”

The council’s capital budgets have been less constrained by resources than revenue expenditure and the capital programme has since 2002 been funded without the need to borrow, which the council says should continue.

The council says it expected to be left with £8.7 million in its capital reserves – after all the projects it is expected to undertake in that time – including £57 million on projects that have already been approved.

However the council adds that the Riverside development – which has seen its budget rise from £25 million to £35 million – will expose the council to “significant operational and financial risks” and that with any large scale, complex project it is anticipated that some contract variations will occur before the project is finally complete.

Current indications are that these should be within 10 per cent, either way, of the overall budget.

Cllr Galley said: “The revenue budget as discussed in the report includes a challenging economic environment, limited revenue support grant, uncertainly over local business rates and new homes bonus.

“There are also short term pressures from the Riverside development and implementation of the digital strategy.”

He added: “The council’s forecast for cost and income for capital programme for the next five years shows that the council does not need to undertake any long term borrowing to fund its capital programme.”