Agenda item

The Mayor and Executive Member for Adult Social Care and Public Health submitted a report for Executive’s consideration.

 

The Mayor advised Executive of an amendment to Appendix 5 of the report which was tabled at the meeting and circulated to Members.

 

The report proposed a 2024/25 net revenue budget of £143.190m, and Medium-Term Financial Plan (MTFP) for the period 2024/25 to 2026/27 following the confirmation of the Local Government Finance Settlement and set out the financial planning assumptions applicable to the budget based upon the best information available at the time.

 

A Council tax increase for 2024/25 of 4.99% was proposed, comprising 2% Adult Social Care Precept and 2.99% Core Council tax which was within the referendum limits set by Government.

 

The report proposed a Capital Programme of £88.549m for 2024/25 and totalled £174.980m over the period from 2024/25 to 2026/27 together with a financing statement comprising a combination of external funding and council resources. In addition, the proposed capital strategy set out the Council’s approach to capital investment and financing, including the forecast levels of borrowing and the Minimum Revenue Provision (MRP) Policy which governed how the Council accounted for debt repayment in accordance with statutory regulations. The Capital programme provided for EFS of £13.4m to be financed from borrowing over a period of up to 20 years whilst the actual amount and terms would be determined by the s151 Officer, based upon the actual requirements, borrowing rates and an assessment of revenue affordability at the appropriate time during the 2024/25 financial year.

 

A summary of the Schools’ Budget and allocation of the Dedicated Schools Grant (DSG) as determined under the Department for Education’s (DfE’s) National Funding Formula, together with an overview of the financial pressures on the DSG High Needs Block and forecast deficit which was being addressed under the Delivering Better Value (DBV) Programme.

 

The s151 Officer’s recommended Reserves Policy for 2024/25 set out the plan for replenishing and maintaining usable revenue reserves over the period of the MTFP in order to achieve financial recovery and re-establish the Council’s financial resilience.

 

The s151 Officer’s recommended Fees and Charges Policy sets out the proposed framework within which discretionary charged for services would be reviewed and fees and charges set in the future in order to ensure financial viability of discretionary services.

 

The report was underpinned by the Section 151 Officer’s report in accordance with s25 of the Local Government Act 2003 which assessed the robustness of budget estimates and the adequacy of financial reserves in the context of the known financial risks that existed in the Council’s operating environment. The report set out the responsibilities of all officers and members to work collaboratively together in order to enable the Council to successfully navigate the complex and challenging path to recover its financial position and achieve financial sustainability over the medium term. Under s31A of the Local Government Finance Act 1992, the Council was required to have regard to this report when making decisions on agreeing the budget and setting the Council Tax.

 

The Executive Member for Finance and Governance thanked officers for their input to the report’s creation. It was commented many councils were struggling to balance their budgets with many drawing on their reserves to do so. While core funds from government had reduced significantly over the previous 10 years the proposals contained in the report would allow the Council to balance its budget. Failure to produce a balanced budget would result in a Section 114 notice which in turn would lead to stopping all non-essential spending.

 

Some proposals in the budget, such as a move to fortnightly bin collections, were included as they had not been included previously, despite being considered. However, the Council could no longer delay addressing those issues.

 

Engagement had taken place with different political groups as part of the budget setting process.

 

The Chief Executive expressed his thanks to all involved for their input to the budget proposals which had been a collaboration approach.

 

A discussion took place about the EFS application and how this related to the budget proposals. It was confirmed the budget report was predicated on the EFS application was successful.

 

ORDERED that the amended Appendix 5 of the report be approved.

 

AGREED that:

 

In terms of the robustness of the Medium-Term Financial Plan, Executive note the statutory s25 report of the Council’s Section 151 Officer in respect of the robustness of the estimates within the budget and the adequacy of reserves.

 

In terms of the Revenue Medium Term Financial Plan 2024/25 to 2026/27 Executive:

 

1)      Note the updated financial planning assumptions following the Final Local Government Finance Settlement, together with confirmed government income sources, expenditure plans and local income budgets.

2)      Recommend to Council budget proposals for savings and income generation of £13.910m in 2024/25 rising to £21.028m in 2026/27, which incorporated the revisions to savings in light of the consultation response as set out in Appendix 3.

3)      Recommend to Council an increase in Council Tax of 4.99% resulting in a Council Tax level (Band D) of £1,975.76 excluding parish, Fire, and Police precepts (detailed in Appendix 7).

4)      Note that after all available measures had been taken in relation to budget proposals, a budget gap of £4.7m existed representing a shortfall of annual income compared to net expenditure plans. Therefore, the Council was dependent upon approval by DLUHC to capitalise this expenditure and finance it from Council borrowing under the provisions of Exceptional Financial Support (EFS) in order to set a balanced budget for 2024/25.

