Agenda item

The Portfolio Holder for Finance and Enabling presented the Medium Term Financial Plan (MTFP – including the Treasury Management Strategy, Capital Strategy, Minimum Revenue Position and Investment Strategy) Tranche 2 for the Executive Committee’s consideration.

 

Members were asked to note that the Council had set its budget in two tranches, similar to the 2023/24 MTFP process.  The initial tranche was published in autumn 2023 and approved at the Council meeting held in January 2024.  The second tranche took into account the final Local Government Settlement figures and the authority’s final budget would be approved in February 2024.  Members were advised that the Housing Revenue Account (HRA) budgets would be included in this tranche.

 

In terms of the Council’s revenue position, the Executive Committee was reminded that at the Council meeting held on 29^th January 2024 this had been approved with a deficit of £518,000 over the three-year period 2024/25 to 2026/27.

The financial settlement, which had been confirmed on 18^th December 2023 by the Government, had allowed the following opportunities for additional funding to be considered which included:

·       Increasing Council Tax from 1.99 per cent to 2.99 per cent resulting in additional funding of £67,000.

·       Increasing planning fees for small applications by 25 per cent and other applications by 35 per cent would recoup £60,000 at present activity levels.

·       There would be additional grant funding of £244,000 due to the overall Local Government Settlement.

By February 2024, the Council was in a position to fully understand the implications of the 2022/23 and 2023/24 pay awards to staff, given that the 2023/24 pay award was implemented in December 2023.  Consequently, Members were advised that the following savings could be made:

·       £100,000 could be released from the 2022/23 Pay Award contingency.

·       £150,000 could be released from the 2023/24 Pay Award budget approved in Tranche 1 of the MTFP process.

However, there were additional pressures amounting to £261,000 that need to be accounted for.  This included:

·       An increase in staffing numbers in Worcestershire Regulatory Services (WRS) due to higher levels of Food Safety compliance testing requirements by the Food Standards Agency, at a cost of £40,000.

·       Planning and Environmental Enforcement costs of £45,000. This increase was linked to a report presented to the Executive Committee in January 2024.

·       Investment in Play Audits starting at £10,000 and rising to £50,000.  These costs had arisen as discussed in respect of the Play Audit report that had been approved at the Executive Committee meeting held in January 2024.

·       Housing Strategy Review costs of £71,000.  This was to account for the increased statutory duties that were being placed on Private Sector Housing teams to address the damp and mould issues that had been raised nationally.  In addition, the Renters Reform Bill would bring new duties and responsibilities to District Councils particularly in relation to improving renting standards.

·       Following an approach from Wyre Forest District Council to disband the North Worcestershire Economic Development and Regeneration (NWeDR) shared service, Officers had been working on the exit agreement and ensuring that Redditch Borough Council was protected from any claims brought as a result of the break-up of the service and any decisions made by NWeDR prior to the split.  The proposed increased costs for Redditch Borough Council would be £72,000.

These departmental changes had resulted in an overall £29,000 surplus in the 2024/25 financial year rising to a surplus of £165,000 and then £166,000 in the following two years.  Given the financial position, there was a proposal to “provisionally” freeze Council Tax in 2025/26.  This would reduce the surplus by an ongoing £144,000 from 2025/26.  By provisionally proposing this change, if financial requirements meant that this was no longer possible, then it would not need to be enacted.  This would change the Tranche 2 financial position to a £21,000 and £22,000 surplus in 2025/26 and 2026/27.

The Executive Committee was asked to note that on 23^rd January 2024 the Government had announced additional measures for Local Authorities worth £600 million. As part of these measures, the Government were asking local authorities to produce productivity plans which would set out how they would improve service performance and ensure every area was making best use of taxpayers’ money.  The Government would monitor these plans, and funding settlements in future years would be informed by performance against these plans.  The magnitude of these additional sums would not be confirmed by the Government until later in February, however initial estimates indicated that Redditch Borough Council would benefit by £103,000.  This figure had not yet been included in the MTFP report as the authority needed first to receive official confirmation from the Government of the final amount. 

