Agenda item

Consideration was given to a report of the Director of Finance which provided Cabinet with the budget reduction requirement and the Administration’s budget proposals for 2023/24 and a forecast of the 2024/25 position having regard to the Provisional Local Government Finance Settlement (PLGFS) published on 19 December 2022. The report also presented the financial forecasts for the remainder of the Medium Term Financial Strategy (MTFS) period 2025/26, 2026/27 and 2027/28.

A version of the Revenue Budget 2023/24 and 2024/25 and Medium Term Financial Strategy 2023/24 to 2027/28 was presented to the Policy Overview and Scrutiny Committee (POSC) on 26 January 2023. The Committee scrutinised the report and the other reports on the agenda that form a core part of the Council’s strategic financial planning framework.

This report included the latest financial information and updates the financial position presented to and approved by Cabinet on 12 December 2022 using information from the PLGFS published on 19 December 2022 and the month 8 financial monitoring forecasts. It also provides a commentary on the changes from the position presented to the POSC on 26 January 2023.

The changes compared to the POSC report relate primarily to the recalculation of the Business Rates Tax Base and Grant in Lieu of Business Rates as a result of the submission to Government of a statutory return, the NNDR1.

Section 1 presented an introduction to the report and explained the report format.

Section 2 set out the key Council Policies and Strategies including the Co-operative Council Values, Corporate Plan, Constitution and Rules of Procedure, as the framework within which the Budget has been prepared.

Section 3 presented the Local Government Finance developments which had an impact on 2023/24 and future years budgets. It also highlighted the Chartered Institute of Public Finance and Accountancy (CIPFA) Financial Resilience Index, the CIPFA Financial Management Code and a commentary on financial resilience, all of which were of importance when considering the Council’s financial standing in the context of budget setting for 2023/24 and future years.

Section 4 presented the Local Government Finance Policy Statement 2023/24 and 2024/25 which set out the Government’s intentions to assist financial planning for Councils. It confirmed the PLGFS for both 2023/24 and 2024/25 would be single year Settlements and that reforms to redistribute funds such as the Review of Relative Needs and Resources (Fair Funding Review) would not progress until 2025/26 at the earliest.

Section 5 detailed the impact of the 2023/24 PLGFS which was the fifth consecutive one-year Settlement. This included key information in relation to overall funding levels, Council Tax referendum limits and grants for 2023/24.

Section 6 presented the 2022/23 revised budget and year end forecasts. The starting point for preparing the 2023/24 revenue budget estimates was the underlying base budget of £250.517m. The 2022/23 revenue budget forecast outturn position highlighted a current unfavourable projected variance for 2022/23 of £2.233m but the commentary advised that this may be improved by the continuation of management action to control expenditure in year. The month 6 monitoring position was used to inform key budget pressures in the budget update report presented to Cabinet on 12 December 2022. The month 8 position highlighted some further issues that have now been included in the 2023/24 budget and also informed the position reported to the POSC on 26 January 2023.

Sections 7 to 9 set out how the expenditure pressures that contribute to the budget gap had been determined since the update to Cabinet on 12 December 2022.

• Section 7 summarised the revisions to the estimates since the budget gap of £27.975m for 2023/24 and £14.575m for 2024/25 was presented to Cabinet on 12 December 2022. It highlighted that a direct comparison would show a budget gap of £19.258m for 2023/24 and £10.157m for 2024/25. These budget gaps represent the position after the use of some reserves. In order to allow budget reductions and the total use of reserves to be the final element in balancing the budget, the forecast net gap/budget reduction requirement before the use of reserves of £27.993m was being used as the starting position from which the 2023/24 budget would be balanced, with £14.254m used as the starting position for the final changes to the 2024/25 budget (as illustrated at Table 7). This was lower than the £29.276m position for

2023/24 reported to the POSC in January 2023 primarily because of the recalculation of the Business Rates Tax Base as described at 12.9 and 12.10.

