Agenda item

Report attached.

The Cabinet considered a report of Councillor Vanessa Alexander, Portfolio Holder for Resources and Council Operations, updating Cabinet on the Council’s financial performance up to the end of September 2025 for the 2025/26 financial year and outlining the projected impact on the Medium-Term Financial Strategy (MTFS) covering the period 2025/26 to 2027/28.

 

In the absence of Councillor Alexander, the Leader of the Council provided a brief introduction to the report.  He highlighted that the latest forecast outturn showed a small surplus of £9k.  The most significant changes since Q1 were shown in Table 3 of the report.  Table 12 within the report showed healthy usable balances of £18.996M, of which £1.877M in the General Fundwas unallocated.  Overall, the Council’s finances were on track.

 

Members thanked the officer team and relevant Portfolio Holder for their sound financial management.

 

Approval of the report was not deemed a key decision.

 

Reasons for Decision

 

Revenue Budget Forecast 2025/26

 

At its meeting on 27^th February 2025, the Council had agreed the General Fund Revenue Budget for 2025/26.  This had set a budget for the Council’s total spend in 2025/26 of £17.313m plus £0.121m use of reserves, in lieu of business rate receipts.

 

The current forecast spend to the end of the financial year in March 2026 was £17.426m.  This brought the forecast underspend for the year against the budget to £0.009m.  Further analysis of changes in forecast spend were shown in Section 4 of the report.

 

Table 1 below showed the working budget and forecast outturn by service area.

 

Table 1: Forecast Outturn Variance - Summary by Service Area

 

Service Area	Original Budget     £’000	In-Year Budget Changes   £’000	Working Budget     £’000	Forecast Outturn     £’000	Forecast Outturn Variance   £’000
Environmental Health	941	-	941	963	22
Environmental Services	5,495	(14)	5,481	5,328	(153)
Legal and Democratic	1,896	-	1,896	1,939	43
Planning and Transportation	712	5	717	840	123
Regeneration and Housing	1,604	-	1,604	1,588	(16)
Resources	6,086	5	6,091	6,371	280
Net Cost of Services	16,734	(4)	16,730	17,029	299
Non-Service	865	4	869	397	(472)
Cabinet Approved Contributions	-	-	-	-	-
Corporate Savings Target	(164)	-	(164)	-	164
Total Net Expenditure	17,435	-	17,435	17.426	(9)
Funding	(17,435)	-	(17,435)	(17,435)	-
(Under)/Overspend	-	-	-	-	(9)

 

 

Table 2 below showed the change in forecast by service area compared to the previous quarter.

 

Table 2: Change in Forecast Outturn – Summary by Service Area

 

Service Area	Quarter 1 Forecast Outturn   £’000	Changes During Quarter   £’000	Quarter 2 Forecast Outturn   £’000
Environmental Health	933	30	963
Environmental Services	5,330	(2)	5,328
Legal and Democratic	1,887	52	1,939
Planning and Transportation	876	(36)	840
Regeneration and Housing	1,604	(16)	1,588
Resources	6,028	343	6,371
Net Cost of Services	16,658	371	17,029
Non-Service	772	(375)	397
Corporate Savings Target	-	-	-
Total Net Expenditure	17,430	(4)	17,426
Funding	(17,435)	-	(17,435)
(Under)/Overspend	(5)	(4)	(9)

 

 

Table 3, which was set out in the report, showed details of the most significant changes in the forecast variance.  A commentary was also provided on the affected areas, as follows:

 

• Staffing Costs and Pay Pressures - The forecasted savings on staffing costs had reduced by £11k since Quarter 1, from £0.126m to £0.115m.  This change was largely attributable to an increased reliance on agency staff to maintain service delivery, which had offset some of the anticipated savings from vacant posts.  In addition, a pay award of 3.2% had been agreed in-year, compared to the original budget assumption of 3% for 2025/26.  This had created a pressure within staffing budgets of £0.025m.

 

• Utilities and Operational Savings - The forecasted savings on utility costs had increased by £0.028m since Quarter 1, rising from £0.108m to £0.136m.  This improvement was primarily attributed to the implementation of a new energy contract, which had helped to stabilise prices and reduce overall expenditure.  The new contract had likely contributed to the additional savings now being forecast.

 

• Grant Income and Housing Benefit - A significant adverse movement of £0.308m had been reported in relation to grant income, shifting from a forecasted surplus of £0.078m in Quarter 1 to a pressure of £0.230m in the current forecast.  This change followed a comprehensive deep dive review of all budgets, which identified several grants that were no longer due to the Council.  The forecast for unrecoverable Housing Benefit overpayments had also increased by £0.023m.

 

• ICT Costs - ICT and software costs had increased by £0.024m since Quarter 1, bringing the total forecast pressure in this area to £0.109m.  This increase was primarily due to additional licensing and support costs associated with the ongoing modernisation of the Council’s ICT infrastructure and the growing reliance on cloud-based systems to support service delivery and secure remote working.

 

• Council Tax Recovery Costs - The forecast for Council Tax recovery costs had increased by £48k since Quarter 1.  This reflected updated assumptions around collection activity and associated costs, including potential increases in enforcement or administrative overheads linked to recovery processes.

