The Chair invited the Cabinet Member for Finance, Customer Services and Community Safety to introduce a report and provide an update of the Council’s Budget and Medium-Term Financial Strategy (MTFS) to 2025/26. The MTFS would be revised further in advance of the Council Budget setting meeting in February 2024, to take account of the Local Government Finance Settlement for 2024/25, when issued, along with budget policy proposals on levels of Council Tax and fees and charges and any budget savings or investments.
This position may be subject to variation should Government announce changes to the funding of local authorities or if inflation assumptions change significantly.
The MTFS review, alongside the latest Financial Monitoring 2023/24 report to Cabinet in November, envisaged a financial overspend of £4.2m for 2023/24 that would require the use of the Council’s reserves to achieve a balanced financial outturn position for 2023/24.
The current MTFS forecasts identified that the Council was able to provide a balanced budget for 2024/25 but faced a significant financial challenge in setting a balanced budget for 2025/26. Therefore, it was expected that additional use of reserves will be required for 2023/24 and likely for 2025/26. This position was subject to review when the Finance Settlement for 2024/25 was received.
Nationally, the financial environment presented a very challenging position with a number of local authorities declaring S114 notices, stating that a balanced budget may not be achieved for those Councils issuing the notice. It was noted that in comparison Rotherham’s budget position was more robust.
The Chair invited the Strategic Director for Finance and Customer Services and the Assistant Director for Finance to give a brief presentation.
It was outlined that the report provided a technical update and was based on the MTFS as approved by Council in March 2023. It had been updated to reflect changing assumptions around inflation, pay and other pressures. It was noted that a similar update was provided to the Board at this stage last year which Members had found helpful.
It was noted that announcements made by Government on the 22 November 2023 or within the subsequent Finance Settlement for 2024/25 may add further financial pressures to the Council’s MTFS position, either through Government not inflating public sector resources as assumed or through other cuts to public sector funding.
The presentation outlined saving proposals agreed for 2023-2024 and 2024-2025. It was noted that progress was being made on the delivery on the identified savings proposals for the current financial year.
Directorates were working on recovery plans to mitigate the financial overspend for 2023/24 to minimise the use of reserves. Within the current forecast overspend, the Directorates had a forecast overspend of £9.2m but reduced to £4.2 million because of budget contingencies. This was largely due to the following overall issues:
· 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 relating to the longer-term recovery from Covid-19 on income generation within Regeneration and Environment.
· 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 within Regeneration and Environment
· It was noted that recovery plans were in place to mitigate against these pressures wherever possible.
The Assistant Director gave an overview of known pressures, including Government funding streams. It was noted that whilst inflation remained a challenge, a number of major contracts had been forecast to be hit with higher inflation, as such this had created some surplus in the Council’s MTFS. It was outlined that business rate values were to be reassessed and it was anticipated that this would be positive for the Council. The Treasury Management Strategy continued to generate savings and additional income to support the budget pressures in the current financial year.
An outline of the budget setting timetable was given, with the budget and Council tax plans for 2024-25 being presented to Council on 28 February 2024.
The Chair invited comments from the Board and a discussion on the following issues ensued:
· Clarification was sought if the recent flooding events in the Rotherham area may have an impact on the budget. It was outlined that there would be some costs but this would not have a significant impact on the MTFS.
· The rise in the number of Section 114 notices was noted and the challenges faced by councils in meeting their obligations. The prudent measures undertaken by the Council was acknowledged, particularly in light of reductions in public spending and rise of cost-of-living pressures.
· Whether savings identified in previous years were achievable. In response the Strategic Director outlined mitigations put in place to achieve cost reductions balanced against increases in demand and placement costs. Other measures to bring down costs, such as promoting in-house fostering and children’s homes, would address these pressures longer term. Details were provided on operational savings.
· Clarification was requested on the status of investments in other financial institutions and local authorities. It was outlined that this was accepted treasury management practice and oversight was provided by the Audit Committee, who received mid-year and outturn reports on the impact of decisions. It was further clarified that the Council’s approach to investment and borrowing was set out in the Treasury Management Strategy which was also appended to the Council's budget and council tax report. It was noted that risks associated with treasury management were prudentially monitored. It was requested that a separate session be organised on treasury management, in addition to that provided to the Audit Committee.
· Clarification was sought on the status of the equality impact assessment. It was confirmed that this would be reviewed.
Resolved:
1) That Cabinet be advised that the recommendations be supported.
1. That the MTFS update be noted.
2. That Cabinet note the potential requirement to use reserves in order to balance the Council’s outturn position for 2023/24.
2) That Cabinet be requested to arrange an all Member Seminar on Council Finances including Treasury Management and Investments.