Agenda item

The Interim Section 151 Officer presented the Medium Term Financial Plan (MTFP) 2023/24 to 2025/26 (including the Treasury Management Strategy and the Capital Programme) for the Executive Committee’s consideration. 

Members were asked to note the following when considering the report:

·             The report built on the tranche 1 savings of £1.5 million that had been agreed in November 2022.

·             An assumption had been made that the Council would agree a 2.99 per cent increase to Council Tax for 2023/24.  A report on the subject of Council Tax Resolutions would be presented for the Executive Committee’s consideration at a meeting scheduled to take place on 27^th February 2023.

·             The costs to the Council arising from the pay award to staff for 2021/22 had been slightly less than previously anticipated due to staff vacancies.

·             The funding from Government for the Council represented a one-year settlement.

·             Final figures had been received from the actuaries for the local government pension contributions for staff which had been taken into account in the report. 

·             Funding had been set aside for anticipated increases to the costs of utilities, with 50 per cent allocated to the base budget and 50 per cent to earmarked reserves, the value of which would fall over the three-year period of the MTFP.  This arrangement was in place as it was anticipated that utilities costs would start to decline during the period of the plan.

·             Whilst there would be income from business rates, Officers were assuming that there would be a high level of non-payment and this had been taken into account when preparing the report.

·             There were a number of additional pressures that had been reflected in the proposed budget:

-        Refurbishment of the Council’s vehicle fleet and fuel payments.  Members were advised that there would be a need to respond to requirements set out in the Environment Act.  The costs of biofuels, compared to diesel, were increasing and this would also need to be taken into account.

-        There was a fund for apprenticeships and Officers were aiming to link this to staff grades in order to take advantage of the Government’s apprenticeship levy.

-        There was a need to fund a new Data Analyst post.  At present, there was only one member of staff at the Council trained on how to undertake this work and Officers believed that the Council’s system, Power BI, could be used more effectively.

-        There remained pressures arising from planning enforcement.

·             Council Tax collection rates for the 2022/23 financial year were at around 98 per cent and this was taken into account when calculating likely income from Council Tax for subsequent years.

·             The Corporate Management Team (CMT) had reviewed the earmarked reserves in December 2022, as there were a number of reserves that had not been used for some time.  As a consequence, a number of the reserves had been released, including funding that would be used to address the rising costs of utilities.

·             Officers were assuming that the general fund would be in a surplus position by the third year of the plan, although there would be gaps to address in the first and second years.

·             By the third year, the Council was projected to have reserves of £2.1 million.  The Government suggested that Councils should have reserves equivalent to 5 per cent of the authority’s income.  The Interim Section 151 Officer was suggesting that in Redditch, reserves should represent closer to 9 per cent of income, to take account of debts and expenditure too.

·             Action would need to continue to be taken to raise the reserves in the general fund.  Therefore, Members and Officers would be encouraged to continue to consider efficiencies that could be made in service delivery as well as potential savings.

·             Legally, all buildings in the public sector would need to have an Energy Performance Certificate (EPC) rating of E or better by 2026.  Some buildings could potentially be upgraded but others might have more complex issues and would potentially need to be sold.

·             Staff retention and recruitment remained an area of concern for local government in the West Midlands, including for Redditch Borough Council.  Therefore, there was a need to review how best to attract and retain skilled and qualified staff moving forward.

·             There was the potential that some redundancy payments would need to be made.  However, given there were in excess of 100 vacancies in the shared services between Redditch Borough and Bromsgrove District Councils, it was possible that staff placed at risk in service reviews could be redeployed in other departments.

·             The capital programme was underspent.  However, there were some signficant projects included in the capital programme, including the replacement of the vehicle fleet and expenditure of the Town’s Fund on the regeneration of Redditch town centre.

·             Members had recently agreed that the rents for Council house tenants should increase by 7 per cent.  Whilst Officers were working on the basis that a similar increase would occur in 2024/25, for service planning purposes, decisions could only be taken on a yearly basis regarding rent increases and the report in respect of the following financial year could therefore contain different proposals.

·             The Treasury Management Strategy had also been included in the report, which detailed how the Council intended to approach borrowing.  Members were asked to note that the Government no longer permitted local authorities to borrow for yield.

·             The Council had not had to borrow to fund the capital programme since 2011 and it appeared likely that the authority would be able to continue to use internal resources to fund the capital programme over the following three years.

·             The Investment Strategy detailed the support that could be provided to local groups where needed, subject to submission of robust business cases.

The Interim Section 151 Officer concluded the presentation of the MTFP by outlining his views of the robustness of the budget and the risks associated with the budget.  Members were advised that a number of risks had been identified which included:

·             The Council’s 2021/22 accounts had not yet been closed, although Officers were close to completing this work.

·             An overspend was anticipated for the 2022/23 financial year. 

·             The impact of inflation on the costs of service and project delivery remained an area of concern.

·             There was a risk that the authority could potentially lose key personnel due to the age profile of the Council’s existing workforce.

·             The authority needed to lobby the Government regarding calculations for the Council Tax Base.  The Council was placed at a disadvantage as the Council Tax Base was calculated based on the number of band d equivalent properties in the local authority area and the majority of houses in Redditch were classified as bands a – c.

·             The Council needed to complete projects, for which the authority had received grant funding from the Government, within relatively tight timescales, including for the regeneration of the town centre.  Should these works not be completed to deadline, the Council would have to return funding to the Government.

The Interim Section 151 Officer had concluded that the figures contained in the MTFP were robust.  There were also adequate reserves, although more efficiencies needed to be achieved in order to ensure that there remained sufficient reserves moving forward.

Following the presentation of the report, the Portfolio Holder for Finance and Enabling thanked the Interim Section 151 Officer, the Head of Finance and Customer Services and the rest of the Finance Department for their hard work on the budget.  It was suggested that the content of the budget was more transparent and easier to follow than it had been in previous years, due to the layout of the report. 

Members acknowledged that there remained financial challenges which would need to be addressed by the Council moving forward.  In particular, Members noted that there was a need to maximise use of grant funding.  It was also noted that Portfolio Holders had collective responsibility for ensuring that they questioned Officers about services within their remit and took nothing for granted.

RECOMMENDED approval of

1)          the tranche 2 growth proposals;

2)          the additional funding to the Council as per the Local Government Settlement on the 19^th December 2022, including the estimated levels for 2024/5 and 2025/6;

3)          the tranche 2 savings proposals, including an Increase of Council Tax at 2.99 per cent;

4)          the Capital Programme 2023/4 to 2025/6 and associated projects where outstanding budgets will be allowed to be carried forward at the end of the 2022/23 financial year;

5)          the levels of reserve being carried forward into future years;

6)          the level of General Fund balances being used to balance budgets over the Medium-Term Financial Plan (MTFP) period; and

RESOLVED that

7)          the Chief Financial Officer’s (CFO) Opinion on Estimates and Reserve Levels – the Robustness Statement (Section 25 Statement) – be noted.