Agenda item

Medium Term Financial Plan 2023/24 to 2025/26 - Update

Minutes:

The Interim S151 Officer presented an update on the Medium Term Financial Plan (MTFP) 2023/24 to 2025/26.

It was reported that each year the Council set out a 3-year Medium Term Financial Plan, with the final Council Tax Resolution being approved by Council in February. The Cabinet was advised that this year, the MTFP process would be run in two tranches in order to prepare the budget as early as possible. The initial tranche would use information known as at the end of September and would seek to close as much of the current deficit as possible. The second tranche would be processed after December 2022 and would be approved in February 2022. This second tranche would take into account the Local Government Settlement, details of which would not be known until early January 2023.

Members were informed that budget setting within the current climate would be more difficult due to a number of challenges. These were outlined as follows:

· Starting the process with an initial deficit amount of approximately £1.5m from the 2022/23 MTFP

· This being the first year that the Government began repaying for Covid-19 and the associated pandemic

· The cost of living crisis

· Changes at national level including new Prime Ministers and changes to Cabinet membership

· The Council having limited Reserves and Balances.

The MTFP 2023/24 to 2025/26 – Update report highlighted 10 major items in terms of budget setting for 2023/24 to 2025/26. These were as follows:

· The starting position for the 2023/24 MTFP and the three year “gap” that needed to be bridged in order for the Council’s budget to come back into a balanced sustainable position

· Unallocated savings – These would be considered as part of the Q2 2022/23 Finance and Performance Monitoring report due to be considered in November 2022.

· The emerging national picture which was not clear at the time of this meeting. It was hoped that more information would be available when the new Chancellor released his statement on 17^th November 2022. At that point, it was thought more clarity would be available on the new Local Government Financial Settlement, which was expected to still be released the final week before Christmas. Officers informed Cabinet that it was still unknown as to whether this would be a single or multiple year settlement, however the preference, from a Council perspective, given the current economic conditions, would be a single year settlement.

Officers reported that they had made a number of base assumptions within the report, including the following:

· An assumption on Council Tax on a full 1.99% or £5 increase (whichever was the least)

· An assumption of no growth in Business Rates

· An assumption that there would no New Homes Bonus in 23/24 onwards

· An assumption that there would be no Lower Tier Services Grant from 23/24 onwards

In respect of Pension Fund assumptions, it was noted that the Council’s pension fund was in surplus, and the new contributions were approximately £500k less than they had been previously.

Cabinet was informed that the greatest impact on budget setting would be inflation. This was in light of the £1,925 proposed increase to staff wages that would cost an additional £718k. Furthermore, it was stated that 10% inflation on Contracts/Transport would cost an additional £182k alongside the increased cost of utilities. These, in particular, were unknown and it had been concluded that if there was a 200% increase in the cost of utilities this would result in an extra £702k cost to the Council. It was noted that Bromsgrove District Council’s utilities contract were due to expire in April 2023 and it was planned that any new contracts would be as short-term as possible and offered the best value for money for the Council in the long term.

In respect of Fees and Charges, it was outlined that was to be an increase of 10% across the services with some exceptions including, WRS, LifeLine and parking charges.

In terms of strategic approach, it was key to move to financial sustainability as quickly as possible

Tranche 2 of the budget would be adjusted for any Government funding that was provided. In addition to this it would also look at other options to close any deficit should the Government settlement not bridge any resultant gap. It should be noted that in Prime Ministers Question Time the previous Prime Minister had said that allocation levels would be in line with 22/23 levels – which would mean the Lower Tier Support Grant and New Homes Bonus, both assumed to be zero in Tranche 1, could be paid out. This was worth approximately £1m to the Council. However, it was stated that given the recent changes in Government this had still not been confirmed.

Initiatives included in tranche 2 required more time for analysis, however individual options included:

· Ensuring grants were maximised.

· Ensuring agency work reflected the income provided for its delivery.

· Minimisation of Bed and Breakfast temporary accommodation costs.

· Reviewing the effectiveness of the Council’s largest contracts.

· Maximising the effectiveness of the Council’s refuse fleet.

· Reviewing the location and effectiveness of the Council’s depot.

· Assessing the Council’s Leisure and Cultural strategy in terms of affordability.

· Reviewing recharging mechanisms between Bromsgrove District and Redditch Borough Councils for appropriateness.

· Rationalisation of back office services in light of the improvement of advanced technology.

In terms of savings in tranche one, the Council had identified £1.62m of savings which would offset the current £1.58m budget deficit. However, when taking into account inflationary pressures, the deficit position would be £863k. In addition to this, the increased costs of utilities would result in an overall deficit position of £1.5m.

Members were provided with information on the Council’s Reserves and Balances, and it was explained that the existing MTFP saw general fund balances reduce from £4.257m to £1.046m over the three year planning horizon finishing in 2024/25. This was not considered a sustainable level of general fund reserves where a level of 5% of gross budget was usually advised, which for Bromsgrove District Council would be £2.5m.

The Council had also earmarked reserves which were held for specific purposes. These earmarked reserves were currently at £8.011m. It was reported that all reserves would be reviewed for their ongoing applicability.

In terms of the Capital Programme, it was stated that the Levelling Up Funding and UK Shared Prosperity Fund must take a priority due to the funding linked to these project being time limited. The projects included within the Capital Program that had not yet commenced (apart from those that were in receipt of grant funding or S106 monies) would have to be rebid for as part of the 2023/24 budget process.

In concluding the detailed update on the MTFP 2023/24 to 2025/26 the Interim S151 Officer referred to the Robustness Statement and the feedback form that were also included within report.

During consideration of the report Members commented on the amount that was included within the report in respect of bus shelters and it was confirmed that as WCC were still not in a position to confirm bus routes until later in 2023 these monies would remain unspent for the time being.

It was recognised that these were very difficult and challenging times for Local Authorities particularly due to the current uncertainty being experienced at a national level.

RESOLVED that

1) the inputs into the Council’s Medium Term Financial Plan as at the start of October, and the associated risks and opportunities be endorsed and;

2) to note that these inputs hadbeen used, along with the 2022/23-24/25 Medium Term Financial Plan (MTFP) agreed by Council in February 2022, to project an initial “gap” to be closed and;

3) to note that an initial Tranche of savings proposals, and the associated Savings Proposal Document, that was published on the 17th October and any feedback will be considered by Cabinet in November 2022 and at Council in December and;

4) Tranche 2 of this process would add further information such as the Local Government Settlement to give a final financial position for the Council.

Supporting documents: