Decision Maker: Policy and Finance
Decision status: For Determination
Is Key decision?: No
Is subject to call in?: No
The Director of Resources & Deputy Chief Executive submitted a report for members to consider the Council’s latest budget forecast and decide what action needs to be taken to meet the financial challenges that lay ahead.
In preparing the budget forecast both national and local circumstances were considered. The forecast would be particularly challenging because of major issues such as unknown government funding, changes to Government and major funding streams, inflation levels and pay rises, cost-of-living impact on demand for services, and assumptions on interest rates. Any of these issues would have a major impact on the Council’s budget and were rapidly evolving. The report included a diagram showing the percentage split of how the net budget for 2023/24 was financed.
In creating the budget, a number of assumptions had been made.
The Council had assumed that the Pay Offer of £1,925 per full time employee up to SCP 43, and 3.88% for Heads of Service and 3.5% for the Chief Officer, would be accepted by the unions for the 2023/24 financial year. It was estimated this would cost between £550k and £600k. The budget had allowed for a 5% increase which meant we could anticipate an additional £170k above what we had estimated.
The Bank of England had forecasted that the Bank Rate would stay higher for longer before falling back. The budget assumed average returns on investments over the life of the forecast based on interest rates of 4% for 2024/25, 3% for 2025/26 and 2% for 2026/27 The forecast also assumed the level of Council investments would be £20m.
It was estimated the Council would retain £2.2m in business rate growth in 2023/24 and 2024/25 (and would use £2m to fund the revenue budget for each of the two years). Not all authorities had benefited from business rate growth and the Government were considering resetting the business rates baselines which would significantly reduce the amount of future growth the Council retained. For 2025/26 it was assumed the Council would retain £1.2m (and use £1m to fund the revenue budget).
The Council had benefitted significantly from the new homes bonus scheme (NHB) over many years. For some time, the Government had indicated that the NHB scheme was going to end. They had also stated that a consultation paper would be issued over the summer months. However, nothing had been issued therefore the future forecast assumed no NHB income.
In 2023/24 the Council received a one-off Funding Guarantee. It was assumed that core Government funding would continue for the life of the forecast with no increase but that the Council would receive Transitional Protection in some form to reflect reduced Core Spending Power. However, it was stressed that this assumption was made in the absence of any information regarding key reforms.
Council Tax increases of £5 each year and a tax base increase of 1% each year were estimated for the life of the forecast. It was explained that a £5 increase would generate approx. £120k each year and a 1% taxbase increase approx. £41k each year.
Based on all the assumptions the budget shortfall would be as shown:
The financial position would be closely scrutinised in the months that followed, and monitoring reports would be shared with Members.
The Budget Working Group had met on 18 August 2023 to consider the budget forecast, and a discussion had taken place around potential levels of inflation and whether fees and charges could be increased by a lower level (potentially 2%) than the 4% which was assumed for inflation, in 2024/25. It was explained that a 4% increase in fees and charges would bring in £141k, therefore an increase of 2% would increase the budget gap by a further £70k each year. This was further discussed by Committee, and it was felt that service Committees should consider very carefully the fees and charges increases in order to protect those that are most vulnerable. Detailed fees and charges reports would be considered by service Committees in the November cycle of meetings.
The Director of Resources & Deputy Chief Executive informed members that the government had written to authorities with regard to Business Rate Pooling preferences for 2024/25. An explanation of the operation of the Lancashire Business Rate Pool was given and how much of the Council’s budget was funded from business rate retention. Committee was minded to request that the Council remains a member of the Lancashire Business Rate Pool under the current operating arrangements and therefore agreed that the Council should express its interest in its continuation for 2024/25.
Committee was asked to consider the Council Tax rate increase of £5 for 2024/25 in order to give a steer to Officers. The increase would be agreed by way of recorded vote by this Committee in March 2024. Committee agreed that Officers should include this assumption in their Budget preparation for 2024/25.
RESOLVED THAT COMMITTEE:
1. Agree the Council’s Budget Forecast.
2. Recommend that service Committees:
· Consider savings to bridge the budget gaps
· Consider an increase of 4% in fees and charges
3. Agree that the pooling preference for 2024/25 was to remain a member of the Lancashire Business Rate Pool under the current arrangements
4. Agree the Budget Working Group recommendation to include the £5 Council Tax increase in the Councils budget preparation for 2024/25.
Report author: Averil Crowther
Publication date: 25/09/2023
Date of decision: 12/09/2023
Decided at meeting: 12/09/2023 - Policy and Finance