Decision details

The Director of Resources and Deputy Chief Executive submitted a report for members to consider the Council’s latest budget forecast and consider any advice to service committees.

In preparing the budget forecast both national and local circumstances were considered. The forecast would be particularly challenging because of major issues such as the new government approach to Local Government Finance, unknown Core funding levels and reviews of key 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.

In creating the budget, a number of assumptions had been made.

The Budget for the current year had allowed for  an average increase on the Council’s paybill of 4%.  Though the latest pay offer had not been accepted it may be that the pay contingency of £200k which had been set aside could be released.

In light of the volatility in energy costs, a contingency of £200k had been set aside in the 2024/25 budget, however, inflation had fallen and therefore it was anticipated that the contingency would not be required.

The current Bank of England base rate was 5%, with the next review on 19 September 2024. It was difficult to predict future levels of investment interest because of uncertainty over how quickly and how far interest rates would fall. The budget assumed average returns on investments over the life of the forecast based on interest rates of 3.44% for 2025/26, 3.14% for 2026/27 and 3.14% for 2027/28. The forecast also assumed the level of Council investments would be approximately £25m which would return an anticipated investment interest for 2024/25 of over £1.2m.

It was estimated the Council would retain £2.9m in business rate growth in 2024/25 and £2.5m in 2025/26, of which £2m would be used to support the revenue budget and £500k to fund the capital programme for each of the two years. The previous Government had been reviewing the Business Rate Retention Scheme and the new Government had indicated the same. This would be kept under close review.

For some time, the Government had indicated that the New Homes Bonus (NHB) scheme was going to end. They had also stated that a consultation paper would be issued, however nothing had been issued therefore the future forecast assumed no NHB income beyond 2025/26 when it was estimated the Council would receive £650k.

In 2023/24 the Council received a one-off Funding Guarantee, which continued in 2024/25 renamed ‘Funding Guarantee’. It was assumed that the Council would receive the Funding Guarantee or some other form of transitional protection over the life of the forecast to ensure a 2.5 minimum increase in 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 3% each year were assumed and a tax base increase of 1.5% each year for the life of the forecast. It was explained that a 3% Council Tax increase would generate approximately £130k each year and a 1.5 taxbase increase approximately £65k each year.

Based on all the assumptions the budget surplus and gaps for the next three financial years would be as shown:

The impact of any Government announcements on the Council’s financial position would continue to be closely scrutinised in the months that followed.

The Budget Working Group had met on 2 September 2024 to consider the budget forecast and recommended that the Council continue with the current five-year capital programme and that service Committees consider their capital bids for the fifth year of the five-year capital programme.

Councillor M Hindle entered the meeting during the report.

Members discussed the report and in particular the uncertainty in Government funding and impact this had on the Council.

RESOLVED THAT COMMITTEE:

1. Agree the Council’s Budget Forecast.

2. Invite capital bids for financial year 2028/29 of the five-year capital programme, for consideration by Service Committees in early 2025.