• Section 8 presented a range of expenditure pressures that contributed to the budget gap. In total they contributed £45.913m to the 2023/24 position, a change of only £1.193m compared to the position reported in both December 2022 and January 2023. The expenditure pressures for 2024/25 were projected at £14.697m. The main pressures arose from pay, energy, contractual and service inflation and demand for both Adults and Children’s Social Care service provision.

• Section 9 set out the forecast impact of the payment of levies and contributions to the Greater Manchester Combined Authority (GMCA) and a levy to the Environment Agency (EA). It showed an increase in expenditure of £1.939m in the 2023/24 budget forecast compared to the December 2022 position (and an increase of £0.014m compared to position reported to the POSC meeting) but advised that £1.044m of reserve resources refunded to the Council by GMCA in 2022/23 could be used to offset some of this increase. The final levies position would be confirmed on 10 February 2023.

Sections 10 and 11 presented the impact of the PLGFS announced on 19 December 2022 and income related adjustments to the estimates. In this regard:

• Section 10 provided a commentary on the unringfenced grants announced by or derived from the PLGFS. A summary of all grants notified or anticipated as included in the PLGFS totalled £108.235m which was £3.302m higher than the forecast previously presented to Cabinet and £0.293m higher than the forecast presented to the POSC due to an increase in Grant in Lieu of Business Rates.

• Section 11 outlined the main ringfenced grants that must be used in accordance with specific guidance but nonetheless help the Council deliver its services. Two specific Adult Social Care grants were detailed in this section and this funding has been used as a contribution to support the Council’s 2023/24 and 2024/25 budgets. The funding available from these grants in 2023/24 has increased by £0.748m compared to the position reported in December 2022.

Section 12 set out how the Locally Generated Income from both Business Rates and Council Tax will support the Council budget. The PLGFS confirmed referendum limits for a general purpose Council Tax increase of up to 3% each year from April 2023 without the need to hold a referendum. In addition the threshold for Adult Social Care Precept (ASCP) increases to a maximum of 2% each year from April 2023. There remained a requirement to evidence that the funds generated from this precept are used for Adult Social Care expenditure. A referendum is required if proposed Council Tax increases exceed 4.99%.

• Paragraphs 12.3 to 12.13 set out the income to support the budget from Retained Business Rates and how this helps to reduce the level of budget reductions required. In total, Retained Business Rates income had increased to £53.683m. This final position (the Business Rates Tax Base) has been calculated after the completion of the Government return (the NNDR1) in time for its submission by the statutory deadline (31 January 2023). Cabinet of 23 January 2023 agreed that the final Business Rates Tax Base could be amended under delegated authority on completion of the NNDR1. There was a general uplift but most of the increase (£4.835m) related to confirmation in the PLGFS that the piloting of 100% Business Rates Retention will continue into 2023/24. The Council would take the benefit of a pilot scheme gain of £3.626m with the GMCA receiving part of this increase in Business Rates Income of £1.209m.

• Paragraphs 12.17 to 12.48 presented the Council Tax position for 2023/24. It advised that:

o The Council Tax Tax Base was 58,500 which is no change from the position previously assumed.

o Council Tax policy was revised (subject to confirmation at Budget Council on 1 March 2023) so that rather than only a 1.99% general purposes Council Tax increase, the proposed approach is to introduce a 2% increase for the Adult Social Care Precept.

o An increase of 3.99% would not require a Council Tax referendum as it would be within the referendum criteria issued by the Government in the PLGFS.

o The Council proposed to remove the Council Tax Empty Property Discount and increase the Empty Property Premium.

o Total Council Tax to be generated for use by the Council based on the Tax Base and the 3.99% increase is £108.995m in 2023/24.

o The Greater Manchester Police and Crime Commissioner precept was confirmed on 26 January 2023 with an increase of £15 for a Band D Council Tax.

o The Greater Manchester Mayoral General Precept (including Fire Services) will be confirmed on 10 February 2023.

o Shaw and Crompton Parish Council agreed its precept on 13 December 2022 and confirmed figures are presented in the report. Saddleworth Parish Council will agree their precept on 6 February 2023 and as such no change has been assumed.

