Agenda item

To provide a general update and overview of the Council’s financial position against the 2023/24 budget and looking ahead to 2024/25 and beyond.

RESOLVED that Cabinet -

(a) notes the Council’s in-year financial position at the end of July 2023 along with the updated financial forecast for 2024/25 and beyond;

(b) approves the proposed adjustments to the 2023/24 budget, as set out in Section 1 of Appendix 1H to the Report of the Leader of the Council/Corporate Finance & Governance Portfolio Holder and requests Officers to review the potential on-going impact in 2024/25 and beyond, where necessary, as part of developing the forecast and detailed estimates for further consideration by Cabinet later in the financial year;

(c) notes the outcome of the review of carry forwards from 2022/23 approved under delegation to the Portfolio Holder for Corporate Finance and Governance as set out in Table 1 of the aforesaid report and -

i) approves items 1 and 2 set out in Section 2 of Appendix 1H to the aforementioned report;

ii) requests Officers to provide additional information relating to items 3 to 6 set out in Section 2 of Appendix 1H to the above mentioned report for inclusion in the Financial Performance Report for Quarter 2 that is scheduled to be presented to Cabinet in November 2023;

(d) notes the treasury transactions with Birmingham City Council set out in the report and request Officers to provide an update in Quarter 2 setting out the response of Members at the Full Council meeting at Birmingham City Council to their Section 151 Officer’s recent Section 114 reports;

(e) the Council continues to be a member of the Essex Business Rates Pool and Council Tax Sharing Agreement with Essex County Council in 2024/25 if it remains financially advantageous to do so;

(f) notes the updated financial forecast set out in the report and requests Officers, in consultation with the relevant Portfolio Holders, to further develop the financial forecast proposals alongside the development of the Council’s priorities, as part of the wider framework within which to identify the necessary budget reductions to support the Council’s long-term financial sustainability; and

(g) requests that the Resources and Service Overview and Scrutiny Committee be consulted on the latest financial position of the Council, as set out in the report.

Cabinet considered a report of the Leader of the Council & Portfolio Holder for Corporate Finance and Governance (A.5), which provided it with a general update and overview of the Council’s financial position against the 2023/24 budget and looking ahead to 2024/25 and beyond.

That report was split over two distinct sections as follows:

1) The Council’s in-year financial position against the budget at the end of July 2023; and

2) An updated long term financial forecast

Members were reminded that previously an additional section had been included within these reports that had undertook a detailed view of items that would have an impact on the in-year position but also an on-going impact on the later years of the forecast. Although this report set out a number of adjustments to the in-year budget, any longer term impacts remained under review at present. However, they would be revisited as part of developing the forecast for 2024/25 and beyond, and they would be reported within future financial performance reports.

SECTION 1 - In respect of the in-year financial position at the end of July 2023:

It was reported that the position to the end of July 2023, as set out in more detail within the appendices, showed that, overall, the General Fund Revenue Account was underspent against the profiled budget by £1.747m.

Cabinet recalled that, as part of developing the budget for 2023/24, which had been agreed by Full Council in February 2023, a number of adjustments had been made to reflect emerging and/or on-going issues. Therefore, only a limited number of variances had developed during the first four months of this financial year. Where variances had been highlighted, those broadly reflected known issues where further review / consideration might be necessary or reflected the timing of general expenditure and/or income budgets. It was acknowledged that other expenditure or income trends might still emerge / develop over the remainder of the financial year.

Members were made aware that this report also set out a number of further potential issues although no adjustments had been made to the budget at the present time as they remained subject to ongoing review and / or reporting separately later in the year.

It was reported that, in respect of other areas of the budget such as the Housing Revenue Account, capital programme, collection performance and treasury activity, apart from additional details set out in this report, there were no other major issues that had been identified to date. In respect of treasury activity, the transactions undertaken with Birmingham City Council were highlighted in the report along with the commitment to report to Cabinet the outcome of the Birmingham City Council meeting when its Members had considered their Section 151 Officer’s Section 114 report.

Members were reassured that any emerging issues would be monitored and updates provided in future reports, which would include their consideration as part of updating the long-term financial forecast.

Cabinet was advised that a number of in-year budget adjustments were proposed as set out in Appendix 1H, with an associated recommendation also included within the report. That same appendix also set out a number of items that had been requested to be carried forward by Services from 2022/23. Those were presented for consideration by Cabinet as they did not meet the criteria relating to carry forwards, but it could still be advantageous to approve them to enable the associated work / projects to be undertaken in 2023/24.

As mentioned within earlier reports, the Chief Executive continued to chair the regular Budget, Performance and Delivery meeting of Senior Managers whereby any emerging issues such as those highlighted within this report and its appendices were identified / discussed.

Cabinet was informed that the net impact of the proposed budget adjustments would be moved to the Forecast Risk Fund. At the end of July 2023, it had been possible to make a contribution to the fund of £0.169m, which supported the requirement set out in the long-term forecast of identifying in-year savings of £0.250m each year.

In addition to the above, it was also proposed that this Council continued to be a member of the Essex Business Rates Pool and Essex Council Tax Sharing Agreement if it remained advantageous to do so in 2024/25.

In respect of the updated long term financial forecast:

It was reported that the forecast had been reviewed and updated at the end of July 2023 and it was set out in Appendix 2A. It continued to reflect the very challenging financial position faced by Local Authorities, which included the inflationary pressures currently being experienced.

Members were advised that the revised forecast also sought to better balance the optimism / pessimism bias that was inherent in any forecasting process and it included the use of one-off funding such as the New Homes Bonus in the short term.

Cabinet was informed that worked remains ongoing within departments and with Portfolio Holders with the aim of remaining ‘sighted’ on potential future cost pressures. Some of those were included in Appendix 1H where there was already an impact in 2023/24.

It was felt that the long-term approach alongside the Forecast Risk fund provided additional flexibility and time to make better-informed decisions. However, significant on-going savings were still required.

Cabinet was made aware that, based on the updated forecast, ongoing savings of £3.000m were required across 2024/25 to 2026/27. This was significant, especially in the context of the Council’s overall net budget being just over £14.000m and it presented the Council with a major challenge.

It was considered that developing the framework against which the required savings could be identified therefore remained a key activity over the coming months alongside the development of the new Corporate Plan. The level of resources required to not only develop the above framework but to deliver the required savings, was not to be underestimated, especially when set against other existing commitments such as delivering the Levelling Up projects and Freeport East. There therefore needed to be a clear focus on the timely development of the plan whilst managing competing resources over the coming months.

Members were told that, although consideration would be given to extending the current forecast period beyond 2026/27, the long-term forecast approach still provided an effective method of managing financial risks, and remained underwritten by the Forecast Risk Fund. As mentioned during the development of the longer-term approach to the budget over recent years, it was important to continue to deliver against this plan as it continued to provide a credible alternative to the more traditional short-term / annual approach.

Cabinet was informed that the challenges faced by the Housing Revenue Account were also significant and included increased expectations and requirements that were likely to emerge from the Social Housing Regulation Act and associated enhanced powers of the Housing Regulator. The HRA 30 Year Business plan would be developed over the coming months with the aim of responding to such challenges as set against the wider context of continuing to provide a financially sustainable position in the long term.

In order to set out the latest financial position for the Council; to respond to emerging issues in 2023/24; and to help develop the budget and long term forecast from 2024/25:-

It was moved by Councillor M E Stephenson, seconded by Councillor I J Hendersonand:-