Agenda item

Report of the Chief Executive which summarises the review of the MTFS as the opening stage of the 2023/24 Budget Setting process.

Cabinet noted the contents of the report and approved the principles to be adopted for the 2023/24 budget setting process as highlighted in section 3.3.6, in particular the 2023/24 budget setting process should focus on closing the indicative budget gap.

Report of the Chief Executive which summarises the review of the MTFS as the opening stage of the 2023/24 Budget Setting process.

(1)        The Decision Taken

RESOLVED:

(unanimous)

Cabinet noted the contents of the report and approved the principles to be adopted for the 2023/24 budget setting process as highlighted in section 3.3.6, in particular the 2023/24 budget setting process should focus on closing the indicative budget gap.

(2)       Reasons for the Decision

Since setting the previous Medium Term Financial Strategy (MTFS), there have been significant ongoing increases and pressures associated with the cost of living, including general inflation, proposed pay award for staff and ongoing increases in fuel and utility costs.

The government was to consult over the summer on a two-year local government settlement. This is looking increasingly unlikely due to the leadership contest (now completed), and there is a growing feeling that a one year settlement would be given again.

It is unclear what will happen with the single year grants announced last year and new homes bonus. The Council’s revised MTFS assumes a business rates reset with some transitional protection payments for one year. 

The government has recently opened applications for business rates pooling applications, which does give some indications that there may be no material changes the business rates retention scheme for next year, but this cannot be guaranteed.

Due to the significant uncertainties and unprecedented inflationary increases, along with variances in market forecasts, the Council have not only completed our standard approach to forecasting but also considered upside and downside risk scenarios. These would not necessarily be the best and worst cases, but do give some context to the wide range of uncertainties the council faces. These were shown in table 3.2.28.

Based on the standard approach to forecasting, the budget gap for 2023/24 has risen from 1.514M at the start of the year, to £4.479M, with the three year gap rising from £2.274M to £6.492M.

The table in section 3.2.31 sets out the key changes to the forecasts, and as you will see, all adverse impacts relate directly to inflationary and cost of living increases outside of the councils control.

The budget setting principles for Cabinet to agree were set out in paragraph 3.3.6.

As things stand, if the gap is not closed the council will go below minimum reserves within one year. The Council will need to consider fees and charges, transformation strategies, and other savings proposals to meet the budget gap to ensure the council balances its budget.

This Council has an excellent record of sound financial management, and previous prudent budgets set by officers and the previous portfolio holder. The budget gap in the coming years is exceptionally challenging and not of a level the Council has previously seen. Whilst the Council will of course aim to protect frontline services, given these extraordinary pressures and uncertainties, it is acknowledged there may need to be difficult decisions taken in relation to front line services.

On the HRA, no material changes have been made to assumptions at this stage, as the Council will be undertaking a full review of the business plan. This will include the new repairs and maintenance contractor changes, an ambitious stock investment programme, and ensuring resource is available to deliver the programme. One of the key considerations for the council will be the rent increases, for which the government has recently started consulting on a cap of 5%.

On the capital programme no updates have been made to the forecasts at the current time, but there will be specific focus on the stock investment programme and our operational and commercial estate investment programme. It is important to note existing schemes not yet started will need to be reviewed in light of inflationary increases on material and labour costs.