Decision details

Decision taken

1.    Cabinet noted:

a)     the Statement of the Chief Financial Officer on the robustness of budgets and adequacy of reserves (appendix N).

b)    that the following amounts for the year 2025/26 have been set in accordance with regulations made under Sections 31A and 31B of the Local Government Finance Act 1992:

 

2.    Cabinet approved the budget proposals as set out in the agenda and note that any comments from Overview and Scrutiny Committee will be returned to Special Cabinet on 21 January 2025 for consideration, before final recommendations are made to Council.

 

 

 

 

Reason for decision

The budget proposals were aligned to the Council’s Business Plan targets for 2025/26.

 

The Council’s ability to deliver a balanced budget has becomes more challenging each year, after a period of significant grant reductions, inflationary increases and the ongoing impacts of the pandemic. There had been a rise in demands on services such as homelessness which had added even more pressures. A multi-year settlement would be provided next year which will provide much needed certainty.

 

The Medium Term forecasts were updated and approved in October 2024, which showed an increased budget gap for 2025/26 of around 4.5 million pounds.

 

General Fund

 

The General Fund budget was summarised in Appendix A, and split by service in Appendix B.

 

The starting point for 2025/26 is a forecast, General Fund reserve balance, of £6.5m. 

 

The 2025/26 budget included an increase in the Net Cost of Services of £1.5m, to £16.1m which included the inflationary impacts, along with growth and savings as set out in appendices C and D.

 

The changes were summarised in Section 3.1.6 of the report.

 

Savings had been identified to the Council’s base budget of just over £1.8m, which would support the Council to meet its growth areas of spend of £2m, and inflationary impacts of £1.4m.

 

It was proposed to increase Council Tax by just under 3% per Band D property, the maximum allowed without a referendum.

 

A full review of fees and charges had been undertaken as set out in Appendices E and H which had included looking at cost recovery of discretionary services and benchmarking with other councils.

 

Appendix E also included a cover sheet to highlight those fees and charges which have deviated from a purely inflationary increase, and the justification for these deviations.

 

The provisional settlement from the Government was higher than anticipated when setting the MTFS, which had assisted the Council in balancing the budget for 2025/26, but it was not certain these grants would continue, the use of these for one year, puts additional pressures on later years in the MTFS.

 

The new Medium Term Financial Strategy in Appendix L set out further gaps of £1.7 m in 2026/27 rising to a cumulative gap of £6m by 2028/29, after a planned use of reserves of £2.7m over the MTFS period.

 

The planned use was a response to funding reductions expected, details of which are set out in the Council’s Reserves Policy.

 

It would be challenging to continue to find savings without impacting upon services as the Council enters the next medium-term period.   

 

The final government settlement was awaited and was not expected to materially change the 2025/26 budget, although it should be noted the grant for National Insurance had been estimated as was not included in the provisional settlement.

 

Housing Revenue Account

 

The HRA budget proposals were summarised in Appendix F, and principal variances were set out in Appendix G.

 

Rent increases had been proposed in line with rent policy of CPI+1%, which for 2025/26 equates to 2.7%.

 

It was intended to maintain HRA balances at a minimum level of just under £3.3 million.

 

Capital

The proposed Capital budget of just over £68m was set out in Appendix I, and included nearly £22m of rephasing from the current financial year. 

 

Around £4m of related to the General Fund, and around £64m related to the HRA. Included in the HRA budget, was £6m on the Affordable Housing Programme, with the remaining £58m being investment into existing stock.

 

Capital Financing

Appendix J summarised the Council’s estimated 5 year borrowing requirements through to 2029/30.

 

For the General Fund, the increase in the borrowing requirement continues.  The increase included the completion of some of the regeneration projects already underway, along with new items such as the works arising from the asset conditions reports on our commercial and operational estate.

 

For the HRA, the significant investment programme for the Council’s existing housing stock over the next few years, and continued investment in new housing, mean that our HRA borrowing requirement is now predicted to reach around £370m by 2029/30. 

 

It was noted that due to increased requirements on the HRA from the social housing regulations, a review of borrowing rates, and increased capital spend, the debt repayments for the HRA now stand at 33 years. This is just outside of the 30 year business plan. This could be considered as affordable, as the life of the stock is longer than 33 years. However, the report included recommendations to consider options over the coming year to seek to bring borrowing repayments back into a 30 year window, to provide future flexibility and buffers to and future legislative changes.

 

 

Medium Term Financial Strategy

The MTFS set out in Appendix L highlighted the challenges faced by the Council in the period through to 2027/28 notably the likely requirement to find a further £1.7m of annual General Fund revenue savings by 2026/27, after a planned use of reserves.

 

The Council’s financial position would be affected by the Governments reform of local government finance, which was currently being consulted upon, along with the planned business rates reset in 2026/27.  The outcome of these was unknown at this stage.

 

As with the MTFS update in previous years, alternative scenarios had been modelled due to volatile and uncertain economic conditions, which show the three year savings target could range between £4.7m and £7.5m.

 

Our level of General Fund Capital Reserves was now depleted, which would constrain the Councils options for major capital spend over and above those projects already planned, unless sources of funding could be identified.

 

Within the HRA, the core income was more stable than the General Fund.  However, the level of capital spend and related borrowing over the next few years is significant, and borrowing repayment now stands at 33 years. 

 

The document demonstrated the Council’s commitment to achieving financial stability. It is intended that the situation would be improved by the driving out of further efficiencies from our Transformation Programme, the identification of further opportunities to increase income generation, and, opportunities to repurpose or dispose of assets to reduce the councils borrowing costs. 

 

Special Expenses

Special Expenses, whereby Council Tax amounts are adjusted by settlement to take account of differing expenditure levels, are set out in Appendix M.