Agenda item

Report for decision and submission to Council.

 

ORDERED the Executive to approve that the following are forwarded to

Council for approval:

 

1. Proposed service budget growth of £6.460m from 2026/27 in order to reinvest in some direct services to the community and provide reinvestment in the resilience of enabling services (detailed in Appendix 3)

 

2. Budget provision of £15.549m for 2026/27 rising to £35.963m in 2029/30 to address forecast service demand pressures and re-basing of budgets (including for reduced income levels and legislative requirements). This includes the decision by Executive not to increase school meals prices for parents who do not receive free school meals in order to support families, for which budget provision of £0.230m for 2026/27 rising to £0.371m in 2029/30 has been provided (paragraphs 4.59 to 4.61 and Appendix 1)

 

3. Budget provision of £0.499m p.a. from 2026/27 for Corporate Demand, and the continuation of the Member Led Ward Schemes budget of £0.235m p.a.  from 2026/27 (Table 7 in paragraph 4.62)

 

4. Budget provision of £2.458m p.a. from 2026/27 to remove savings from the MTFP which are now found to be unachievable in the manner originally intended (paragraph 4.65)
5. No increase in core (general) Council Tax for 2026/27, but an increase in Council Tax for 2026/27 of 2% relating to the Adult Social Care precept to fund increased costs of statutory duties in Adult Social Care (paragraph 4.30), resulting in a proposed Council Tax level (Band D) of £2,115.86 excluding parish, Fire, and Police precepts (detailed in Appendix 11)

 

6. The proposed General Fund revenue budget for 2026/27 with a net budget requirement of £200.675m (Appendix 5)

 

7. The Financial Reserves Policy for 2026/27 (Appendix 7) including the proposed contributions to reserves to strengthen the Council’s financial resilience and the setting up of a new Budget Smoothing Reserve from 2026/27

 

8. The proposed Fees & Charges Policy for 2026/27, and the schedule of fees and charges arising from the application of the approved policy for 2026/27 (Appendix 8)

 

9. The Capital Strategy Report 2026/27 and the proposed 2026/27 to 2029/30 Capital Programme totalling £183.741m which includes the addition of new Council funded schemes and additions to current schemes and extension of schemes deemed Business as Usual totalling £11.735m in 2026/27 and  rising to £56.633m by 2029/30, and the associated financing statement (Appendix 9)

 

10. The Flexible Use of Capital Receipts (FUoCR) Strategy for 2026/27 including transformation and redundancy expenditure as part of the Transformation Programme amounting to £5.789m which can be capitalised in 2026/27 (Appendix 10)

 

11. The Pay Policy Statement for 2026/27 which sets out the Council’s policies on remuneration of its staff in accordance with Section 38 of the Localism Act 2011 (Appendix 13)

 

AGREED the Executive:

 

1. Notes 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 6)

 

2. Notes that the Council’s S151 officer recommends that the Council increases the Council Tax each year by the maximum allowed by the Government due to the reasons outlined in paragraph 4.31. However, whilst not recommended, given the improved financial position and financial resilience of the Council and the improved governance and budget spending controls that exist, and the increased Government funding available to the Council it is possible to financially accommodate a decision by the Mayor and Executive for a lower than maximum increase in core (general) Council Tax to be proposed to  Council for 2026/27 (paragraph 4.32). Also, it is recommended that no decisions are made in relation to 2027/28 and 2028/29 Council Tax increases, and these should be made at a later date when there is more certainty on the financial position (paragraph 4.33)

 

3. Notes the updated financial planning assumptions in the Council’s Medium Term Financial Plan following the publication of the Provisional Local Government Finance Settlement, and that these will be updated further following publication of the Final Local Government Finance Settlement in early February 2026, with any changes being reported to the Council on 18 February 2026 as part of the budget setting report

 

4. Notes the Government funding in the form of Fair Funding Allocation (Revenue Support Grant, Local Authority Better Care Fund, Retained Business Rates and Business Rates Top up Payment) of £130.960m in 2026/27 (summarised in Table 1a in paragraph 4.14), which is an increase of £14.171m for 2026/27 (as shown in Table 1b in paragraph 4.14)

 

5. Notes the increase in the Council’s Core Spending Power (the Government’s calculation used to illustrate the overall impact of local authority funding which includes the Settlement funding, the Government’s assessment of Council Tax income, and various specific grants) from 2025/26 to 2028/29 is £57.369m or 28.3% and from 2024/25 to 2028/29 £75.096m or 40.6% (paragraph 4.17)

 

6. Notes that there is no requirement currently for the Council to make any additional further budget savings in 2026/27 other than those already included in the current MTFP, however work will continue to identify and deliver efficiencies and savings in the future through robust budget monitoring and the Transformation Programme (paragraphs 4.63 and 4.69)

