Agenda item

The Deputy Chief Executive presented the Medium Term Financial Plan (MTFP) – Tranche 1 Budget including Fees and Charges.

 

MTFP 2025/6 Tranche 1

The Council sets a 3-year Medium Term Financial Plan every year, with the final Council Tax Resolution being approved by Council in February.  This year’s process takes account of the following factors:

 

·       The starting point from the 2024/5 MTFP being neutral starting balances.

·       This was the first budget of a new National Government and would be for only 1 year in duration. Future budgets would be multi year.

·       The present cost of living crisis which continued to impact our most vulnerable residents.

·       Three years accounts (2020/21 to 2022/23) where the Council had/would receive a disclaimer opinion (like many other Councils). 

·       The continued uncertainty of the existing movement of the Government to funding projects as per the Chancellors Statement on the 30^th October and not knowing yet those allocations.

·       Uncertainty over what would be required by the new Government, and other stakeholders.

·       Loss of key personnel, present vacancies rates, and staff retention

·       Business Rates and Council Tax Income – and associated collection rates and reliefs linked to the “cost of living” crisis and C-19 grants working their way through our system.

·       Inflation now moving back to the Government target of 2%.

 

As such, it was prudent to split the budget process into two tranches,

 

·       Having an initial Tranche which sought to close as much of the deficit as possible using information known as at the end of October, after the Chancellors Statement but before the Local Government Settlement) and seeking approval for those savings to be implemented at Council in January,

·       Having a second Tranche after the Christmas break, for which approval would be sought in February, that takes account of the Local Government Settlement whose final detail would not be known until early January.

 

The emerging national picture was in many ways quite similar to last year

 

·       The War in Ukraine had still not been resolved impacting inflation rates that impacted everyone.

·       Councils having declared “Climate Emergencies” and having challenging carbon reduction targets to deliver by 2030, 2040 and 2050.  These needed to move into implementation.

·       We had the Office for Local Government in 2023 looking at Council data to assess performance and trying to predict if Councils were getting into difficulty.

·       The data provided was important as the Government now worked on an allocation’s method using data to inform its decisions.

 

·       In the Local Government area

·       There were a number of Local Authorities who had now issued S114 Statements.

·       Bromsgrove would have 3 years of accounts that would have a Disclaimer Opinion issued by the External Auditor. 

·       That in the Local Government sector, there were still circa 700 Audits up to 2022/23 that were still not Audited at this time across Councils in England.

 

The Chancellors Autumn Statement made on the 30^th October had the following impacts on Council budgets:

 

·       A 3.2% real-terms increase in Core Spending Power (CSP) for the whole sector in 2025-26.  This would include £1.3b additional grant funding, of which at least £600m would be directed to social care. 

·       The Budget was silent on council tax referendum limits, but the DCN expectation was that referendum principles would stay at 2.99% for districts.

·       £233m new funding for homelessness prevention. This would be in addition to the £1.3b grant funding mentioned above.

·       £1b to extend the Household Support Fund and Discretionary Housing Payments into 2025-26.

·       £1.1b new funding through implementation of the Extended Producer Responsibility scheme for recycling. 

·       Right to Buy: councils would be permanently allowed to retain 100% of receipts locally and discount levels would revert to pre-2012 levels from 21st November.

·       Business Rates support to the retail, hospitality and Leisure sector, although it was not known the route of compensation yet for Councils.

·       A £500m increase to the Affordable Homes Programme in 2025-26.

·       UK Shared Prosperity Fund had been extended for 2025-26 at a reduced level of £900m, a 40% decrease on the current year. It was not yet clear whether this funding would continue.

·       to be allocated directly to district councils in two-tier areas.

 

It was good news that the sector would get a real-terms funding increase, but it was not yet clear how this increase would be distributed.

 

The Government signalled it would reform the local government funding system after 2025-26.  It had also signalled its intention to embark on local government reorganisation to deliver “efficiency savings”. It would set out more detail in the English Devolution White Paper, likely to be published in late 2024.

 

It was expected to publish a finance policy statement in mid/late November to set out the key decisions and principles for the provisional Local Government Finance Settlement.