Any increases to costs in relation to the Parking Service Level Agreement (SLA), subject to approval by the Executive Committee, would be valued at a maximum of £27,000.  As this had not yet been determined by Members by the time that the MTFP report was being debated at the Executive Committee meeting, this figure had not yet been incorporated into the MTFP Tranche 2 report.  However, Members were advised that the net effect of these two changes would be that ongoing revenue budgets would be in surplus by approximately £100,000 a year.

The Council’s General Fund was due to increase to a value of £3,786 million (taking account of the Tranche 2 position and provisional Council Tax Freeze in 2025/26) as at 31^st March 2027.  This sum was approximately 9 per cent of the Council’s gross expenditure and above the 5 per cent benchmark quoted by the Government as being a minimum requirement.  If housing benefit payments, which were passported through the Council, were ignored than this percentage would increase to 15 per cent of expenditure.

 

The Capital Programme for the following five years had been included in the report. Overall, this amounted to spending of £37.1 million of which £20.1 million was funded by grants.

 

Significant Council spending continued to be planned in respect of the Fleet Replacement Programme, although this was slipping into the future as the authority awaited the Government’s final Environment Bill and confirmation of the type of vehicles required after 2030. There would be the need to extend the Town’s Fund Projects, but that application process had not started by the date of the meeting. It was expected that this would take the same route as the Levelling Up schemes that were due for completion a year before Towns’ Fund Schemes, where authorities had been asked whether extensions were required.

 

Members were reminded that a number of capital bids were approved in Tranche 1 of the budget.  Given that the Council had a five-year ongoing Capital Programme, Members were asked to note the following key additions and changes:

 

·       Car Park maintenance being allocated at £150,000 a year for the full five years.

·       Footpath maintenance being allocated at £75,000 a year for the full five years.

·       An assumption that Disabled Facility Grants would continue at a level of £700,000 per annum.

·       Public Building maintenance budgets allocated at £250,000 a year, with an additional £150,000 for the initial three years due to the implications of ensuring that the Council met energy efficiency requirements by 2026.

·       Fleet replacement was backed up by a full listing of all assets.  HRA fleet assets were dealt with separately.

·       Wheely bin purchases were set at £100,000 a year.  This would be reviewed over the following financial year.

·       The acceleration of approved Arrow Valley Park works was planned to maximise income.

·       Houses in Multiple Occupation (HMO) Grants and Home Repairs Assistance continued at their current levels of £25,000 and £40,000 respectively.

·       Significant investment was required in ICT to ensure that this core enabling service was kept up to date.  This included updating networks, and hardware and ensuring that cyber security was continually improved.

·       The implications of the Play Audits, which had recently been the subject of a report to the Executive Committee, were also reflected.

 

 

The HRA budget for 2024/25 and beyond was set out in detail, with the following overall assumptions:

 

·       A “revenue” budget had been set of £28.8 million for 2024/25 rising to £31.3 million in 2027/28.

·       A Capital Programme had been set of £11.7 million for 2024/25 reducing to £10.8 million in 2027/28.

·       Reserve balances would reduce slightly from £29.4 million in 2024/25 to £26.5 million in 2027/28.

Based on current assumptions, the HRA MTFP ensured:

 

·       Adequate levels of balance reserves were maintained to help manage risks and mitigate the impact of unforeseen circumstances.

·       There was a robust capital programme that was fully funded from available resources within the HRA.

·       Surpluses were generated and transferred to a capital reserve and used to match fund the costs of replacement homes.

·       The Council complied with legal requirements and did not set a deficit budget for the HRA.

 

The Section 151 Officer’s robustness statement in respect of the budget reported that this was considered to be sustainable over the medium-term but more work would need to be done to ensure financial sustainability was embedded across the organisation. A provisional freeze of Council Tax was proposed for the 2025/26 financial year based on the present position which still left a surplus budget.  However, if financial conditions changed, this would not be enacted.  Members were asked to note that the S151 Officer’s view was that, although the Council would have a small surplus budget, it would not be prudent to freeze Council Tax for the longer-term financial sustainability of the Council, even though General Fund Reserves were almost double the minimum recommended Government level.

 

Once the report had been presented, Members discussed the following points in detail:

 

·             The extent to which the Council was at risk of being issued with a Section 114 Notice.  Officers advised that in a recent audit of the Council’s balances, it had been reported that the Council was performing well and was probably in the top half of Councils, in terms of being less likely to be issued with such a notice.