 

7. Notes the updated Medium Term Financial Plan position for 2026/27 to 2029/30 highlighting a balanced budget each year for the MTFP period (Table 12 in paragraph 4.74)

 

8. Notes the feedback of the budget consultation exercise (paragraphs 4.76 to 4.86 and Appendix 4)

 

9. Notes the forecast level of Council reserves over the period of the MTFP from 2026/27 to 2029/30 following the proposed budget, and that the proposed budget and MTFP should not negatively impact reserves levels in the medium term. The estimated balances on unrestricted usable revenue reserves as at 1 April 2026 of:

 

·         General Fund balance - £11.100m

·         Unrestricted Usable Earmarked reserves – £14.837m

 

10. Notes the details of the Dedicated Schools Grant (DSG) Grant for 2026/27 and the allocation to schools, the forecast total cumulative DSG deficit of £31.213m on 31 March 2026, and the risk to the Council if Government does not provide a suitable funding solution (Appendix 12)

 

11. Notes that the budgets for the Members’ Small Scheme programme for 2025/26 and 2026/27 would be reprofiled to allocate £150,000 for 2025/26 and £120,000 for 2026/27. The £6,400 underspend from 2025/26 would be rolled over to 2026/27 and £7,500 would be brought forward from 2027/28, resulting in a total allocation of £133,900 for 2026/27 to cover all eligible schemes proposed for that year.

 

12. Notes that wording on appendix 3 would be amended to clarify that increased capacity would enable the Council to extend the service beyond back alleys and open spaces to domestic properties, ensuring it was clear that the expanded offer focused on key public health pests. This amendment was made to avoid the wording being interpreted as applying to offices or shops, and it was noted that a separate report would follow setting out detailed operational arrangements.

 

The Executive Member for Finance submitted a report for Executive consideration which set out the proposed 2026/27 Revenue Budget, Medium Term Financial Plan (MTFP), and Council Tax proposals following the publication of the Provisional Local Government Finance Settlement.

 

The report outlined key financial assumptions, Government funding allocations, service demand pressures, proposed budget growth, and the recommended Council Tax position for 2026/27, and requested that the Executive approved a series of recommendations for referral to Full Council at its meeting on 18 February 2026.

 

Members noted that Government funding through the Fair Funding Allocation totalled £130.960m, an increase of £14.171m, and that the Council’s Core Spending Power was forecast to increase by £57.369m (28.3%) between 2025/26 and 2028/29. A balanced MTFP had been achieved for all four years, with a proposed Net Revenue Budget of £200.675m for 2026/27. The Mayor and Executive proposed no increase in core Council Tax but a 2% Adult Social Care precept, resulting in a Band D charge of £2,115.86.

 

Members acknowledged the significant service demand pressures and re‑basing requirements amounting to £15.549m in 2026/27, alongside the proposal to remove £2.458m of previously approved savings that were no longer achievable. It also noted the proposals for £6.460m of service budget growth, aligned with Council Plan priorities, and £0.499m of corporate demand pressures, as well as the continuation of the Member‑Led Ward Schemes budget. Details of the proposed Capital Programme were provided, totalling £183.741m over 2026/27–2029/30, together with the 2026/27 Flexible Use of Capital Receipts Strategy amounting to £5.789m.

 

The recommendations on reserves were noted, including maintaining the General Fund at a minimum of £11.1m and building the Financial Resilience Reserve to £10m in 2026/27, rising to £20m by 2029/30. It also considered the outcomes of the public consultation, which saw 54% support for the 2% Council Tax proposal, and received an update on the Dedicated Schools Grant, with an indicative allocation of £222.114m and a forecast cumulative deficit of £31.213m at 31 March 2026.

 

Members proposed a series of amendments to the report which following a vote, were agreed. The budgets for the Members’ Small Scheme programme for 2025/26 and 2026/27 were reprofiled to reflect the earlier decision to allocate £150,000 for 2025/26 and £120,000 for 2026/27. It was further agreed to roll forward the £6,400 underspend from 2025/26 to 2026/27 and to bring forward £7,500 from 2027/28, resulting in a total allocation of £133,900 for 2026/27 to cover all eligible schemes proposed for that year.

 

In relation to Pest Control, the committee agreed that the wording be amended in Appendix 3 to clarify that increased capacity would enable the Council to extend the service beyond back alleys and open spaces to domestic properties, ensuring it was clear that the expanded offer focused on key public health pests. This amendment was made to avoid the wording being interpreted as applying to offices or shops, and it was noted that a separate report would follow setting out detailed operational arrangements.

 

Members were advised that the proposed budget had been shaped through close working with colleagues across the Council and had been underpinned by what was described as “a simple ABC” of core principles: A – ensuring the budget was affordable, B – delivering clear benefits for residents, and C – cementing the Council’s financial position.

