Agenda item

To provide a general update and overview of the Council’s financial position against the 2024/25 budget as at the end of July 2024 and looking ahead to 2025/26 and beyond.

That Cabinet:-

(a)   notes the Council’s in-year financial position at the end of July 2024;

(b)   approves the proposed adjustments to the 2024/25 budget, as set out in Appendix 1H to the Portfolio Holder’s report (A.2), and requests Officers to review the potential on-going impact in 2025/26 and beyond where necessary as part of developing the forecast and detailed estimates for further consideration by Cabinet later in the year;

(c)   agrees that the Council continues to be a member of the Essex Business Rates Pool in 2025/26 if it remains financially advantageous to do so;

(d)   notes that £0.165m of unspent external funding previously received via the North Essex Health & Wellbeing Alliance, that has subsequently been carried forward into 2024/25, is being returned to them in accordance with the original agreement / MOU agreed by Cabinet on 17 September 2021;

(e)   notes the payment of £0.092m to East Suffolk District Council in-line with the previously agreed Freeport East Local Growth and Investment Strategy;

(f)   notes the updated financial forecast, as set out in this report, and requests Officers, in consultation with Portfolio Holders to further develop the financial forecast proposals alongside the development of the Council’s priorities; and

(g)   invites the views of the Resources and Services Overview and Scrutiny Committee on the information set out in this report along with the Council’s wider financial position as part of its work programme for the year.

Earlier on in the meeting as detailed in Minute 57 above, Councillor Barry had declared a Discloseable Pecuniary Interest in respect of this item insofar as he was a Trustee of the Brightlingsea Lido which was referred to in Appendix 1D. Councillor Barry had been granted a Dispensation by the Monitoring Officer pursuant to Section 33(2)(e) of the Localism Act 2011, that enabled him to stay in the room and vote on this item as the reference to the Brightlingsea Lido, of which he was a Trustee regarded noting a factual position, rather than making any new decisions about the Lido.

Cabinet considered a detailed report of the Corporate Finance and Governance Portfolio Holder (A.4), which provided it with a general update and overview of the Council’s financial position against the 2024/25 budget as at the end of July 2024 and looking ahead to 2025/26 and beyond.

SECTION 1 - In respect of the in-year financial position at the end of July 2024:

It was reported that the position to the end of July 2024, as set out in more detail within the appendices to the Portfolio Holder’s report showed that, overall, the General Fund Revenue Account was overspent against the profiled budget by £0.480m. However, it was important to highlight that this was primarily due to the timing of when the Government reimbursed the Council for the cost of meeting housing benefit claims and the Parliamentary General Election expenses incurred earlier in the year.

No significant new issues had emerged to date in terms of the underlying budget, albeit a number of cost pressures had been identified as set out within Appendix 1H. Those cost pressures were largely unavoidable, and it was both timely and prudent to respond to such issues as early as possible in the year. It was acknowledged that other expenditure or income trends might still emerge / develop over the remainder of the year, which would be included in future financial performance reports as necessary.

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 within the Portfolio Holder’s report, there were no other major issues that had been identified to date.

As highlighted in Appendix 1H,a total of £0.250m had been transferred to the Forecast Risk Fund. This was in effect the annual required contribution highlighted within the long-term forecast which was a ‘banking for the future’ adjustment and was therefore prudent to make at this time.

In addition to the above, it was also proposed to continue to be a member of the Essex Business Rates Pool if it remained advantageous to do so in 2025/26.

SECTION 2 - In respect of the updated long-term financial forecast:

Members were made aware that the forecast had been reviewed and updated at the end of July 2024 and was set out in Appendix 2A. It continued to reflect the very challenging financial position faced by Local Authorities, which included on-going inflationary pressures.

As committed to within earlier reports, the forecast had been extended out to 2033/34 to support the Council in managing its budget sustainability and financial resilience over a longer term period. Although further information was set out in Section 2 of the Portfolio Holder’s report, there remained some potentially tough decisions that lay ahead. However, against this backdrop, it would be important that the development of the forecast was based on engagement with as many stakeholders as possible, including Members and residents to support the Council in balancing the provision of services with the need to deliver long-term financial sustainability. 

The revised forecast also remained based on balancing optimism / pessimism bias that was inherent in any forecasting process and included the on-going use of one-off funding such as the New Homes Bonus.

Cabinet was advised that work remained ongoing within Departments and with Portfolio Holders to identify the longer-term impact of issues emerging to date along with remaining sighted on potential future cost pressures. With this in mind, it was important to highlight that the long-term forecast did not currently reflect the potential increase in costs expected from the retender of the Council’s waste, recycling and street cleansing contract. This could place a significant level of additional financial burden on the financial forecast.

However, the long-term approach alongside the Forecast Risk fund remained a key element of providing additional flexibility and time to make better-informed decisions. However, significant on-going savings were still required, with the first iteration of the Council’s savings plan set out in Appendix 2B.

It was felt that the potential savings identified to date of just under £2.500m broadly meet the ‘target’ set out in the forecast covering the years 2025/26 and 2026/27. The savings proposed represented a credible financial plan and work would remain on-going to deliver the various items over the coming months. It was important to highlight that the savings did not necessarily have to accrue from 1 April 2025, given the flexibility provided by the Forecast Risk Fund, but the earlier they could be delivered would be helpful in terms of supporting the later years of the plan.

As previously highlighted, a structural budget deficit was forecast to remain at the end of 2026/27 even after the delivery of the savings mentioned earlier. This presented further significant challenges as this had to be addressed via the identification of additional on-going savings. As set out in the forecast, this remained the case until such time as the Council delivered an underlying annual balanced budget. In terms of this latter point, the forecast showed that the level of inflation, especially pay inflation, outstripped the estimated level of forecast increases in income from council tax and business rates, which was clearly not sustainable without significant ‘corrections’ to the budget in future years.

The above remained subject to any intervention from the Government, who themselves had a very challenging financial question to resolve in the context of many Councils up and down the country potentially running out of money in the coming months and years.

It was pointed out that the challenges faced by the Housing Revenue Account (HRA) were also significant and included increased expectations and requirements that continued 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 weeks with the aim of responding to such challenges 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 and to respond to emerging issues in 2024/25 and to develop the budget and long-term forecast from 2025/26:-

It was moved by Councillor M E Stephenson, seconded by Councillor Barry and:-

RESOLVED that Cabinet:-

(a)   notes the Council’s in-year financial position at the end of July 2024;

(b)   approves the proposed adjustments to the 2024/25 budget, as set out in Appendix 1H to the Portfolio Holder’s report (A.2), and requests Officers to review the potential on-going impact in 2025/26 and beyond where necessary as part of developing the forecast and detailed estimates for further consideration by Cabinet later in the year;

(c)   agrees that the Council continues to be a member of the Essex Business Rates Pool in 2025/26 if it remains financially advantageous to do so;

(d)   notes that £0.165m of unspent external funding previously received via the North Essex Health & Wellbeing Alliance, that has subsequently been carried forward into 2024/25, is being returned to them in accordance with the original agreement / MOU agreed by Cabinet on 17 September 2021;

(e)   notes the payment of £0.092m to East Suffolk District Council in-line with the previously agreed Freeport East Local Growth and Investment Strategy;

(f)   notes the updated financial forecast, as set out in this report, and requests Officers, in consultation with Portfolio Holders to further develop the financial forecast proposals alongside the development of the Council’s priorities; and

(g)   invites the views of the Resources and Services Overview and Scrutiny Committee on the information set out in this report along with the Council’s wider financial position as part of its work programme for the year.