Agenda item

This report will be subject to pre-scrutiny at a meeting of the Budget Scrutiny Working Group due to take place on 21^st November 2024.  Any recommendations arising from that meeting on this subject will be reported to the Executive Committee in a supplementary pack.

 

 

The Deputy Chief Executive and Section 151 Officer presented the MTFP Tranche 1 report (including fees and charges) for 2025/26 to 2027/28.

 

The Executive Committee was reminded that the Council set a three-year MTFP every year, with the final Council Tax resolutions being approved by Council in February.  Members were asked to note that this year’s process took into account the following factors:

 

·             The starting point from the 2024/25 MTFP being neutral starting balances (which was actually a £63,000 surplus on the date of the meeting).

·             This was the first budget under a new Government and the local government settlement would be for only one year in duration for the first year of the plan. Future budgets would cover multiple years.

·             The present cost of living crisis continued to impact on the Borough’s most vulnerable residents.

·             Three years’ accounts had been submitted (2020/21 to 2022/23).  Like many other Councils, the authority would receive a disclaimer opinion on these accounts. 

·             There was continued uncertainty of the Government’s funding for projects detailed in the Chancellor’s statement on the 30^th October 2024, as allocations were not yet known.

·             There was also uncertainty over what would be required by the new Government and other stakeholders.

·             Loss of key personnel, present vacancy rates, and staff retention needed to be noted.

·             Business Rates, Council Tax income and associated collection rates and reliefs linked to the “cost of living” crisis and Covid-19 grants were still working their way through the authority’s system.

·             Inflation was moving back to the Government’s target level of 2 per cent.

As such, it was considered prudent to split the budget process into two tranches, in line with the approach taken in recent years.   The initial tranche would seek to close as much of the deficit as possible using information known as at the end of October 2024, after the Chancellor’s statement but before the Local Government Settlement and seeking approval for those savings to be implemented at Council in January 2025.  The second tranche would be presented after the Christmas break, for which approval would be sought in February 2025.  This tranche would take account of the Local Government Settlement, in respect of which the final detail would not be known until early January 2025.

 

The Committee was informed that the emerging national picture was in many ways quite similar to the previous year:

 

·             The war in Ukraine had still not been resolved and was impacting on inflation rates for everyone.

·             Many Councils, including Redditch Borough Council, had declared “Climate Emergencies” and had challenging carbon reduction targets to deliver by 2030, 2040 and 2050.  These needed to move into the implementation phase.

·             The Office for Local Government was looking at Council data to assess performance and to try to predict if Councils were getting into difficulty.

·             The data provided by the Council was important as the Government worked on an allocation method using data to inform decisions.

·             In the Local Government arena:

 

o     There were a number of Local Authorities that had issued Section 114 Statements.

o     Redditch Borough Council would have three years of accounts that would have a Disclaimer Opinion issued by the External Auditor. 

o     There were circa 700 local authority accounts up to 2022/23 that had still not been audited across England.

 

The Chancellor’s Autumn Statement was made on the 30^th October 2024.  Members was asked to note the following impacts on Council budgets:

 

·             A 3.2 per cent real-terms increase in Core Spending Power (CSP) for the whole sector in 2025-26.  This would include £1.3 billion additional grant funding, of which at least £600 million would be directed to social care. 

·             The budget was silent on Council Tax referendum limits, but the District Council Network’s (DCN) expectation was that referendum principles would stay at 2.99 per cent for district Councils.

·             In total, £233 million new funding had been announced for homelessness prevention. This would be in addition to the £1.3 billion grant funding to Councils, as discussed earlier in the meeting.

·             There would be £1 billion to extend the Household Support Fund and Discretionary Housing Payments into 2025-26.

·             There would also be £1.1 billion new funding through implementation of the extended producer responsibility scheme for recycling. 

·             In terms of Right to Buy, Councils would be permanently allowed to retain 100 per cent of receipts locally and discount levels would revert to pre-2012 levels from 21st November 2024.