 

It was highlighted that significant financial risks remained, particularly within Children’s Services. In relation to Council Tax, members noted that a 0% increase would have contradicted the strong advice issued in the briefing the previous week, and that an increase below 2% was considered insufficient to meet rising Children’s Services costs. Members acknowledged that a very low or no increase would not have reflected the Council’s current financial circumstances, could have sent the wrong message to central government, and might have been detrimental in future years, particularly given the three‑year phased settlement which only provided part of the funding uplift in year one.

 

In discussing service priorities, members recognised that although the Council could have chosen not to grow services, residents did not yet feel that service levels were where they should be. Continued investment, mature decision‑making and a focus on key services, including youth provision and pest control, were therefore considered essential. It was noted that pest control remained a town‑wide service and that frontline services more generally required strengthening. Members also heard that even at the end of the three‑year financial process, the Council would remain £50m short of previous funding levels, making it important to continue rebuilding services that had historically been underfunded and acknowledging that the phased settlement did not allow a return to earlier budget levels.

 

Members expressed a range of views regarding the broader impact of the budget. Members noted the benefits for neighbourhoods, elderly residents and children, and welcomed investment in CCTV, evidence‑gathering capability, the professional witness service, parenting support and over £500k per year for neighbourhood improvements. Members also highlighted town‑wide benefits, including the doubling of the caretaking team, investment in the becks team to improve their condition and reduce flood risk, and enhanced provision of park rangers. Members noted that the budget was refreshing and reflective of a more positive position, referencing the increasing complexity of Adult Social Care needs, improvements to frontline services, strengthened homelessness and domestic abuse support, a shift towards prevention, and alignment with the Adult Social Care Strategy. Members endorsed the approach in Children’s Services, recognising the importance of reducing reliance on external residential placements, the role of scrutiny in examining costs, and the value of programmes such as 10 x 10 in providing life‑changing opportunities for young people. Members also emphasised the need for flexibility for children in care and the critical contribution made by foster carers.

 

OPTIONS

 

1. The Council is required by law to set a balanced budget and to operate robust and meaningful financial planning arrangements and this report is a key part of achieving that objective. Therefore, no other options were feasible.

 

ORDERED the Executive to approve that the following are forwarded to

Council for approval:

 

1. Proposed service budget growth of £6.460m from 2026/27 in order to reinvest in some direct services to the community and provide reinvestment in the resilience of enabling services (detailed in Appendix 3)

 

2. Budget provision of £15.549m for 2026/27 rising to £35.963m in 2029/30 to address forecast service demand pressures and re-basing of budgets (including for reduced income levels and legislative requirements). This includes the decision by Executive not to increase school meals prices for parents who do not receive free school meals in order to support families, for which budget provision of £0.230m for 2026/27 rising to £0.371m in 2029/30 has been provided (paragraphs 4.59 to 4.61 and Appendix 1)

 

3. Budget provision of £0.499m p.a. from 2026/27 for Corporate Demand, and the continuation of the Member Led Ward Schemes budget of £0.235m p.a.  from 2026/27 (Table 7 in paragraph 4.62)

 

4. Budget provision of £2.458m p.a. from 2026/27 to remove savings from the MTFP which are now found to be unachievable in the manner originally intended (paragraph 4.65)
5. No increase in core (general) Council Tax for 2026/27, but an increase in Council Tax for 2026/27 of 2% relating to the Adult Social Care precept to fund increased costs of statutory duties in Adult Social Care (paragraph 4.30), resulting in a proposed Council Tax level (Band D) of £2,115.86 excluding parish, Fire, and Police precepts (detailed in Appendix 11)

 

6. The proposed General Fund revenue budget for 2026/27 with a net budget requirement of £200.675m (Appendix 5)

 

7. The Financial Reserves Policy for 2026/27 (Appendix 7) including the proposed contributions to reserves to strengthen the Council’s financial resilience and the setting up of a new Budget Smoothing Reserve from 2026/27

 

8. The proposed Fees & Charges Policy for 2026/27, and the schedule of fees and charges arising from the application of the approved policy for 2026/27 (Appendix 8)

 

9. The Capital Strategy Report 2026/27 and the proposed 2026/27 to 2029/30 Capital Programme totalling £183.741m which includes the addition of new Council funded schemes and additions to current schemes and extension of schemes deemed Business as Usual totalling £11.735m in 2026/27 and  rising to £56.633m by 2029/30, and the associated financing statement (Appendix 9)

 

10. The Flexible Use of Capital Receipts (FUoCR) Strategy for 2026/27 including transformation and redundancy expenditure as part of the Transformation Programme amounting to £5.789m which can be capitalised in 2026/27 (Appendix 10)

