Agenda item

 

To consider the enclosed Medium-Term Financial Strategy update which had been due for consideration by OSMB on 14 January 2025.

 

 

Consideration was given to the introduction by the Cabinet Member for Finance and Clean and Safe Communities and supported by the Assistant Director of Corporate Finance which set the local context by way of a presentation for the Medium-Term Financial Strategy Update.

 

The presentation drew attention to: -

 

Main Pressures

 

·            Placement pressures within Children and Young People’s Services and Adult Social Care.

·            Home to School Transport pressures within Regeneration and Environment and Children and Young People’s Services.

·            Pressures on income generation within Regeneration and Environment, relating to the longer-term recovery from Covid-19 and the cost-of-living crisis.

·            Inflationary costs impacting the cost of food in Schools Catering and contractual and provider inflation impacting Children and Young People’s Services.

·            Increased costs of homelessness due to increased demand.

·            Increased property costs

·            Impact of the Local Government Pay Award.

 

How the Council was funded.

 

Where the money was spent.

 

Net Revenue Budget Comparison.

 

Budget 2024/25 and Medium-Term Financial Strategy and in order to set a balanced Budget for 2024/25 the Council approved: -

 

·            Further increases in fees and charges to 6% (up from MTFS plan of 2%)

·            Council Tax increased by 3.5% out of a possible 5% (0.5% above what had been assumed in MTFS)

·            £4.6m use of reserves across 2024/25 and 2025/26 (£9m less than planned at 2023/24 Budget)

·            No new savings for 2024/25

·            New revenue investments of £1.8m

·            Funding gap of £6.6m in 2025/26, not a concern at that point given uncertainty and time.

2024/25 Current Financial Challenges.

 

·            Placement pressures within Children and Young People’s Services (£4.8m) and Adults Social Care (£6.6m).

·            Home to School Transport pressures within Regeneration and Environment (£2.5m) and Children and Young People’s Services (£1.1m).

·            Inflation has rebased our costs, over 20% increase in base costs over last 2 years.

·            Increased costs of homelessness due to increased demand.

·            Pressure in waste management on staffing, vehicle costs, disposal costs and related income.

·            Impact of the Local Government Association (LGA) Pay Award.

 

November Monitoring Position 2024/25

 

December Medium Term Financial Strategy Update (Technical Update to Cabinet)

 

•             Picking up on what we know, rather than trying to pre-empt Governments plans.

•             Deal with inflation, energy, pay award position.

•             Refresh future pay assumptions

•             Refresh Council Tax / Business Rate assumptions

•             Refresh Fees and Charges assumptions

•             Expected Budget Gap of £5m-£10m per annum (pending Autumn Policy Statement clarity)

 

Autumn Statement and Provisonal Settlement Impacts

 

•             September’s CPI was confirmed at 1.7%, £350k resources reduction

•             Autumn Statement & Provisional Settlement really positive

•             £1.3bn extra – inc £0.68bn for Social Care (£3.8m for RMBC)

•             Bulk of £0.7bn is new recovery grant, to be provided on deprivation basis (£8.7m for RMBC – Services Grant cut £0.4m)

•             £1bn more for SEND – expected to flow into Dedicated Schools Grant to support High Needs Block.

•             Extended Producer Responsibility (EPR) grant- £6.1m

•             £233m for Homelessness grant continues £86m for further Disabled Facilities Grants

•             Household Support Fund to continue for a further year

•             New Homes Bonus announced for further year £1.4m

•             NIC funding of £515m to cover LA pressures, concerns around allocation.

 

Decision Points

 

•             Fees and Charges uplifted above assumed 2%

•             New savings proposals

•             Council Tax increases above the 3% assumed in the MTFS (max 5%)

•             Further use of reserves

•             New investments Capital or Revenue

 

Reserves Position

 

Challenges Ahead

 

•             Adult Social Care cost of care packages, rising demand and complexity leading to large pressures. Last 2 years has seen demand/pack complexity rise by £7m (excluding inflationary increases).

•             Home to School Transport - £3.5m contingency doesn’t appear to be sufficient for long term sustainability (£4.3m current year overspend).

•             Future Pay Awards remain difficult to predict, 2024/25 impact £3m above Budget. Inflation is now down below 2%.

•             CYPS Placements remains a challenge nationally

•             Waste remains a challenge though work around route optimisation will reduce impact.

•             Autumn Statement understanding the full and true impact of what appears to be a positive outcome for the Council.

 

Impact of Additional Council Tax Increases

 

•             The current MTFS assumes a Council Tax increase of 2.99%.

•             1.99% basic and 1% Adult Social Care Precept

•             The Financial Settlement (2025) gave capacity to uplift basic to 2.99% and Adult Social Care Precept by 2%, creating a maximum increase of 5% for 2025/26.

•             The table below outlines the annual and cumulative impact of these potential increases for 2025/26, if utilised.

 

Impact of increase in Council for 2025/26 at 3%, 4% and 5%

 

Local Council Tax Support Top Up

 

2024/25 and 2025/26 Scheme Update:

 

•             Council approved Budget 2024/25 included LCTS Top Up scheme

•             The scheme was to run on the same basis as 2023/24 the cost will range from £1.7m to £1.9m dependent on LCTS levels.

•             Grant reserves available and earmarked to fund this in 2024/25 only.

•             Household Support Fund for 2024/25 announced initially for 6 months, so used to cover £500k of cost. Further 6 months extension has allowed that to be topped to £650k.

•             As such around £650k to £850k could be carried forward for a scheme in 2025/26 (roughly half the support)

•             If HSF is a full allocation for 2025/26 as expected a full LCTS Top Up could be run again.

 

Budget 2024/25 Key Dates

 

Following the presentation assurance was sought that the management actions could be delivered. The Strategic Director of Finance and Customer Services indicated they were confident that the management actions would be delivered. Finance worked robustly with the service directorates, directorate leads and strategic directors to ensure they could be delivered, many of which had been delivered already.

 

Resolved: - That the detail within the presentation was received and the contents noted by the Overview and Scrutiny Management Board.