 

• Fees and Charges Income - Fees and charges income had improved by £0.054m compared to the previous quarter.  This positive movement was primarily driven by increased income from commercial property rents, as well as higher-than-anticipated income from Building Control and Planning services.  These uplifts suggested stronger market demand and improved performance in these service areas.

 

• Non-Service Budgets - There had been a significant increase of £0.490m in forecast investment income since Quarter 1, bringing the total to £0.587m.  This improvement was primarily due to the continuation of favourable interest rates and higher-than-anticipated cash balances, which had been sustained in part by delays in capital expenditure.

 

Offsetting this, there were new cost pressures within financing budgets, with interest payable increasing by £0.073m and the Minimum Revenue Provision (MRP) rising by £0.042m.  These increases were largely attributable to a higher volume of vehicles being acquired through leasing arrangements, which had impacted borrowing costs and associated MRP charges.

 

Variance by Service Area

 

Section 4 of the report provided a breakdown of forecast outturn variances by service area set out in additional tables (Nos 4 to 11), as well as a supporting commentary.  It highlighted the key changes since Quarter 1 and compared the current forecast against the approved working budget.

 

This analysis aimed to provide greater transparency on the financial position of individual services and to support ongoing monitoring and management of budget pressures and savings.

 

Table 12 comprised the Forecast Movements in Reserves 2025/26 at Quarter 2, which showed that the Council was currently forecasting a reduction of £11.228m in its usable reserves during the year, bringing them to £18.996m at the end of the year.  The most significant movements in reserves were the forecast spending on the capital programme, which was in line with the Council’s ambitious regeneration projects.

 

Pressures and Risks

 

The forecast underspend at Quarter 2 is relatively small at £0.009m. There are some real pressures and risks that need to be considered, which are not currently built into any financial forecasts.

 

The main pressures/risks to be considered were detailed below:

 

• Waste Disposal Site/Transfer Station – Negotiations were still underway with Lancashire County Council regarding their contract situation for the disposal of waste at the Whinney Hill site.  This might require Hyndburn and the other East Lancashire districts to find alternative sites to dispose of their residual household waste.  The assumption for any new arrangements was that any costs would be contained within the budgets set aside within the Medium-Term Financial Strategy.

 

• Oswaldtwistle Civic Theatre – The closure of the theatre and return of the lease to the Council had resulted in the need to undertake surveys and compliance works to understand the condition of the building, prior to it being ready for potential future occupation.  The Council had approved revenue costs for ensuring the site met all annual safety requirements and had set aside capital budgets to undertake some of the works that would be required.  The facilities management team continued to undertake surveys and would report back the potential costs once the surveys were complete.

 

• Crematorium/Cremators – There was a risk that there might be a change in legislation to enforce new systems for mercury abatement to be installed/retro fitted to the current incinerators at the crematorium.  It was expected that these changes might come into place in 2 to 3 years’ time and there would be a significant capital cost for works to ensure compliance.  The parks team were currently investigating this further and would inform Cabinet of the requirements as soon as the information was available.  Cabinet had put £200,000 into reserves to date to be used for this purpose, and a further contribution of £150,000 was included in the budget for 2025/26.

 

• Food Waste Collections – From April 2026 the Council had to provide a food waste collection for residents.  A grant had been received from DEFRA to be used towards the capital costs of implementing the new collection (e.g. purchasing new vehicles, bins and food caddies), procurement had been undertaken to provide the capital resources, and it was expected that a further grant would be provided to assist with the additional ongoing revenue costs.

 

• Hyndburn Leisure – The Council had set aside funding within its Medium-Term Financial Strategy to provide financial assistance / subsidy to Hyndburn Leisure.  This funding was part of an agreed process for reporting and monitoring and linked to an efficiency savings plan with the Trust to reduce this subsidy in future financial years.  The budget subsidy approved in the Medium-Term Financial strategy was £700,000 in 2025/2026, £500,000 in 2026/2027 and £350,000 in 2027/2028.  Prior to payment of any subsidy the Council would first have to complete a Subsidy Compliance Assessment and would then seek approval from Cabinet to make any payment(s).

 

• Housing Benefit Supported / Exempt Accommodation – The Council continued to feel pressures from unrecoverable benefit payments although it was expected to be managed in 2025/2026 within the overall revenue budget.  The Council had started to take action to try to reduce these costs through introducing planning restrictions and supporting housing regulation although this did not have an immediate effect and without additional support from the Government this would continue to be a pressure for most councils nationally.

 

These pressures/risks might need to be considered over the course of the Medium-Term Financial Strategy against the forecast underspend for the year.

 

There were no alternative options for consideration or reasons

 

Resolved                                    -    That Cabinet:

 

(1)   Notes the financial position of the Revenue Budget at Q2 of the 2025/26 financial year, as shown in Section 3 of the report.

 

(2)   Notes the financial pressures and risks facing the Council as at the end of September 2025, as shown in Section 5 of the report, and acknowledges the potential longer-term impact on the Medium-Term Financial Strategy for 2025/26 to 2027/28.