 

On the cost side, as an employer there were the following additional costs:-

 

• Employer national insurance (NI) contributions would increase by 1.2% to 15% from April 2025 but the public sector would be covered.  Our rates if not funded would have been £144k.
• The National Living Wage would increase by 6.7% to £12.21. Minimum wage for 18- to 20-yearolds would increase by 16% to £10 per hour. Officers were assessing the impact of this.

 

The report takes account of the Council’s new Strategic Plan which was set out in Sections 3.15 thought to 3.19.  The Council’s strategic approach continued to be to set a balanced budget over the next three year period having over the past 2 years moved to a fair level of financial sustainability.

 

In building the 2025/6 budget, our base assumptions were set out in paragraphs  3.25 to 3.30. 

 

Tax Base and Corporate Financing underlying assumptions were as follows:

 

·       Council Tax – Figures assumed the full 1.99% allowable increase over all years of the 3 year MTFP, with growth of 200 and 150 over these years.

·       Business Rates increases assumed growth based on Pooling with the other Districts and the County Council.

·       There would be no New Homes Bonus .

·       Central Government Grants were at similar levels to previous years.

 

Other Corporate Pressures:-

 

·       At Q2 the overall revenue financial position was a £344k overspend position.  This position was set out in detail in an additional report to the Cabinet today. 

·       The Pay Award was increased from 2% to 3% for 25/6.  This would be an additional £154k cost.  In her Statement on the 30th July, the Chancellor did say that Government would accept acceptance of the recommendations of the independent Pay Review Bodies for public sector workers’ pay.  It was not clear if this was included in the 3.2% Spending uplift.

·       Pension Fund Actuarial Triennial Revaluation.  Although the fund continued to perform well we were concerned on the reducing numbers of live members in the scheme and so had included an amount from 2026/7 of £200k as a potential risk.

·       Fees and Charges had assumed an increase of 2%. However, given 50% of fees and charges costs were linked to staff costs and these possibly would increase at 5% for the 2024/5 financial year.  Therefore, to keep pace on this increase of costs it was proposed that 3%, 4% and 5% increases were looked at.  These amounted to additional income of the following for each scenario:

 

·        Until more information was understood in the detailed Local Government Settlement in December, it was assumed that Grant levels would remain at present levels.

·        The largest change however would link to upcoming Waste Requirements. The Council was required to implement these proposals from April 2026, which the Council challenged present Government Funding allocations.  The impact on Council budgets was significant in terms of both Revenue and Capital:

·       There was the requirement for additional Capital Investment, over and above any Grant, of £540k.  It assumed that this was required to be spent in 2025/6 and costs apportioned accordingly.

·       At the present time, additional revenue costs were estimated to be circa £950k a year.

·       Bromsgrove School loses its Business Rates reliefs as part of the Budget. Presently, circa £600k of business rates were charged against the school to which it received 80% relief.  This relief of circa £500k would become part of the collection fund calculation, with planning purposes circa 50% coming to the Council and 50% going back to the Government.

·       Additional Artrix Costs were limited at the Empty Business rates which amounted to £31k.

·       Additional inflation of 5% on contract was included at 5% which was £90k.

·       A review had been undertaken of Corporate Budgets (Council Tax/Business Rate, Investment Income and Debt) against expected numbers and due to a number of factors there was a positive position.

·       The Council had 4% in to cover staff inflation in 2024/5.  This pay award was now circa 5% and a 1% adjustment had also been made in the corporate budgets. To be adjusted for actual in Tranche 2.

·       As set out in section 3.9 the Chancellors Statement on the 30th September set out significant additional grant funding.  The allocation of these grants would not be known until December and the Provisional Local Government Finance settlement.

·       Adjustments, following the establishment review would need to be made across both Councils to account for the £1m in-balance between pay budgets and recharges across both Councils.

·       Analysis would be undertaken on Benchmarking data as well – as this would inform areas where further savings, if required, would be initially looked at.

 

Corporate pressures were summarised in the table at 3.30 and amounted to a surplus of £329k in 2025/6 changing to an ongoing deficit of £858in 2026/7 and £644k from 2027/8.

