Agenda item

Policy and Resources Strategy 2023-24 to 2025-26 update

To note, as necessary, any changes and/or progress following the financial remit report submitted in July 2022.


The report had not been circulated five clear days in advance of the meeting. The chair agreed to accept this item as urgent as it was important that the cabinet received regular updates on the progress of the budget setting process, particularly given the pace of change in the economic, political and policy environment in recent months.




That the following be noted:


1.  The updated medium term financial strategy (MTFS) included at Appendix 1 of the report, forecasting a most likely gap in 2023-24 of £19.84m.


2.  The tax and policy changes announced in the 23 September 2022 mini-budget and the potential for further policy changes following the election of the new Prime Minister.


3.  The mini-budget gave no specific details on local government funding but the subsequent rapid deterioration in the UK economy will require substantial remedial action which is likely to include cuts to public sector spending.


4.  Given the change in policy direction, the council faces a further period of austerity at a time when public services are already under significant pressure  arising from the impact of the previous austerity period (2010-2020) together with the worsening economic outlook.


5.  The updated assumptions are detailed in paragraph 36 of the report. The  key assumptions being:


·  All government funding expected to increase by 2% to account for inflationary pressures  with the exception of:


o  New homes bonus – expected reduction of circa £2m resulting from ending of current scheme

o  Market sustainability and fair cost of care fund – expected to increase with matching commitments

o  Public health grant expected to remain at current cash levels

o  2022-23 services grant expected to remain at current levels with a reduction to offset the reversal to the 1.25% national insurance increase.


·  The fair funding review and business rate retention reset will be delayed again until at least 2024-25


·  Additional costs arising from pay and contract prices (3% and 6% respectively)


·  Additional costs arising from energy cost increases on council properties (100%)


·  Additional debt financing costs arising from additional capital projects (£3.4m)


·  Council tax will increase by the maximum amount allowed (1.99%)


·  An adult social care precept of 1%.


6.  That the budget challenge process commenced in early October 2022 as planned and that an update on progress will be brought to cabinet in December 2022.


7.  Continuing financial uncertainty as a result of a number of further factors:


·  The reaction of the currency and bond markets to the mini budget and subsequent emergency actions taken by the Bank of England;

·  Unknown impact of U- turn over abolition of 45% tax band

·  The government’s medium-term fiscal plan due to be published on 31 October, giving further details of proposed debt repayments and a full forecast from the Office for Budget Responsibility (OBR)

·  Possible spending cuts to public services[1] of up to 15% as a means to reduce government borrowing in the medium term

·  Further announcements in October and November are expected on the supply-side growth measures, including changes to the planning system, business regulations, childcare, immigration and digital

·  Unlikely that the three-year spending review outline cash figures will be updated for the increased inflation forecasts

·  Limited information on the major changes to adult social care which are expected to carry a significant price-tag in 2023-24 and 2024-25

·  The business rate revaluation taking effect on 1 April 2023 and the potential impact on locally retained revenues

·  The 50% rate relief for retail, leisure and hospitality businesses, and the energy bill relief scheme  for businesses will end on 31 March 2023

·  Rising inflation including exceptional increases in energy costs driving a cost of living crisis

·  Rising interest rates increasing the cost of credit for residents and the cost to the council of financing its ambitious capital programme

·  Economic and financial impacts to the council of exiting the European Union

·  The current absence of any certainty of funding streams to support climate emergency plans.


8.  That discussions with the Department for Education (DfE) for financial support for the historic dedicated schools budget (DSG) ‘high needs’ deficit of £21.7m  are ongoing.


9.  The strategic director of finance and governance, with the support of other strategic directors are preparing indicative savings options and commitments, initially for 2023-24. For the following 2 years, 2024-25 and 2025-26, a long-term strategy is going to be developed which will support the new council delivery plan.

[1] Outlook for public finances’ (IFS) 11 October 2022

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