 

11. The Pay Policy Statement for 2026/27 which sets out the Council’s policies on remuneration of its staff in accordance with Section 38 of the Localism Act 2011 (Appendix 13)

 

 

AGREED the Executive:

 

1. Notes 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 6)

 

2. Notes that the Council’s S151 officer recommends that the Council increases the Council Tax each year by the maximum allowed by the Government due to the reasons outlined in paragraph 4.31. However, whilst not recommended, given the improved financial position and financial resilience of the Council and the improved governance and budget spending controls that exist, and the increased Government funding available to the Council it is possible to financially accommodate a decision by the Mayor and Executive for a lower than maximum increase in core (general) Council Tax to be proposed to  Council for 2026/27 (paragraph 4.32). Also, it is recommended that no decisions are made in relation to 2027/28 and 2028/29 Council Tax increases, and these should be made at a later date when there is more certainty on the financial position (paragraph 4.33)

 

3. Notes the updated financial planning assumptions in the Council’s Medium Term Financial Plan following the publication of the Provisional Local Government Finance Settlement, and that these will be updated further following publication of the Final Local Government Finance Settlement in early February 2026, with any changes being reported to the Council on 18 February 2026 as part of the budget setting report

 

4. Notes the Government funding in the form of Fair Funding Allocation (Revenue Support Grant, Local Authority Better Care Fund, Retained Business Rates and Business Rates Top up Payment) of £130.960m in 2026/27 (summarised in Table 1a in paragraph 4.14), which is an increase of £14.171m for 2026/27 (as shown in Table 1b in paragraph 4.14)

 

5. Notes the increase in the Council’s Core Spending Power (the Government’s calculation used to illustrate the overall impact of local authority funding which includes the Settlement funding, the Government’s assessment of Council Tax income, and various specific grants) from 2025/26 to 2028/29 is £57.369m or 28.3% and from 2024/25 to 2028/29 £75.096m or 40.6% (paragraph 4.17)

 

6. Notes that there is no requirement currently for the Council to make any additional further budget savings in 2026/27 other than those already included in the current MTFP, however work will continue to identify and deliver efficiencies and savings in the future through robust budget monitoring and the Transformation Programme (paragraphs 4.63 and 4.69)

 

7. Notes the updated Medium Term Financial Plan position for 2026/27 to 2029/30 highlighting a balanced budget each year for the MTFP period (Table 12 in paragraph 4.74)

 

8. Notes the feedback of the budget consultation exercise (paragraphs 4.76 to 4.86 and Appendix 4)

 

9. Notes the forecast level of Council reserves over the period of the MTFP from 2026/27 to 2029/30 following the proposed budget, and that the proposed budget and MTFP should not negatively impact reserves levels in the medium term. The estimated balances on unrestricted usable revenue reserves as at 1 April 2026 of:

 

·         General Fund balance - £11.100m

·         Unrestricted Usable Earmarked reserves – £14.837m

 

10. Notes the details of the Dedicated Schools Grant (DSG) Grant for 2026/27 and the allocation to schools, the forecast total cumulative DSG deficit of £31.213m on 31 March 2026, and the risk to the Council if Government does not provide a suitable funding solution (Appendix 12)

 

11. Notes that the budgets for the Members’ Small Scheme programme for 2025/26 and 2026/27 would be reprofiled to allocate £150,000 for 2025/26 and £120,000 for 2026/27. The £6,400 underspend from 2025/26 would be rolled over to 2026/27 and £7,500 would be brought forward from 2027/28, resulting in a total allocation of £133,900 for 2026/27 to cover all eligible schemes proposed for that year.

 

12. Notes that wording on appendix 3 would be amended to clarify that increased capacity would enable the Council to extend the service beyond back alleys and open spaces to domestic properties, ensuring it was clear that the expanded offer focused on key public health pests. This amendment was made to avoid the wording being interpreted as applying to offices or shops, and it was noted that a separate report would follow setting out detailed operational arrangements.

 

REASONS

 

The forward planning and setting of a robust budget and balanced MTFP ensures the Council can deliver services within its corporate and financial framework and supports its vision for Middlesbrough as a thriving, healthier, safer, and more ambitious place where communities can flourish. All elected members are legally required to agree a balanced budget and set Council Tax by 11 March 2026, and the Council must meet its Best Value duty by demonstrating financial sustainability through a balanced MTFP covering at least three years, with Full Council approval scheduled for 18 February 2026.

 

The recommendations support progress toward meeting these statutory duties by enabling the Council to set a balanced revenue budget for 2026/27 and secure medium‑term financial sustainability, while taking a systematic and controlled approach to addressing ongoing financial challenges and delivering the Mayor’s priorities through the wider Council Plan.