Agenda item

The report informs the Committee of the 3-year projections of income and expenditure for the Council ahead of formulating its 2023/24 Revenue and Capital Budgets.

Recommended - That consideration be given to the report.

The Leader of the Council reported that this sets out the forecast financial position of the Council over the next 3 years.

The purpose of undertaking this exercise is to ensure that in setting the budget for 2023/24, the Council has regard for its overall medium term financial prospects and does not take a narrow one year view of the funds it has and the spending pressures it faces, and that it takes a mature prudent view, so that it is able to maintain the Council’s finances in a stable condition year on year going forward.

The Leader reported that making three year forecasts over the last decade has been difficult due to the Government’s commitment to austerity and its drive to reduce public spending, which has led to a series of large reductions in funding to local government on a regular basis. The COVID 19 pandemic and the war in Ukraine have now added additional dimensions to trying to accurately forecast what will happen economically over the next 3 years.

From the announcements made by the Government in December, we know the local government settlement this year will provide some of the funds the Council needs to maintain its services, but also that no commitment has been made to maintaining these funds in future years. Major reform to local government finances remains a strong possibility for 2024/25 and beyond.

The report indicates that the Council potentially faces a fork in the road in terms of its financial position over the next three years. If the Government decides not to embark on reform to local government finances and largely continues to fund the Council as they do currently, the Council will face the need to undertake some cost savings in 2024/25 and 2025/26 along with applying increases to council tax at 2% and achieve some growth in the tax base in both business rates and council tax.

If the Government, however, choose to implement large scale changes in its funding of local government, which sees the amount the Council receives in direct Government grant reduced or even abolished, or the amount we retain from business rates reduced, the Council would face the need to make significant savings. We should receive some more clarity from the Government in late 2023. Therefore, the Medium Term Financial Strategy indicates the Council should remain cautious in its decision taking around any major financial commitments until future funding levels for local government are clear.

The Leader also highlighted several sections of the report including a 0.8% in year savings target, total staffing costs and the 2022/23 pay award, pension costs and the positive position of the Council’s reserves.

The Chair thanked the leader for the report and opened it up to the Committee for questions.

Ken Moss asked how much the Council retain from the collection of business rates. The Executive Director for Resources responded. The Council collect approximately £24 million in business rates. We currently retain 40% of this. However, this 40% is then subject to a number of tariffs and compensations which result in actual figure of business rates retained by the Council closer to 25% of that collected.

Councillor Bernard Dawson asked why a Hyndburn Borough Council financial strategy refers to South America. The Leader responded that that the Council must consider global economic circumstances in order to plan for the medium term.

Councillor Paddy Short asked if unions were engaged in negotiations for and agreed to the 2022/23 pay award. The Leader responded that the local government pay award was agreed nationally.

Councillor Nordad Aziz asked for more information regarding the £100k increase in external audit budget for 2023/24. The Executive Director for Resources responded. The audit commission was disbanded previously. Private audit firms now bid to the PSAA to undertake local government audit work. Local government accounts are more complicated than the private sector, therefore the audit costs are higher. There is also a shortage of audit providers. The PSAA have done a tender exercise, and prices have increased significantly. The Council is not involved in this tender process. Our recent change in auditor is therefore not the reason in the increased cost. The budget is an indication from PSAA, and may be higher or lower.

Councillor Noordad Aziz asked what the worst case scenario was for the increase in costs. The Executive Director for Resources responded. The Council have been told to prepare for a possible increase of 150%, which would be £120k, however, he is confident that the additional £100k budgeted will suffice.

Councillor Noordad Aziz asked if the Council is confident that we have the appropriate reserves to cover potential threats. The Leader responded that he is satisfied that the Council’s current earmarked and non-earmarked reserves are sufficient. 

Councillor Noordad Aziz asked why there is no forecast increase in utilities costs in the standard model. The Executive Director for Resources responded. There is a forecast increased in costs in year 1. This increase remains in year 2 and 3. The standard model does not anticipate further increases beyond year 1 in years 2 and 3. The Leader also commented that the Medium Term Financial Strategy Standard Model predictions have been very close to correct for many years.

Ken Moss commented on the recent PSDS development at Hyndburn Leisure Centre, which has reduced the carbon footprint by 71% and will reduce energy costs. He suggested if there are concerns around future utility costs, the Council should look at this model for its other major buildings. The Leader responded that the Council supports decarbonisation and has previously set aside £1million for this.

Resolved        -           That the report, questions and answers be noted.