Agenda item

This report and appendices will follow in a supplementary pack for the meeting.

This item is due to be pre-scrutinised at a meeting of the Budget Scrutiny Working Group on 20^th February 2026. Any recommendations arising from the meeting will be published in a supplementary pack for the Executive Committee meeting.

The Interim Director of Finance and Section 151 Officer presented the Medium Term Financial Plan Budget Report 2026/27 (including Treasury Management Strategy, Capital Strategy and Investment Strategy).

It was noted that there were typographical errors in the report which referred to the District rather than Borough Council, but this would be corrected when the report was presented at the full Council meeting. 

It was highlighted that the Council was in a strong position to set a balanced budget across the three-years of the Medium Term Financial Plan, which represented a significant shift from the position the Council had been in previously. Members were informed that the report explained the reasons for this and how Members could be assured that the projections could be relied upon.

The Committee was advised that there were three key areas which had been transformational in offsetting pressures.

1. Pension payments. In the previous year it had been assumed that pension payments were going to increase. In contrast, pension payments actually decreased by £216,000.
2. Fairer Funding Review. The Council was not impacted as severely as initial assumptions had suggested.
3. Business Rates appeals. The Government had changed the formula for this and so by adopting the new formula this resulted in an additional £200,000 in the first year and a further £100,000 in the following year.

In relation to the Council’s earmarked reserves, Members were asked to note the Reserves Position. It was explained that a review of the reserves had been carried out which looked at what the funding was originally set aside for and whether this applied currently. For example, the business rates reserve had accumulated too much funding under the old formula. Members were advised that once the Council released reserves, the general balance would rise. This would then provide the opportunity for Members to consider what they would like to invest in moving forward and to earmark funding for those areas.

Three main areas had been identified which related to risk (£2.5 million allocated), readiness for Local Government Reorganisation (£1 million) and an earmarked reserve for community projects aligned to the Council’s priorities (£1.6 million).

It was noted that earmarked reserves could be used for revenue and capital. Members could choose to allocate the difference from the Community Investment Reserve in order to fund the Capital Programme and £1 million would remain available to be spent elsewhere.

Officers explained that the report outlined assurance and the mitigation of risks, it was an exhaustive Section 25 report which was designed to clearly explain the Council’s position.

Members were advised that the Housing Revenue Account (HRA) was due to repay its first tranche of debt in March 2027. It was explained that the HRA relied on debt and it was important to consider the whole picture across a thirty-year business plan. The current borrowing profile for the HRA did not currently lend itself to supporting growth at the top.

In relation to Council Tax, Worcestershire County Council was proposing to increase Council Tax by nearly nine per cent. It was highlighted that this would affect Redditch Borough Council’s income as residents would likely not be able to pay in advance as they had previously done and in some cases, residents might not be able to cover the cost. This rise was in addition to the change in the default direct debit payment plans from ten months to twelve.

It was also highlighted that significant progress had been made to resolve a long-standing period of underclaimed VAT refunds.

The Portfolio Holder for Finance welcomed the report and the balanced budget position. He explained that risks had been balanced with opportunities when investing in the Borough and contingences had been set aside. Reference was made to the Community Investment Reserve and funding for staffing to implement this, particularly at a time when other local authorities were cutting services. In concluding his comments, the Portfolio Holder emphasised the strong position the Council was in and that an additional £1.6 million was being invested in the community.

Following the presentation of the report, Members had detailed discussions and commented on the following points –

• Regarding the HRA debt profile, it was queried whether this could be spent to further accelerate the fire remediation works or whether it would be best to invest elsewhere. Members were advised that for every pound the HRA paid in interest payments for debt, for example an Interest Coverage Ratio of £1.15 required £1.15 of income for every £1 of interest payment. It was highlighted that the HRA may have additional capacity for borrowing and the General Fund was paying a high price for temporary accommodation. In summary, in order to accelerate the fire remediation programme, it was explained that the HRA needed to first accelerate growth in rental income.
• It was queried whether the Government would be providing funding support in relation to LGR following the decision that elections would be held in May 2026. Officers clarified that some funding had already been granted for LGR, but this was not related to local elections. Members were advised that the twenty-one areas which were undergoing LGR would be granted some additional funding on top of the funding already allocated. It was currently unclear how much the Council could expect to receive.
• Members made clear that the Council was ambitious and they wanted to invest in projects that benefitted residents and communities going forward.
• It was noted that there could be some opposition to increasing Council Tax. Officers explained that the Fairer Funding Review (FFR) worked on the basis that local authorities would seek to maximise revenue funding opportunities. If the Council chose not to increase Council Tax this would have a compounding effect each year and funding received from the FFR would reflect that.
• Communications regarding the budget. Officers advised that the Communications Team had already drafted a press release which was due to be published shortly, although the budget first needed to be approved by Council.

During consideration of this item, Members noted that the report had been pre-scrutinised at a meeting of the Budget Scrutiny Working Group held that day.  The group had proposed the following recommendation for the Executive Committee’s consideration:

  “That a review of the Council’s capital financing requirements including the financing of HRA is undertaken in Quarter 1 2026/27, as stated in the Section 151 Officer’s Robustness Statement.”

The Committee considered this recommendation and in doing so noted that they were supportive of the proposed action.  This recommendation was therefore endorsed.

The Chair thanked the Interim Director of Finance and Section 151 Officer for her work with the Finance team to produce the report.

RESOLVED that:

1) The updated position and assumptions be noted in respect of the 2026/27 annual budget and for the Medium-Term Financial Plan up to 2028/29.

2) The comments and implications set out in the Section 151 Officer’s Robustness (Section 25) Statement of the 2026/27 to 2028/29 Medium Term Financial Plan, in its commitment to maintaining the delivery of good quality services and investment to meet local needs within a sustainable financial position, be noted.

3) A review of the Council’s capital financing requirements including the financing of HRA is undertaken in Q1 2026/27, as stated in the Section 151 Officer’s Robustness Statement.

RECOMMENDED that:

4) The Growth proposals of £187,935 in 2026/27, £192,502 in 2027/28 and £194,182 in 2028/29, be approved.

5) The Budget Pressures of £829,378 in 2026/27, £702,745 and £1,038,188 in 2027/28 and 28/29 respectively, be approved.

6) The Savings proposals of £29,750 in respectively in each year be approved.

7) The Capital Programme 2026/27 to 2029/30, including bids of £1.739m for new capital projects, be approved.

8) The council tax increase of 2.99% be approved.

9) The revised levels of Earmarked Reserves of £17.294m be carried forward into 2026/27.

10) That new earmarked reserves be approved, namely the creation of a new Financial Resilience Reserve of £2.5million, a Local Government Reorganisation Reserve of £1m and a Community Investment Fund of £1.6m.

11) Increases relating to Worcestershire Regulatory Services of £30K for Food Standards Agency related work on an ongoing basis are approved.

12) The Flexible Use of Capital Receipts Strategy be approved.

13) The Housing Revenue Account Budget for 2026/27 – 2029/30 be approved.