Agenda item

 

AGREED that Executive note the contents of the report and submit the following to Council for approval:

 

1.    Budget proposals for savings and income generation of £7.036m in 2025/26 rising to £8.686m in 2028/29, as set out in Appendix two (Annex one and two) of the report.

2.    Budget growth of £2.521m in 2025/26 rising to £2.918m in 2026/27 for re-investment in services aligned to the Recover, Reset, and Deliver plan as set in Appendix two (Annex four) of the report.

3.    Budget provision of £0.311m in 2025/26 and a further £0.100m in 2026/27 to address the removal of previously approved savings in line with the priorities outlined in the Council Plan and after listening to residents’ views as set out in Appendix two (Annex three) of the report.

4.    An increase in Council Tax of 4.99% resulting in a Council Tax level (Band D) of £2,074.35 excluding parish, Fire, and Police precepts in line with both the Government’s referendum limits and the s151 Officer’s advice (paragraphs 4.29 to 4.32 and detailed in Appendix seven of the report).

5.    The proposed General Fund revenue budget for 2025/26 with a net budget requirement of £143.362m

6.    The Financial Reserves Policy for 2025/26 (Appendix four of the report) including the proposed contributions to reserves to strengthen the Council’s financial resilience, and which proposes:

·         a minimum General Fund Balance of least 7% of the Net Revenue budget over the MTFP period to 2028/29. In the 2025/26 proposed budget the level is 7.75% equivalent to £11.1m.

·         the building up of the Financial Resilience Reserve to at least £10m in 2025/26 and £20m by the end of 2028/29 to strengthen the Council’s financial resilience

7.    The proposed Fees & Charges Policy for 2025/26, and the schedule of fees and charges arising from the application of the approved policy for 2025/26 (Appendix five of the report).

8.    The Capital Strategy 2025/26 and the proposed 2025/26 to 2028/29 Capital Programme totalling £170.290m which included the addition of new Council funded schemes, and the associated financing statement (Appendix six of the report).

 

AGREED that Executive note:

 

1.    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 (Appendix one).

2.    The updated financial planning assumptions in the Council’s Medium Term Financial Plan following the publication of the Provisional Local Government Finance Settlement (Appendix two), and that these will be updated further following publication of the Final Local Government Finance Settlement in early February 2025, with any changes being reported to the Council on 19 February 2025 as part of the budget setting report.

3.    The creation of a Delivery Risk Budget of £2m on a one-off basis in 2025/26 only to protect against unplanned use of reserves (Appendix two).

4.    The transfer of the estimated surplus on the Collection Fund for 2024/25 of £3.135m to a new Savings Delivery Risk Reserve to help provide against the risk of non-delivery or delay of savings and to rebuild reserves (Appendix two).

5.    The creation of a Middlesbrough Priorities Fund totalling £4.367m for 2025/26 only, along with the process for use and governance of the Fund (Appendix two).

6.    Whilst the budget was balanced for 2025/26 and 2026/27 there would still be a budget gap of £2.726m in 2027/28 rising to £5.170m by 2028/29. Further savings proposals arising from the Transformation Programme would be required as a minimum to meet those budget gaps (Appendix two).

7.    The feedback of the budget consultation exercise (paragraphs 4.8 to 4.16 and Appendix three).

8.    The estimated balances on unrestricted usable revenue reserves as at 1 April 2025 of:

·         General Fund balance - £11.100m

·         Usable Earmarked reserves – unrestricted £10.269m

9.    The inclusion of transformation and redundancy expenditure which could be capitalised under the Flexible Use of Capital Receipts strategy (FUoCR) of £7.500m in 2025/26 (as part of planned £26.700m Transformation Programme from 2024/25 to 2028/29), and that the annual Flexible Use of Capital Receipts (FUoCR) Strategy would be presented to Council for consideration and approval in April 2025.

10.  The Council’s estimated revenue cost of borrowing for 2025/26 was £12.060m which was equivalent to 8.4% of the Net Revenue Budget and was approaching the maximum affordable level (currently set at 10% over the MTFP period), therefore future capital investment would need to rely more heavily on external funding and capital receipts in order to maintain borrowing at affordable levels.

11.  Details of the Dedicated Schools Grant (DSG) Grant for 2025/26 and the allocation to schools (detailed in Appendix eight)

12.  The forecast total cumulative DSG deficit of £20.693m on 31 March 2025, including £21.281m relating to the High Needs Block (Appendix eight).

13.  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 was removed without a suitable funding solution (Appendix eight).

 

The Mayor and Executive Member for Finance submitted a report for Executive consideration. The Executive Member for Finance emphasised the report was not for decision and was to be recommended to Council.

 

The report proposed a 2025/26 net revenue budget of £143.362m, and a Medium-Term Financial Plan (MTFP) for the period 2025/26 to 2028/29 following the issuing of the Provisional Local Government Finance Settlement (LGFS) 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 2025/26 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 £74.798m for 2025/26 and totalling £170.290m over the period from 2025/26 to 2028/29 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. The Prudential Indicators and Treasury Management Strategy 2025/26m which was discussed at another point in the meeting, translated the Council’s revenue income and expenditure plans and capital investment plans for the purpose of the Council’s cash flow management together with setting the framework within which the Council’s investment and borrowing activity was governed. It included the Minimum Revenue Provision (MRP) Policy which governed how the Council accounted for debt repayment in accordance with statutory regulations.

