Agenda item

To note the attached report which is due to be considered by Cabinet on 18^th February 2026 (NB. Report updated following that meeting).

The Council considered report of Councillor Vanessa Alexander, Portfolio Holder for Resources and Council Operations, regarding the 3-year projections of income and expenditure for the Council ahead of formulating its 2026-2029 Revenue and Capital Budgets.

Councillor Dad gave a brief introduction to the report.  A copy of the report had also been provided to the Cabinet on 18^th February 2026.

The Council required an update on its medium-term financial outlook ahead of setting the Budget for 2026/27 and determining the level of Council Tax for the new financial year.

In summary, during 2025/26, the Council’s work and finances were largely focused on

delivering major capital projects, including the Levelling Up/Town Centre regeneration, the new Cath Thom Leisure Centre at Wilson Playing Fields, and progress on the Huncoat Garden Village project, which would provide 1,800 new homes.  These efforts had been delivered alongside the Council’s day?to?day services and other key strategic priorities.

It was expected that these key events and their impact on the Council’s finances, would continue over the next few financial years, with the potential for the effects to continue beyond the MTFS period.

The Council would operate a roll forward Budget for 2026/27 based on the 2025/26

Budget with adjustments for changes to salary and wages, energy and other cost

pressures. This would provide Service Managers with a degree of stability for 2026/27.  Overall expenditure would need to be contained at around £17.608m in 2026/27 to set a balanced budget.

If necessary, the Council might have to use some of its reserves to help balance the Budget. This was likely given the reductions made to Government funding across Business Rates and grants as part of the Fair Funding Review.  Additionally, it might be necessary to use reserves if it was believed that in the current economic climate , it would be inappropriate to raise Council Tax.

The Council would face significant financial challenges over the next three years as it sought to overcome the consequences of both national and global issues.  It would also face the challenges of Government funding reforms and increased pressures on spending over this period.

The 2026/27 Local Government Finance Settlement (LGFS) had introduced the major reforms consulted on as part of the Fair Funding Review, including a multi-year funding approach (the first in 10 years) and changes to grant funding and business rates.  While national Core Spending Power (CSP) was projected to grow steadily, Hyndburn Council itself faced real-terms reductions due to formula changes and limited tax–raising capacity.

The Government had issued its Fair Funding Reform 2.0 consultation paper in June 2025, which had proposed fundamental changes to local government finance.

The proposals had included:

·        A revised funding formula with a stronger link to deprivation levels and population size.

·        A full reset of the baseline for retained business rates in 2026/27.

·        Ending the New Homes Bonus and reallocating the funding to the core settlement.

·        Simplifying and merging multiple grant streams, including those for homelessness prevention, rough sleeping, and temporary accommodation.

·        Introducing transitional funding, including a minimum funding floor, to protect councils from the full impact of the changes.

Although, most councils received cash flat protection against their 2025/26 baseline, Hyndburn was identified early in the consultation as being among the authorities furthest from their assessed funding level.  As a result, the Council would lose 5% of its 2025/26 baseline funding by 2028/29.

Despite an anticipated loss of almost £6.35m over the MTFS period, the multi–year settlement offered a level of certainty that enabled the Council to prepare for future challenges. The Council had addressed the £6.35m reduction through, savings and use of resources.

It was recognised that the 2027 spending round (and those in future years) might bring about alterations, however these were likely to be minor in terms of quantum and would likely only be upwards with the announced 3-year settlement representing a minimum level of funding.

The certainty that the 3-year settlement had provided around Government funding had resulted in a relatively stable outlook across all scenarios, pessimistic, standard and optimistic.  Any variances might occur due to diverging assumptions over service income and expenditure with the most severe of the scenarios assuming no or low growth in income but an above inflationary rise in expenditure.  The Pessimistic Model assumed a modest increase in Council Tax below the Local Plan and Government targets.  The Standard Model assumed growth in the Council Tax base in line with the Local Plan.

A third, Optimistic Model was also presented which showed the Council’s potential position if it was able to boost its own tax revenue due to a buoyant tax base, and expenditure inflation being low.  This Optimistic Model was considered to have a much lower probability of occurring compared to the other two models but was provided to illustrate the wide range of potential outcomes.

In these circumstances, it was prudent for the Council to look to increase its reserves and revenue streams such as Council Tax and Business Rates whenever it could and to avoid committing to any new revenue expenditure while continuing to concentrate on its work to reduce internal costs.

The main MTFS document, provided as an Appendix to the report, included the following detailed sections:

·        Snapshot View

·        Corporate Strategy Summary

·        Summary

·        Elements of the MTFS

·        Background

·        Resources (including Government Grant, Council Tax, Business Rates)

·        Changes in Costs

·        Budget Pressures

·        Capital Costs

·        Growth

·        Reserves

·        Other Assumptions

·        Equality Impact Assessment

·        Scenarios ((including Breakdown of Pessimistic, Standard and Optimistic Models and a suggested Course of Action)

·        Robustness of the Forecast

·        Overall Net Position

·        Statutory Obligations of the Responsible Financial Officer (s151 Officer) and

·        Meeting Future Funding Gaps

Councillor Dad reported that the Council faced some real reductions in Government funding over the next three years.  Given the difficult position these reductions in funding had placed upon the Council, it was a testament to the Council’s financial management that it would still be able to meet all its financial commitments over this period, including funding for its Capital Programme and growth in staffing for key service areas.

The Council would remain cautious in its take up of any other future financial commitments that might arise, unless any additional surpluses or Government grant funding could be identified.

Resolved                                    -    That the Council notes the report and the accompanying Medium Term Financial Strategy (MTFS), as approved by the Cabinet on 18^th February 2026.