·             Business Rates support would be provided to the retail, hospitality and leisure sector, although the route of compensation for Councils in relation to this remained to be clarified.

·             A £500 million increase to the Affordable Homes Programme in 2025-26 had been announced.

·             The UK Shared Prosperity Fund had been extended for 2025-26 at a reduced level of £900 million.  This was a 40 per cent decrease compared to 2024/25 and it was not yet clear whether this funding would continue in the future.

 

Officers highlighted that it was good news that the local government sector would get a real-terms funding increase.  However, the Committee was advised that it was not yet clear how this increase would be distributed.

The Government had signalled that it would reform the local government funding system after 2025-26.  The Government had also signalled its intention to embark on local government reorganisation to deliver “efficiency savings”. The proposals would be set out in more detail in the English Devolution White Paper, likely to be published in late 2024.  It was anticipated that the Government would publish a finance policy statement in mid/late November to set out the key decisions and principles for the provisional Local Government Finance Settlement.

 

In terms of staff costs, the following points were raised:

 

·             Employer national insurance (NI) contributions would increase by 1.2 per cent to 15 per cent from April 2025 but the public sector would be covered.  The Council’s rates, if not funded, would have been £92,000.

·             The National Living Wage would increase by 6.7 per cent to £12.21. The minimum wage for 18-to-20 year olds would increase by 16 per cent to £10 per hour. The Council was assessing the impact of this, including on costs for Rubicon Leisure Limited.

 

The report took account of the Council’s existing strategic priorities, although new ones would be set over the coming months by the new administration.  The Council’s strategic approach continued to be to set a balanced budget over the following three-year period having over the past two years moved to a fair level of financial sustainability.

 

In building the 2025/26 budget, the following underlying assumptions had been made:

 

·             Council Tax – Figures assumed the full 2.99 per cent allowable increase over all three years of the MTFP.  Housing growth had not been included, so this would need to be reviewed in tranche 2.

·             For Business Rates it was assumed there would be growth based on pooling with the other district Councils in the county and Worcestershire County Council.

·             There would be £25,000 in New Homes Bonus contributions.

·             It was assumed that central Government grant funding would be at similar levels to previous years.

Other corporate pressures highlighted for Members’ consideration included:

 

·             At the second quarter of the 2024/25 financial year, the overall revenue financial position was a projected £299,000 overspend position. 

·             Officers were suggesting it would be prudent to budget for a Pay Award of 3 per cent for 2025/26, increasing from the assumption of a 2 per cent per annum Pay Award in previous years.  This would represent an additional £100,000 cost to the Council.  In her statement on the 30th October 2024, the Chancellor had announced that the Government would accept the recommendations of the independent Pay Review Bodies for public sector workers’ pay.  However, it was unclear whether this was included in the 3.2 per cent spending uplift.

·             Pension Fund Actuarial Triennial Revaluation - although the fund continued to perform well, there were concerns about the reducing numbers of live members in the scheme and so an additional sum had been included from 2026/27 of £200,000 to address a potential risk.

·             Fees and Charges had originally assumed an increase of 2 per cent. However, given 50 per cent of fees and charges costs linked to staff costs and these would possibly increase at 5 per cent for the 2024/25 financial year, it was proposed that 4% increases were instead looked at in order to cover costs.  This would result in additional income of £142,000.

·             Until more information was understood in the detailed Local Government Settlement in December, it was assumed that grant levels would remain at present levels.

·             The largest change would link to upcoming requirements for waste collection services. The Council was required to implement these proposals from April 2026.  The Council was challenging present Government funding allocations to these service changes because the impact on Council budgets was significant in terms of both revenue and capital costs. The following such costs were highlighted:

o      There was the requirement for additional capital investment, over and above any grant funding, of £193,000.  It was assumed that this was required to be spent in 2025/26 and costs apportioned accordingly.

o      At the present time, additional revenue costs to the Council were estimated to be circa £500,000 a year.

·             A review had been undertaken of corporate budgets (Council Tax/Business Rates, Investment Income and Debt) against expected numbers and due to a number of factors, there was a positive position.