 

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 2025/26 set out the plan for replenishing and maintaining unrestricted 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 charges for services will be reviewed and fees and charges set in the future 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 to enable the Council to successfully 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 stated the previous 12 months had been difficult and that the road to financial recovery was tough. While there was still work to do, it was due to some difficult decisions that there were now opportunities to provide investment in frontline services. Executive was advised that since 2010 the Council budget had been reduced by approximately 43% and that the recent Local Government Settlement had helped to ease the Council’s financial situation.

 

It was clarified that further information about the creation of a priorities fund would be included in a future report to Executive.

 

The Mayor and Executive Member for Finance expressed their sincere thanks to the Director of Finance and Transformation and his team for their efforts in the budget process.

 

OPTIONS

 

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

 

AGREED that Executive note the contents of the report and submit the following to Council for approval:

 

1.    Budget proposals for savings and income generation of £7.036m in 2025/26 rising to £8.686m in 2028/29, as set out in Appendix two (Annex one and two) of the report.

2.    Budget growth of £2.521m in 2025/26 rising to £2.918m in 2026/27 for re-investment in services aligned to the Recover, Reset, and Deliver plan as set in Appendix two (Annex four) of the report.

3.    Budget provision of £0.311m in 2025/26 and a further £0.100m in 2026/27 to address the removal of previously approved savings in line with the priorities outlined in the Council Plan and after listening to residents’ views as set out in Appendix two (Annex three) of the report.

4.    An increase in Council Tax of 4.99% resulting in a Council Tax level (Band D) of £2,074.35 excluding parish, Fire, and Police precepts in line with both the Government’s referendum limits and the s151 Officer’s advice (paragraphs 4.29 to 4.32 and detailed in Appendix seven of the report).

5.    The proposed General Fund revenue budget for 2025/26 with a net budget requirement of £143.362m

6.    The Financial Reserves Policy for 2025/26 (Appendix four of the report) including the proposed contributions to reserves to strengthen the Council’s financial resilience, and which proposes:

·         a minimum General Fund Balance of least 7% of the Net Revenue budget over the MTFP period to 2028/29. In the 2025/26 proposed budget the level is 7.75% equivalent to £11.1m.

·         the building up of the Financial Resilience Reserve to at least £10m in 2025/26 and £20m by the end of 2028/29 to strengthen the Council’s financial resilience

7.    The proposed Fees & Charges Policy for 2025/26, and the schedule of fees and charges arising from the application of the approved policy for 2025/26 (Appendix five of the report).

8.    The Capital Strategy 2025/26 and the proposed 2025/26 to 2028/29 Capital Programme totalling £170.290m which included the addition of new Council funded schemes, and the associated financing statement (Appendix six of the report).

 

AGREED that Executive note:

 

1.    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 (Appendix one).

2.    The updated financial planning assumptions in the Council’s Medium Term Financial Plan following the publication of the Provisional Local Government Finance Settlement (Appendix two), and that these will be updated further following publication of the Final Local Government Finance Settlement in early February 2025, with any changes being reported to the Council on 19 February 2025 as part of the budget setting report.

3.    The creation of a Delivery Risk Budget of £2m on a one-off basis in 2025/26 only to protect against unplanned use of reserves (Appendix two).

4.    The transfer of the estimated surplus on the Collection Fund for 2024/25 of £3.135m to a new Savings Delivery Risk Reserve to help provide against the risk of non-delivery or delay of savings and to rebuild reserves (Appendix two).

5.    The creation of a Middlesbrough Priorities Fund totalling £4.367m for 2025/26 only, along with the process for use and governance of the Fund (Appendix two).

6.    Whilst the budget was balanced for 2025/26 and 2026/27 there would still be a budget gap of £2.726m in 2027/28 rising to £5.170m by 2028/29. Further savings proposals arising from the Transformation Programme would be required as a minimum to meet those budget gaps (Appendix two).

7.    The feedback of the budget consultation exercise (paragraphs 4.8 to 4.16 and Appendix three).

8.    The estimated balances on unrestricted usable revenue reserves as at 1 April 2025 of:

·         General Fund balance - £11.100m

·         Usable Earmarked reserves – unrestricted £10.269m

9.    The inclusion of transformation and redundancy expenditure which could be capitalised under the Flexible Use of Capital Receipts strategy (FUoCR) of £7.500m in 2025/26 (as part of planned £26.700m Transformation Programme from 2024/25 to 2028/29), and that the annual Flexible Use of Capital Receipts (FUoCR) Strategy would be presented to Council for consideration and approval in April 2025.

10.  The Council’s estimated revenue cost of borrowing for 2025/26 was £12.060m which was equivalent to 8.4% of the Net Revenue Budget and was approaching the maximum affordable level (currently set at 10% over the MTFP period), therefore future capital investment would need to rely more heavily on external funding and capital receipts in order to maintain borrowing at affordable levels.

11.  Details of the Dedicated Schools Grant (DSG) Grant for 2025/26 and the allocation to schools (detailed in Appendix eight)

12.  The forecast total cumulative DSG deficit of £20.693m on 31 March 2025, including £21.281m relating to the High Needs Block (Appendix eight).

13.  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 was removed without a suitable funding solution (Appendix eight).

 

REASONS

 

All Council members had a legal obligation to agree a balanced budget and set the Council Tax by 11 March 2025. 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 three 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 2025/26 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.