Agenda item

Report attached.

Members considered a report of Councillor Vanessa Alexander, Portfolio Holder for Resources and Council Operations, providing an update on the Council’s financial performance up to the end of December 2025 for the 2025/26 financial year and outlining the projected impact on the Medium-Term Financial Strategy covering the period 2025/26 to 2027/28.

The Leader of the Council introduced this report on behalf of Councillor Alexander.  Councillor Dad highlighted the forecast surplus for the year 2025/2026, the cost pressures faced throughout the year offset through treasury management income streams, significant variances, the provision made to deal with any potential liabilities and the level of and use of reserves.  The Leader was pleased to note that the Council’s finances were on track through close budget monitoring and good management.

Councillor Khan made the following observations and asked various questions as follows:

• Waste Services were predicting an £61k underspend.  Could the saving be reallocated to enforcement activity?
• The announcement at Council on 15^th January 2026 about progress on the Waste Disposal contract was welcomed, as this should mean the no large financial investment would be required.
• The overall forecast underspend of £0.594m was good news.  Would the controlling group consider spending this in year?
• Would the controlling group consider reducing the level of unallocated reserves?
• Could the controlling group advise what the funding deficit would be following the Fair Funding Review 2.0 and the Government’s subsequent provisional financial settlement for Hyndburn?

Councillor Dad responded that further information about the draft Budget would be available at the next Cabinet meeting.  The Fair Funding Review outcome would still lead to a reduction in grant income from the Government, but the change was not as significant as had been first anticipated.  The full implications would be considered during the Budget setting process in February.  The Council would need to manage any shortfall and hence needed to be prudent in relation to expenditure within the last few months of 2025/26.

Councillor Eaves reported that a two-year waste disposal contract had been signed by Lancashire County Council with Envirofuel Ltd.  From 1^st April 2026, waste would be taken to their existing processing facility at Accrington Road, Hapton, in Burnley.  Councillor Dad confirmed that there would be no additional cost to Hyndburn Borough Council for this service.

Approval of the report was not deemed a key decision.

Reasons for Decision

At the Full Council meeting on 27^th February 2025, Full 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 £17.106m, with forecast funding increasing to £17.700m.  This brought the forecast underspend for the year against the budget to £0.594m.  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.  During Quarter 3 2025/26 there had been a restructure of service responsibilities, however, to allow for consistency between monitoring reports all the tables in the report reflected the service structure at budget setting.

Table 1: Forecast Outturn Variance - Summary by Service Area

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

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 £0.177m since Quarter 2, from £0.115m underspend to a pressure of £0.062m.  This change was largely attributable to an increased reliance on agency staff to maintain service delivery, which had offset 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 £0.015m since Quarter 2, rising from £0.136m to £0.151m.  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 favourable movement of £0.466m had been reported in relation to grant income, shifting from a forecasted pressure of £0.230m in Quarter 2 to surplus of £0.236m in the current forecast.  This change followed notification of additional grant income in the quarter, including additional Homelessness Prevention Grant and additional Housing Benefit subsidy, in addition to the use of grant income to support general services.

• ICT Costs - ICT and software costs had increased by £0.060m since Quarter 1, bringing the total forecast pressure in this area to £0.169m.  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 £0.080m since Quarter 2.  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 £0.074m 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 £0.151m in forecast investment income since Quarter 2, bringing the total to £0.737m.  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.  The Council had also received £0.181m as part of a reconciliation exercise following the upfront payment of its employer contributions to the Pension Fund.

As explained at Quarter 2 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.  It was expected that these additional costs would be funded by earmarked reserve, therefore they would not adversely affect the forecast revenue outturn position.

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 2 and compared the current forecast against the approved working budget.  For comparison purposes the various tables reflected the organisational structure prior to recent changes in service area responsibility.  Figures would be amended at outturn, with budget movements shown.

The 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 3, which showed that the Council was currently forecasting a total of £16.849m at the end of the financial year.  It was anticipated that all of this amount, with the exception of £1.887m in general reserve would be used to support the forecast shortfall in future years of the Medium Term Financial Strategy and the funding of the Capital Programme.  It was recommended that the authority maintained a level of general reserve of around £1m to act as a financial cushion to cover any unknown future financial pressures.

Pressures and Risks

The forecast underspend at Quarter 3 was a surplus of £0.594m.  Although this was positive position for the Council, there were some real pressures and risks that needed to be considered, which were 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 works including a full roof replacement and other internal works that should prepare the theatre for reopening in the future.

• 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 £350,000 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 would have to provide a food waste collection for residents.  A grant had been received from the Department for Environment, Food and  Rural Affairs (Defra) to be used towards the capital costs of implementing the new collection (e.g. purchasing new vehicles, bins and food caddies) and procurement had been undertaken to provide the capital resources.  The Council had received advice from Central Government indicating that there would be no separately identifiable new burdens funding to support the cost of providing the revenue costs of food waste collection.  As such this would place additional pressure on the Council’s revenue budget for 2026/27 of circa £300,000.

• 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.  This had been taken to Cabinet on 3^rd December 2025, which had subsequently approved payment of £700,000 in 2025/26.

• 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                                 (1)   That the Cabinet notes the financial position of the Revenue Budget at Q3 of the 2025/26 financial year, as shown in Section 3 of the report.

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