 

Departmental pressures were requested to be returned by the 24^th October.  These were attached in Appendix A and covered both revenue and capital pressures. These departmental changes resulted in an overall £1.387m revenue pressure in the 2025/6 financial year and then £938k by 2027/8.  This was summarised in the table at 3.31.  This table was reviewed during the meeting.

 

This resulted in an ongoing pressure of circa £1m rising to £1.5m.  It should be noted that if the Council received the full 3.2% Core Spending Power increase set out in the 2024 Chancellors budget, then this would result in circa £490k of additional funding, reducing the gap to circa £500k in 2025/26 and £1m by 2027/8.  It should be noted that there would also be political pressures as well.

 

Another key factor in balancing the budget would be the allocation methods for Grants set out in para 3.9 as they impacted a number of the “pressure areas. This would not be known until the Provisional Local Government Finance Settlement.

 

To meet strategic priorities, the Council required more funding.  For Tranche 2 it needed to review a number of areas including:

 

·       Ensuring Grants were maximised.

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

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

·       Reviewing the location and effectiveness of our Depot

·       Assessing the Council’s leisure and cultural strategy in terms of affordability

·       Reviewing recharging mechanisms between the Councils for appropriateness.

·       Rationalisation of Back Office services as we embrace technology.      

 

The Transformation Team had looked at Income and fees/charges levels for:

 

·       Its deliverability in 2023/4 and 24/5

·       Views on if additional % increases would be deliverable

 

The outcome of that high level analysis was that:

·       A blanket % increase on all controllable fees and charges and budgets would not be advisable, as this would just increase the rolling year variances in specific areas. Those budgets needed adjusting to the correct base (both up and down).

·       Car parking, given the changes in 2024/5 should not be increased and allowed to stabilize at the new rates and take account of the full VAT implications.

·       Knowledge of the full extent of what was or was not Vatable in income lines also needs to be clarified – so the right budgets were set.

·       Garden and trade waste and cesspools were all areas where above inflation increases could be variable with previous years and current forecasting showing promise.

 

Detailed Fees and Charges, at a 4% increase were set out in Appendix B.

 

The existing 24/25 MTFP saw general fund balances increase by £27k over the three year period as the original plan moved the Council towards sustainability.  Now that the 2020/21 and 2021/22 accounts had been closed and we had far clearer positions on the 2022/23 and 2023/4 outturn positions a stronger reserves position was reflected in Appendix C.

 

Appendix D sets out the present capital programme as agreed at Council in February.  Spend to date at Q2 is £1.993m. The table at 3.44 highlights the present Capital programme position to 2029/30 rolling forward the “Rolling Budgets” for an additional year.  To date only two new capital items had been added.

 

Initial Risk Assessments and Robust Statement implications were set out in paragraphs 3.46 to 3.52. It should be noted that the MTFP highlights that the current financial position was potentially untenable without some form of intervention or further substantial savings, and that this would become clearer with the Provisional Local Government Settlement in December.

 

Tranche One was the first Phase of the 2025/26 budget process. There would be consultation via the quarterly “Customer Survey” to see if more stakeholders could be reached.  This would happen over November and December.

 

At the invitationj of the Leader, Councillor P.M. McDonald commented that the Finance and Budget Working Group had raised some questions with regards to the Parking Report and Parking Machine Replacements.  The Executive Director - Environment and Communities agreed to check on the progress of this.

 

Members referred to the upcoming waste requirements and the impact on the Councils budgets in meeting these proposals. Officers provided brief information on local authorities that had moved to three weekly collections, a reduction in grey bin collections and paper and card specific collections. Officers also referred briefly to the green bag scheme in Norway.

 

The Leader commented that a number of local authorities had been running such services for a number of years and had therefore made service savings.

 

RESOLVED that Cabinet notes

 

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

 

2.               these inputs had been used, along with the 2024/25-26/27 Medium Term Financial Plan (MTFP) agreed by Council in February 2024, to project an initial “gap” to be closed;

 

3.               an initial Tranche of savings proposals, as set out in Section 3.25 and the associated Savings Proposal Document in Appendix A, published on the 2^nd December and any feedback would be considered by Cabinet in January 2025 prior to seeking approval at Council in January 2025; and

 

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