·             The previous administration had mooted a freeze in Council Tax.  It was assumed that this would not be enacted providing an additional £144,000 of funding.

·             The Council had budgeted for 3 per cent increase in staff pay in 2024/25.  The pay award had been announced at circa 5 per cent and so a 2 per cent adjustment had also been made in the corporate budgets.

·             The Council would also need to deal with potential single status savings set to be implemented in the 2025/26 budget.

·             As set out in the Chancellor’s statement on the 30th October 2024, there was due to be significant additional grant funding to local government.  The allocation of these grants would not be known until December, when the Provisional Local Government Finance Settlement would be announced.

·             Adjustments, following the establishment review, would need to be made across both Councils to account for the £1 million imbalance between pay budgets and recharges across both Councils.

·             Analysis would be undertaken on benchmarking data as well, as this would inform areas where further savings, if required, could initially be looked at.

·             The Committee was asked to note that Rubicon Leisure Limited was assessing the impact of the National Insurance changes both in terms of the increases and the movement up of the minimum wage. The financial implications of this to the company could be valued between £100,000 and £200,000.

Corporate pressures amounted to a surplus of £317,000 in 2025/26 changing to an ongoing deficit of £436,000 from 2026/27.

Assistant Directors had reported on departmental pressures by the 24^th October 2024.  These covered both revenue and capital pressures. The departmental changes resulted in an overall £1.309 million revenue pressure in the 2025/26 financial year and then £897,000 by 2027/28.   This would result in an ongoing pressure of circa £1 million rising to £1.3 million.  Members were asked to note that if the Council received the full 3.2 per cent core spending power increase set out in the 2024 Chancellor’s budget, then this would result in circa £490,000 of additional funding, reducing the gap to circa £500,000 in 2025/26 and £1 million by 2027/28.

There were other initiatives that were due to be addressed in the Tranche 2 MTFP report.  This would include funding relating to Ward Budgets, a Bid Writer and Neighbourhood Wardens.

Another key factor in balancing the budget would be the allocation methods for grants, as these impacted on a number of the pressure areas. This would not be known until the Provisional Local Government Finance Settlement was announced.

To meet strategic priorities, the Council required more funding.  For Tranche 2 a number of areas needed to be reviewed including:

·             Ensuring grants were maximised.

·             Ensuring agency work reflected the income provided for its delivery.

·             Reviewing the effectiveness of the Council’s largest contracts.

·             Reviewing the location and effectiveness of the authority’s depot.

·             Assessing the Council’s Leisure and Cultural Strategy in terms of affordability.

·             Reviewing recharging mechanisms between Redditch Borough and Bromsgrove District Councils for appropriateness.

·             Rationalisation of back office services as technology was increasingly used more effectively.              

 

The Council’s Business Improvement Team had reviewed income and fees and charges levels in relation to:

 

·             Deliverability in 2023/24 and 2024/25.

·             Views on whether additional per centage increases would be deliverable.

 

The outcome of that high level analysis was that:

 

·             A blanket per centage increase on all controllable fees and charges and budgets would not be advisable, as this would just increase the rolling year variances in specific areas. Instead, those budgets needed adjusting to the correct base (both up and down).

·             Income for Bereavement Services had been heavily impacted by a newly created crematorium which the Bereavement Services Manager had an action plan to partially mitigate.

·             Clarification was required on what was and was not subject to VAT in income lines, so that correct budgets could be set.

·             Garden and trade waste services were areas where above inflation increases could be variable with previous years and current forecasting showed promise.

The existing 2024/25 MTFP resulted in general fund balances increasing by £63,000 over the three-year period as the original plan moved the Council towards sustainability.  Following closure of the 2020/21 and 2021/22 accounts, the Council had far clearer positions on the 2022/23 and 2023/24 outturn positions and a stronger reserves position had been identified.

