Agenda item

The Mayor and Executive Member for Finance and Governance submitted a report for Executive’s consideration.

 

The report identified there was a legal requirement upon all members of the Council to set a balanced General Fund Budget for 2024/25 by 11 March 2024. In addition, it was a Best Value requirement to secure the financial recovery and return to financial sustainability of the Council through setting a balanced three-year MTFP over the period to 2026/27.

 

The report identified the Council’s financial position remained critical, and it was necessary to identify, approve, and implement a range of budgetary control measures at significant scale to return to a financially sustainable position where the annual expenditure of the Council remained within its annual income over the medium term.  Achieving financial sustainability was essential to enable the Council to succeed in delivering improved services and outcomes for the people of Middlesbrough in the medium to long term.

 

The risk of the s151 Officer being required to issue a s114 Notice, under s114(3) of the Local Government Finance Act 1988, remained were the Council be unable to set a legally balanced budget for 2024/25. The adverse consequences of issuing a section 114 notice were significant and were set out in more detail in paragraphs 4.132 to 4.135.

 

Middlesbrough Council continued to operate in a volatile and challenging economic and financial environment. Like many local authorities, the Council was experiencing significant financial challenges because of continuing high inflation, increasing demand, and complexity of need for services for the most vulnerable in the community, primarily adult and children’s social care, home to school transport, homelessness, and waste disposal, for which it was required to meet its statutory responsibilities.

 

The Mayor described the Council’s challenging financial position and his desire to mitigate cuts to frontline services where possible. It was clarified Executive was being asked to approve proposals for consultation, not to agree a budget as this would be approved by Council in February 2024.

 

It was commented officers were continuing to analyse the recent Local Government Settlement and Members stressed the need for the Council to avoid issuing a Section 114 notice.

 

Executive NOTED:

 

1.    The updated General Fund Budget gap to be closed for 2024/25 of £6.279m rising to £8.180m in 2026/27 further to the Medium-Term Financial Plan (MTFP) refresh report considered by the Executive on 23 August 2023.

2.    The national financial and economic context within which the Council was operating and the financial benchmarking which provided context for the range of Council services which presented some of the most significant financial pressures to be addressed in the Council’s business and financial planning.

3.    The updated budget assumptions set out in paragraph 4.67 of the report and the progress in developing proposals to balance the Council’s General Fund Budget for 2024/25 and the updated MTFP position for the three-year period 2024/25 to 2026/27.

 

Executive ENDORSED the draft budget proposals including:

 

4.    Total budget savings and income growth of £14.038m in 2024/25 rising to £21.088m in 2026/27, of which £3.949m in 2024/25 rising to £5.465m in 2026/27 were deemed to involve policy change and/or impact service delivery levels and would be subject to public consultation (detailed in Appendix 2)

5.    Total budget growth of £2.219m in 2024/25 comprising:

·         Revision of 2023/24 approved savings of £1.114m in 2024/25 to reflect the Elected Mayor’s priorities (detailed in Appendix 3)

·         Delayed savings of £1.105m (detailed in Appendix 4)

 

6.    That Executive endorses the proposed total Council Tax increase of 4.99% for 2024/25 comprising:

·         2.99% increase in general Council Tax and

·         2% Adult Social Care Precept,

 

This was in line with the current maximum referendum limits announced by the Government.

 

7.    That Executive endorses that where applicable, budget consultation would commence, on 21 December 2023 and conclude on 18 January 2024 prior to finalising the proposed budget on 14 February 2024 for consideration and approval by Council on 28 February 2024.

 

Executive NOTED:

 

8.    A budget gap of £6.279m in 2024/25 rising to £8.180m in 2026/27 remained after the inclusion of all current budget proposals and the proposed council tax increase;

9.    Further work was required to develop and agree final proposals to present to Council on 28 February 2024 to achieve a legally balanced budget for 2024/25 by the statutory deadline of 11 March 2024.

10.  The Mayor and Executive were working with Officers and external consultants to develop a Transformation Programme that would deliver modernisation and redesign of services to operate from a significantly lower and financially sustainable cost base over the medium to long term.

11.  Transformation Programme business cases must be robust, and adequately assured to enable their inclusion in the proposed 2024/25 budget that was to be considered and approved by Council on 28 February 2024.

12.  The timeframe to achieve the required levels of assurance including consultation, was likely to extend beyond these applicable deadlines and would need subsequent consideration by the Executive and approval by Council during the 2024/25 financial year to revise the 2024/25 budget and MTFP.

 

Executive NOTED:

 

13.  A further review of the budget and MTFP would be undertaken following consideration and analysis of the expected announcement for the Local Government Finance Settlement which was due on/around 19 December 2023.

14.  If the combined effect of the Local Government Finance Settlement and any further identified and assured budget proposals were insufficient to close the remaining budget gap for 2024/25, then it would not be possible for the Council to achieve a legally balanced budget for 2024/25.

15.  In these circumstances, the interim Director of Finance (s151 Officer), after appropriate consultation with the interim Chief Executive and Monitoring Officer, would be required by law to consider issuing a s114 Notice under s114 (3) of the Local Government Finance Act 1988.

16.  Prior to issuing a s114 Notice the s151 Officer and Chief Executive with the support of the Mayor and Executive, would make an application to DLUHC for Exceptional Financial Support (EFS) by mid-January 2024. This was likely to be in the form of a capitalisation direction in respect of any remaining budget shortfall in 2024/25. This application would incorporate a draft plan for financial recovery over the medium term of which the developing of a Transformation Programme would be a key element.

17.  If DLUHC refused the application for EFS or approved an amount less than the Council required to balance the 2024/25 budget, then it would be necessary for the s151 Officer to issue a s114 Notice under s114 (3) of the Local Government Finance Act 1988. The implications of issuing a s114 notice were set out in paragraphs 4.132 to 4.135 of the report.

 

Executive NOTED the updated financial position for 2023/24 at Period 7 to 31 October 2023 and the measures taken by the s151 Officer in order to mitigate the risk of a s114 Notice arising in 2023/24 as set out in paragraph 4.28 of the report.

 

OPTIONS

 

No other options were submitted as part of the report.

 

REASONS

 

The Council had a legal obligation to set a balanced budget by 11 March 2024 and a Best Value duty to demonstrate financial sustainability through a balanced Medium Term Financial Plan (MTFP). The setting of the budget was part of the budget and policy framework and therefore required Full Council approval.

 

The recommendations enabled the Council to progress towards meeting its statutory responsibility to set a balanced revenue budget in 2024/25 and the requirement to secure financial sustainability of the period of the MTFP.

 

The Council was required to take a systematic, coherent, and controlled approach to addressing its ongoing financial challenges over the medium-term, while enabling the delivery of the Mayor’s vision and priorities for Middlesbrough through delivery of the wider Council Plan.