·             The number of local authorities that had received Section 114 Notices in recent years and the circumstances leading to this.  Members were informed that there was a need for due diligence in local government activities and many of the local authorities in this position had taken greater risks than Redditch Borough Council over the preceding 20-year period.  It was also noted that the Government had asked Councils to enter into discussions with DLUHC and Government Ministers if they were experiencing problems before there was a need to issue a Section 114 Notice.

·             The significant proportion of funding for local government, at 70 per cent of that total funding, that was allocated to adult and children’s social services, which served 3 per cent of the population.

·             The risks that an unforeseen situation could impact on the Council’s financial sustainability.  The Committee was informed that there was always a risk that a disaster could befall any authority that would require funding from balances to achieve a resolution.  Should the required expenditure be significant, then this could impact on long-term sustainability.  An example was given of a car park issue at another authority and if an issue of this magnitude hit the Council is would half the General Fund Reserves.

·             The financial implications in the medium to long-term for the authority of a Council Tax freeze in 2025/26 and the extent to which this would create a gap in the Council’s finances.  The Section 151 Officer explained that, from a financial prudence perspective, a S151 Officer’s view would always be that not increasing Council Tax in one year would create a financial gap in later years and impact long term financial sustainability.  However, in the current financial circumstances for the Council, the Section 151 Officer could not advise that this action could not be taken.

·             The extent to which it was morally acceptable to increase Council Tax during a cost of living crisis.

·             The £777,747 per annum expenditure on Rubicon Leisure Limited listed in the MTFP and the extent to which the authority could aspire to reduce this cost in future.  Members were informed that this was the management fee for the company.  The Council was planning investment in Rubicon Leisure Limited’s facilities and there was the possibility that this would result in an increase in income and a subsequent reduction in the management fee at a later date.

·             The £2.45 million funding that the Council was eligible to receive as a previous member of the former Greater Birmingham and Solihull Local Enterprise Partnership (GBSLEP) and whether this figure was secure.  Officers explained that the eight Councils that had previously been members of this LEP had all agreed that each authority should receive that amount of funding, which was currently held by Birmingham City Council on behalf of the other authorities.  Partnership members were moving to ensure these funds, including those due to Redditch Borough Council, were delivered by the end of the 2023/24 financial year.

·             The figure that had been included in the MTFP tranche 2 report in respect of the proposed increase to Council Tax each year, and the reasons why this had been recorded as 2 per cent rather than 3 per cent in parts of the report.  Officers clarified that when this subject was initially considered, the legislation limited Council increases to 1.99 per cent.   The Government had subsequently confirmed that increases could be made at up to 2.99 per cent by lower-tier authorities.  The report reflected in chronological order the different advice that had been provided by the Government on this subject over time and the Council’s proposed response, including the potential Council Tax freeze in 2025/26.

·             The inclusion of a new column in some of the tables in the report relating to sources of capital funding including borrowing, which Members praised for enhancing the transparency of the figures and source of funding.  The Committee was informed that the Council was still in a position to fund most capital projects but in the medium-term, it was likely that the Council would need to address the costs of the vehicle fleet replacement using funding from borrowing.

·             The positive impact that income from the Council’s Garden Waste Collection Service would have on the financial sustainability of the authority moving forward.

RECOMMENDED that

 

1)          the additional funding to the Council as per the Local Government Settlement on the 18^th December 2023, including the estimated levels for 2024/25 and 2025/26, be agreed;

 

2)          the Tranche 2 growth and savings proposals, including an increase of Council Tax of 2.99% for 2024/25, be agreed;

 

3)          a proposed Council Tax Freeze in 2025/26, subject to financial requirements allowing this to be possible, be noted;

 

4)          the updated five-year Capital Programme 2024/25 to 2028/29 along with its ongoing revenue costs be agreed;

 

5)          the levels of Earmarked Reserves being carried forward into future years be agreed;

 

6)          the level of General Fund balances following additions from the 2024/25 MTFP be agreed;

 

7)          the HRA budget be approved;

 

8)          Members take account of any feedback from the Tranche 2 consultation process undertaken; and

 

RESOLVED that

 

the implications set out in the Section 151 Officer’s Robustness (Section 25) Statement of this 2024/25 to 2026/27 Medium Term Financial Plan, in moving the Council to financial sustainability, be noted.