Agenda item

The Director of Finance (S151 Officer) submitted a report, the purpose of which was to assist members in fulfilling their responsibility to set a balanced budget for 2023/24.

Section 25 of the Local Government Act 2003 required the Chief Finance Officer to report on the robustness of the budget estimates and the adequacy of the financial reserves. The Act also required the Council to have regard to the report when making decisions about the budget. The Chief Finance Officer was defined in Section 151 of the Local Government Act 1972 and was fulfilled by the Director of Finance.

The report was in respect of the Budget 2023/24 as set out in the Revenue Budget, Council Tax, Medium Term Financial Plan, and Capital Strategy 2023/24 report to this Council.

This report covered:

•           An overview of current financial standing.

•           An assessment of the robustness of the 2023-24 budget setting process for both revenue and capital.

•           An assessment of key risks that may impact the budget 2023-24.

•           An assessment of the overall adequacy of reserves to contain financial risk and ensure the sustainability of the Council over the financial year 2023-24, and

•           An indication of future direction of travel for the council beyond 2023-24.

In summary, the proposals to establish a net budget requirement of £126.4m and council tax requirement of £67.3m for 2023/24, as set out in the Revenue Budget, Council Tax, Medium Term Financial Plan, and Capital Strategy 2023/24 report to this Council, were robust and provided sufficient resource to enable the council to set a balanced budget.

Reserves were adequate insofar as the minimum level of general balance was set at £12m, based on risk assessment; there were currently no plans for its use being the fund of last resort. However, there was little resilience in earmarked reserves, and these were at a critical level. The lack of substantial earmarked reserves meat that the overall reserves position, whilst adequate, was fragile and could require a reliance on cost control or the delivery of additional savings in the event of any unplanned costs.

The budget gap 2023/24 of £14.9m required delivery of £9.4m savings in year (full year: £12.4m). The budget carried significant risk especially around the volatility of the budget for children’s services and the delivery of approved saving plans in a timely way. The Council was advised to have an unrelenting focus on the delivery of saving plans and demand mitigation during the year. The delivery of children’s financial improvement plan would be overseen by the Children’s Finance Focus Group. Some level of contingency (£1.3m) and limited reserves (social care transformation – currently estimated to be £1.7m at the end of 2022/23) were held to mitigate these risks. In the event of significant unexpected cost pressures emerging during the year, further savings would be required from across the Council, and early consideration was advisable to forward plan future savings so they could be brought forward as necessary.

The Council’s current financial standing reflected a number of weaknesses: relatively low levels of reserves; significant demands on services and governance weaknesses limiting the delivery of value for money for the people of Middlesbrough, resulting in a best value improvement notice issued in January 2023. The Council had in place a Governance Improvement Board under the purview of the LGA and CIPFA. It was imperative there was organisational grip to deliver planned improvements to ensure council money was spent wisely and this would require a significant programme of work during 2023/24 to be delivered at pace that focussed on embedding budget management and improved accountability arrangements within the organisational culture.

The CFO did not consider Middlesbrough Council to be at risk of a s114 Notice (Local Government Act 1988) in setting the budget for 2023/24 as set out in the Revenue Budget, Council Tax, Medium Term Financial Plan, and Capital Strategy 2023/24 report to this Council. This view was based on the latest available information and in the event of a change in the risk profile or financial circumstances, the position could not be assured over the medium term and would be kept under review in the coming months. Council was asked to note the requirement for early consideration of budget proposals for 2024/25 and for these to be available for acceleration if required.

The Council was advised to pursue a policy of strengthening its financial resilience by maximising its local revenues; seeking to replenish reserves and delivery of savings in a timely way. In this way the Council would be better able to withstand any future financial shocks and be in a stronger position to develop and implement its strategic plans.

The Chair requested members to note the report.

ORDERED as follows:

That the report be noted and that members have regard to it when setting the Revenue Budget 2023/24.

That members note the following:

•           An unrelenting focus on delivery of 2023/24 savings and demand mitigation would be required to maintain a balanced budget; further work could be needed to accelerate future budget proposals, if necessary.

•           The Chief Finance Officer advice would be to adopt a medium-term strategy that sought to maximise resources and replenish reserves.

•           The requirement for a future programme of work to embed an organisational culture of good governance and financial management and within this a particular focus on strengthening financial practice in children’s services.