The detailed Council Tax charges (subject to confirmation) are presented at Appendix 3.

Section 13 outlined the impact of Collection Fund (the ringfenced account within which Council Tax and Business Rates were managed). The 2022/23 Collection Fund forecast outturn projection as outlined in the month 8 financial monitoring report produced a net surplus of £4.179m of which £4.130m was Oldham Council’s share and would be available to support the 2023/24 revenue budget.

Section 14 outlined the review of previously approved 2023/24 and 2024/25 Budget Reductions agreed in the 2021/22 and 2022/23 Revenue Budget Reports and advised that there has been some reprofiling of anticipated benefits.

Section 15 outlined the proposal to use capital receipts flexibly to finance expenditure leading to transformation in the sum of £2.600m for 2023/24 and a further £2.600m in 2024/25.

Section 16 detailed the revision to estimates for the financial years 2023/24 to 2024/25 compared to the position previously reported to Cabinet on the 12 December 2022 and the POSC in January. This presented a revised budget reduction requirement (before the use of reserves) of £27.993m for 2023/24 and £14.254m for 2024/25.

Having regard to the proposed increase in Council Tax, Section 17 presented the Administration’s approach to balancing the budget for 2023/24 via the budget reduction process. There are a total of 45 proposals presented in accordance with Political Portfolios. These were expected to deliver savings totalling £16.313m and have an FTE impact of 7 in 2023/24. The proposals also had an impact on 2024/25 of £7.575m (and a further £1.135m in 2025/26). All the proposals were presented in summary at Appendix 6 and in detail at Appendix 7.

Assuming approval of the 2023/24 budget reduction proposals and taking into account the impact of one-off budget reduction proposals, the budget reduction requirement for 2023/24 reduced to £11.680m and 2024/25 to £11.479m.

Section 18 advised how the budget for 2023/24 is balanced and the final position for 2024/25 as follows:

• The first step in balancing 2023/24 was however, to increase the budget gap by introducing a contribution to reserves in 2023/24 of £1.209m, payable to the GMCA in relation to 100% Business Rates Pilot scheme Gain.

• This increased the budget gap to £12.889m which was then balanced by the use of:

o £6.000m general reserves (approved as part of the 2022/23 budget);

o £2.900m of earmarked reserves as approved at Cabinet on 12 December 2022 to pump prime initiatives in Children’s Social Care;

o £1.044m of reserves created from resource returned by the GMCA in 2022/23; and

o Additional general reserves of £2.945m to balance the 2023/24 budget.

• After all the budget adjustments and impact of the use of reserves to balance 2023/24, there remained a budget gap still to be addressed of £10.327m for 2024/25.

Section 19 presents the expected level of reserves at the end of 2022/23 at £78.555m and how they support the 2023/24 budget including the balancing budget reserve for 2023/24.

Section 20 presents the Statement of Robustness, a requirement under Section 25 of the Local Government Finance Act 2003 which is the assurance by the Director of Finance on the robustness of the estimates used for the purposes of the revenue budget calculations and the adequacy of proposed reserves and balances. Balances are recommended at £20.012m. The Director of Finance was able to provide Members with the necessary assurances. A more detailed commentary was provided at Appendix 10.

Section 21 set outs out the proposed fees and charges for the financial year 2023/24 with a full schedule provided at Appendix 11.

Section 22 and 23 set out the Medium Term Financial Strategy covering the financial years 2024/25 to 2027/28 including the plans for the transformation programme that would deliver the savings required to balance the budgets in future years.

Section 24 set out the Council’s Pay Policy Statement in accordance with the requirements of Section 38 to 43 of the Localism Act 2011, which required full Council approval. The detailed statement is provided at Appendix 13.

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Sections 25 to the end of the report included options to consider, consultation comments and Legal and Procurement comments in accordance with standard practice. Appendix 14 presented an interim analysis of the results of the public consultation.