As part of the tranche 1 budget, it was requested that £300,000 should be allocated from the Economic Development reserve to undertake feasibility studies at the following district centres: Matchborough Centre, Winyates Centre and Woodrow Centre.

 

Members were asked to note that there would be an impact on general fund reserves from the decision to stop the library development.  This was due to aborted design work which could not be charged to the capital budget.  The magnitude of these costs remained to be finalised, but potentially could be in the region of £300,000 - £500,000.

 

Spend to date on the agreed Capital Programme by the end of the second quarter of 2024/25 was £3.628 million.To date, three new capital items had been proposed for addition to the Capital Programme and four further proposals from the Property Services team linked to health and safety considerations in respect of the Council retaining the value of the authority’s leisure estate.  Rubicon Leisure Limited had also submitted requests for capital funding for a number of areas.

 

Initial risk assessments and robust statement implications were included in the report.  The Committee was asked to note that the MTFP highlighted that the current financial position was potentially untenable without some form of intervention or further substantial savings.  The position would become clearer with the Provisional Local Government Settlement once this was announced in December 2024.

 

Tranche 1 was the first phase of the 2025/26 budget process. There would be consultation concerning the content via the quarterly Customer Survey and it was hoped that this would reach more stakeholders than previous budget consultations.  This consultation process would occur in November and December and the outcomes would be reported to Members in the new year.

 

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

 

·             The timeframes for obtaining further information about the local Government finance settlement and the reasons why limited information had been made available to the sector on this subject to date.  The suggestion was made that further clarity would emerge once the Government’s Devolution White Paper had been published.

·             The hard work of the Council’s Financial Services team which had resulted in the submission of three sets of accounts in a relatively short period of time.

·             The increases that had been proposed to fees and charges for Bereavement Services and the reasons why these differed from the standard 4 per cent increase.  The Portfolio Holder for Environmental Services explained that a lot of benchmarking work had been undertaken to ensure that the fees charged for services provided by the team were competitive.  Income had not been as high as had been anticipated, partly due to mortality rates in the Borough having been lower than expected in recent years.

·             The need for the Budget Scrutiny Working Group to scrutinise the figures and the date when this would occur.  Officers confirmed that the Budget Scrutiny Working Group had pre-scrutinised the content of the report at a meeting held on 21^st November 2024.

·             The potential for a Bid Writer to be employed by the Council to help bid for grant funding.  The Committee was advised that this was referenced in the report and a budget bid would be included in the tranche 2 report in relation to this position.

·             The additional financial costs involved in introducing new neighbourhood forums and neighbourhood wardens.  It was again confirmed that budget bids would be included in the tranche 2 report relating to these pressures.

·             The proposed increases to Dial a Ride fees which would be subject to review.

·             The fees paid by Council tenants for repair and maintenance jobs at their properties and the circumstances under which tenants were charged for these services.  The Committee was advised that the Council had a Recharge Policy which provided further clarity in respect of when tenants would be required to pay fees for repair and maintenance services.  The suggestion was made that the Portfolio Holder for Housing should be briefed on the content of this policy.

·             The feasibility study in respect of Matchborough, Winyates and Woodrow District Centres for which additional funding was being requested from the Council.  Members welcomed this proposal as it was suggested that clarity was needed regarding future arrangements for these district centres.

 

RESOLVED to note

 

1)          the inputs into the Council’s Medium Term Financial Plan as at the start of October, and the associated risks and opportunities;

 

2)          these inputs had been used, along with the 2024/25-2026/27 Medium Term Financial Plan agreed by Council in February 2024, to project an initial “gap” to be closed;

 

3)          an initial tranche of savings proposals and the associated Savings Proposal Document was published on the 18^th November 2024 and any feedback would be considered by the Executive Committee in January 2025 prior to seeking approval at Council in January 2025;

 

4)          tranche 2 of this process would add further information such as the Local Government Settlement to give a final financial position for the Council; and

 

RECOMMENDED that

 

5)          the use of £300,000 of the Economic Development Reserve for feasibility studies at Matchborough, Winyates and Woodrow be approved.