5)      Recommend to Council the approval of the proposed General Fund revenue budget for 2024/25 with a net budget requirement of £143.190m after adjusting for the capitalisation of £4.7m of revenue expenditure relating to EFS;

6)      Note whilst the budget gap for 2024/25 has been addressed by the EFS, there would still be a budget gap of £7.474m in 2025/26 and £0.491m in 2026/27 resulting in a cumulative budget gap over the MTFP period of £7.965m. Further savings proposals arising from the Transformation Programme would be required as a minimum to meet these budget gaps.

7)      Note that in assessing the adequacy of reserves in the context of financial risks within the Council’s operating environment, the s151 Officer had determined that financial provision for:

•       the sum of £3.5m in relation to savings delivery risk

•       the sum of £4.6m in relation to the timing of realisation of capital receipts to fund Transformation expenditure

              were required in the form of capitalisation of expenditure to be funded from Council borrowing under the provisions of EFS to provide assurance on the adequacy of reserves, should those risks crystalise.

8)      Note that the recommended budget was dependent upon DLUHC approval of EFS in the sum of £13.4m in order for it to be considered and approved by Council as a robust and deliverable balanced budget.

9)      Note that in the event of DLUHC not approving EFS totaling £13.4m, the s151 Officer would have no option but to issue a s114 Notice under s14(3) of the Local Government Finance Act 1988 with the implications as set out in paragraph 4.11 of Appendix 2.

 

In terms of the Budget Consultation Executive:

 

1)     Note the feedback of the budget consultation exercise, and submissions from Overview and Scrutiny Board.

2)     Approve the recommended response to the consultation as set out in Appendix 3

 

In terms of the Financial Reserves Policy Executive:

 

1)     Recommend to Council the approval of the Financial Reserves Policy for 2024/25 which proposes:

·         A minimum General Fund Balance of 7.5% of the Net Revenue Budget (£147.890m before EFS temporary adjustment), equivalent to £11.1m for 2024/25

·         That the Council build a Financial Resilience Reserve Balance of between £8m and £10m over the term of the MTFP to 2026/27 to strengthen its financial resilience.

2)     Note that the reserves policy would be subject to an annual review and Council approval at annual budget setting and would be revised to reflect changes in risk and/or external factors that the Council needs to address in order to secure its financial resilience over the medium to long term.

3)     Note the estimated balances on usable revenue reserves as at 1 April 2024 of:

·         General Fund balance - £11.1m

·         Earmarked reserves – unrestricted £6.3m

·         Earmarked reserves – restricted £4.7m

 

In terms of Fees and Charges Executive:

 

1)     Recommend to Council the approval of the proposed Fees & Charges Policy for 2024/25.

2)     Recommend to Council the approval of the schedule of fees and charges arising from the application of the approved policy for 2024/25

 

In terms of Capital Programme 2024/25 to 206/27 and Capital Strategy 2024/25 Executive:

 

1)     Recommend to Council the approval of the proposed 2024/25 – 2026/27 Capital Programme totalling £174.980m and the associated financing statement as shown in Appendix 6.

2)     Recommend to Council the approval of the Capital Strategy and endorse the recommendations included in it as shown in para. 4.20 of the report and detailed in Appendix 6.

 

3)     Note the Council’s revenue cost of borrowing for 2024/25 was £11.154m which was equivalent to 7.8% of the Net Revenue Budget and was approaching the maximum affordable level, therefore future capital investment would need to rely more heavily on external funding and capital receipts in order to maintain borrowing at affordable levels.

4)     Note that the high-level estimate of Transformation and Redundancy Expenditure totalling up to £13.7m in 2024/25, £7.7m 2025/26 and £5.2m in 2026/27 was required to be approved within this report to set the capital expenditure and financing limits, together with prudential indicators for borrowing within the Treasury Management Report elsewhere on this agenda. 

5)     Note that the detailed development of the Transformation Programme governance, investment plans and funding through the Flexible Use of Capital Receipts Strategy, would be the subject of further reports to the Executive and Council in March 2024 to incorporate into the Budget and Policy framework for 2024/25.

 

In terms of Schools Budget Executive:

 

1)     Note details of the Dedicated Schools Grant (DSG) Grant for 2024/25 and the allocation to schools as detailed in Appendix 8.

2)     Note the forecast pressures upon the High Needs block of £6.644m in 2024/25 and the resulting cumulative deficit on the DSG account of £13.208m at 31 March 2025.

3)     Note that the Council was part of the Delivering Better Value (DBV) scheme operated by the Department for Education (DfE) to support local authorities to manage and control the deficit.

4)     Note that a statutory override was in place which prevented the DSG deficit from being met from General Fund resources and the Government’s plan to deliver a funding solution was awaited. This presented a potential significant medium term financial risk to the Council in the event that the statutory override is removed without a suitable funding solution.

 

OPTIONS

 

No other options were put forward as part of the report.

 

REASONS

 

All Council members had a legal obligation to agree a balanced budget and set the Council Tax by 11 March 2024. In addition, the Council had a Best Value duty to demonstrate financial sustainability through the delivery of a balanced Medium Term Financial Plan (MTFP) over a period of at least 3 years. 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.