Agenda item

Report attached.

The Cabinet considered a joint report of Councillor Noordad Aziz, Deputy Leader and Portfolio Holder for Transformation, Education and Skills, and Councillor Vanessa Alexander, Portfolio Holder for Resources and Council Organisation, providing an update on the process to produce the Council’s Revenue and Capital Budgets for 2025/2026 and the impact of the risks and assumptions on the Medium-Term Financial Strategy (MTFS) 2024/25 to 2026/27.

Councillor Noordad Aziz provided brief introduction to the report and highlighted the controlling group’s intention to be transparent about decision making and the challenges faced by the Council, such as the provision of a waste disposal site/transfer station.  He outlined the timetable for Budget-setting and development the Capital Programme provided in the tables at Paragraphs 7.2 and 8.2 of the report.  He also thanked the officer team, led by the Executive Director (Resources), for their hard work.

Councillor Khan enquired about whether critical timelines could be applied to the individual risks identified within the report.  Councillor Alexander responded that the various projects and associated risks were currently being reviewed, but it was not possible to give details of key dates at this stage.  More information would be available as a when the relevant decisions had been taken.  Councillor Aziz commented that the early identification and publication of risks was an improvement on the arrangements under the previous administration.

Approval of the report was not considered to be a key decision.

Reasons for Decision

The Council had approved its Revenue Budget for 2024/2025 and Medium-Term Financial Strategy (MTFS) at the Full Council meeting on 27^th February 2024.

The development of the budget was a key element of the Council’s financial governance processes.  Starting this work early in the current financial year allowed adequate time to develop a range of options for the Council to consider when setting the budget for 2025/26.

The Council’s approach to setting its budget and developing options formed part of the assessment of the Council’s Value for Money (VfM) arrangements by the External Auditors.

The Council was expected to have in place a plan to deliver a balanced budget including savings proposals that were robust and deliverable.  It was therefore important for the Council to achieve a balanced and sustainable budget over the life of its Medium-Term Financial Strategy to provide assurance to its External Auditors and to avoid any adverse commentary in the Auditor’s Value for Money report.

The report included key risks and potential pressure in the Medium Term Financial Strategy.  The main risks related to the following matters, further details of which were set out in the report:

• Oswaldtwistle Civic Theatre;
• Repurposing of Mercer Hall;
• Crematorium/Cremators;
• Waste Disposal Site/Transfer Station;
• Food Waste Collections
• Hyndburn Leisure/Leisure Service Delivery Model;
• Huncoat Garden Village;
• Pay Award;
• Future Revenue Costs for Levelling Up Fund Projects;
• Posts Funded from Reserves or External Grants;
• Other Potential Revenue Pressures in year; and
• Investment Interest Returns

Funding for Local Government

The current Government’s Spending Review period ran to the end of March 2025 (the 2024/25 financial year). This meant that, at this stage, there was no indication of funding levels for Government Departments (including the Department for Communities, Housing and Local Government (DHLCG)) beyond that date.  The Government would need to undertake a new Spending Review in the Autumn, prior to implementing any changes for 2025/2026.  This might be possible now that there was a new Government in place, and this could inform the provisional Local Government Finance Settlement in December.

What was clear was that there would be limited scope for the new Government to consider any of the proposed reforms to the Local Government Finance system.  So, both the Business Rates Retention Scheme and Council Tax were likely to remain unchanged (although there might well be a review of the Council Tax Referendum thresholds).  It was possible that areas such as the New Homes Bonus, the Services Grants and other such grant funding streams might be affected depending on the new Government’s assessment of the state of the national finances and what, if any, actions were required, to curb Departmental public spending.

Assumptions for the Medium Term Financial Strategy

The Medium-Term Financial Strategy for Hyndburn Borough Council was set out in 3 scenarios:

• Standard – this scenario represented what the Council expected to be the most likely outcome for the year.  The Council’s actual budget for the year was set based on this scenario.
• Pessimistic – this scenario represented what was expected to be a “worst case”.
• Optimistic – this scenario estimated a “best case”.

Given how early the Council was in the budget setting process and the unknowns at this point, (e.g. no indications had been received of changes in Government funding yet) the 3 scenarios could differ significantly at this stage.

There were several assumptions which were used as part of producing the budget.  The main factors taken into account during the construction of the budget are as indicated below, with further details set out in the report:

• Pay award;
• Inflation;
• Utilities;
• Sales, fees and charges;
• Government grant income;
• Income from business rates; and
• Income from Council Tax (derived from the Council Tax Base and Council Tax Rate)

The table below shows the overall Council Tax Income which would be assumed under the three scenarios:

Budget Timetable

The Council had a legal requirement to set a balanced budget for the 2025/26 financial year before 11^th March 2025.  Hyndburn Borough Council’s budget would also have to be set after the budgets had been approved by the major Council Tax precepting authorities (eg. Lancashire County Council).

The timetable set out below ensured that the Council would meet its legal budget setting deadlines:

Capital Programme 2025/26

At the same Council meeting in February 2025, the Capital Programme for 2025/26 would be approved.

The timetable for the development of the Capital Programme was as set out below:

There were several risks to be considered in the development of the Capital Programme and the key risks related to the following categories, further details of which were included in the report:

• Capital receipts;
• Useable reserves;
• Staffing capacity.

There were no alternative options for consideration or reasons

Resolved                                    -    That Cabinet:

(1)   Notes the key risks and pressures to the delivery of the budget in 2024/25 and that these will be subject to consideration as part of the regular Budget Monitoring reports submitted to the Cabinet.

(2)   Notes the timetable set out in the report for the development of the Council’s Budget for 2025/26.

(3)   Agrees the assumptions in Section 6 of the report, which will be reflected in the revised MTFS 2024/25 to 2026/27 that will be presented to Cabinet in October.