A COMBINATION of events has resulted in “a perfect financial storm”, county councillors have been warned in a new budget report.

Reduced government grants and the unexpected damage caused to roads by the recent severe weather look set to put pressure on North Yorkshire County Council’s finances over the coming years.

Increased child welfare following the Baby P case and the cost of the recession on older people who need financial support will also have an impact.

The bleak outlook for the county council is highlighted in the medium-term financial strategy and revenue budget report, due to be discussed by county councillors next week.

In a statement, the county council acknowledged the increased demands on services has led to an estimated £4m overspend, but said this could be covered by reserve funds.

The report, which contains the sub-heading “a perfect financial storm”, comes a day after it was announced councillors would be asked to approve a 2.94 per cent rise in council tax, the lowest increase for 16 years.

The report notes that the council tax rise would have been less were it not for the extra resources needed for maintenance and highway repairs after the heavy snow.

One of the key issues affecting all public authorities is the expected cuts to government grants for the forseeable future.

The county council has prepared the medium-term strategy on the basis that grants will be reduced by five per cent in 2011-12 and 2012-13, which is equivalent to a three per cent reduction in spending.

The report notes: “The biggest financial challenge that lies ahead for the county council is the prospect of reduced levels of funding in the years from 2011-12.

“Despite this, the reality is that Government has prescribed standards and targets, and customer expectations will continue to rise, so the county council has a major challenge in maintaining service delivery at current levels.

“Feedback from the consultation process suggests no public appetite for reductions in service, although there are growing worries for people on fixed incomes about council tax increases.”

The report will be discussed in full at a public meeting in County Hall, in Northallerton, on Tuesday, from 11am.