As advised above, the Revenue Budget 2023/24 and 2024/25 and Medium Term Financial Strategy 2023/24 to 2027/28 was presented to the POSC on 26 January 2023 based on the information available at that time. The Committee scrutinised the report and the other reports on the agenda that form a core part of the Council’s strategic financial planning framework.

The Committee considered in detail the Administration’s 45 budget reduction proposals for 2022/23 and was content to commend to Cabinet at a value of £16.313m in 2023/24, £7.575m for 2024/25 and a further £1.135m in 2025/26. The Committee was also content with all other aspects of the report, including the proposed changes to fees and charges and therefore commended it to Cabinet.

At the time of preparing this report, the one major announcement awaited was the Final Local Government Finance Settlement. Once this was received, its impact would be incorporated into the version of the Revenue Budget 2023/24 and 2024/25 and Medium Term Financial Strategy 2023/24 to 2027/28 report to be presented to Council on 1 March 2023.

 

Options/alternatives considered

Option 1 – Cabinet accepts the 2023/24 Council Tax and ASCP increases, the 2023/24 and 2024/25 budget assumptions and resulting financial forecasts presented within the report and the budget position at Appendix 5.

Option 2 – Cabinet proposes amendments to the financial forecasts which will change the resulting budget reduction requirement.

Option 3 – Cabinet approves and commends to Council all the 2023/24 and 2024/25 budget proposals included in this report and the approach to the use of reserves and balances.

Option 4 – Cabinet approves the fees and charges for 2023/24 as set out at Appendix 11 of the report.

Option 5 – Cabinet approves the revisions to the Council Tax Empty Property Discount and Council Tax Empty Property Premium.

Option 6 – Cabinet agrees to the delegation of decision making with regard to the pre-payment of pension contributions to the GMPF and the design of the grant allocation scheme for the Household Support Fund and the Council Tax Support Fund.

Option 7 - Cabinet requests that further work is undertaken on some or all of the budget proposals and fees and charges and the approach to balancing the budget and that Cabinet considers a revised position.

 

RESOLVED – That:

1.    The policy landscape and context in which the Council is setting its revenue budget for 2023/24; be approved and commended to Council.

2.    The financial forecasts for 2023/24 and 2024/25 having regard to the Provisional Local Government Finance Settlement and associated funding announcements be approved and commended to Council.

3.    Revisions to Budget Reductions approved in 2021/22 and 2022/23 resulting in a value of £3.655m for 2023/24 and £5.700m for 2024/25;be approved and commended to Council.

4.    The Flexible Use of Capital Receipts at a value of £2.600m for 2023/24 and 2024/25 be approved and commended to Council.

5.    A proposed overall 2023/24 Council Tax increase of 3.99% for Oldham Council services (1.99% for general purposes and 2% Adult Social Care Precept) resulting in the charges at Band D set out at Table 16 of the report and the detailed charges at Appendix 3; be approved and commended to Council.

6.    The 2023/24 Budget Reduction proposals at a value of £16.313m with a further £7.575m for 2024/25 and £1.135m for 2025/26; be approved and commended to Council.

7.    The proposed use of £12.889m of reserves to balance the 2023/24 budget and a transfer to reserves of £1.209m for Retained Business Rates; be approved and commended to Council.

8.    The proposal to draw on the Collection Fund for major preceptors of £129.543m for Borough Wide services and £108.995m for Council services (subject to confirmation) be approved and commended to Council.

9.    The proposed net revenue expenditure budget for 2023/24 for the Council set at £287.041m be approved and commended to Council.

10.The proposed fees and charges as set out in the schedule included at Appendix 11; be approved and commended to Council.

11.The proposed revisions to the Council Tax Empty Property Discount (paragraph 12.37) and Council Tax Empty Property Premium (paragraph 12.39) be approved and commended to Council.

12.The level of balances supporting the 2023/24 budget of £20.012m underpinned by the agreed policy on Earmarked Reserves; be approved and commended to Council.

13.The Pay Policy Statement included at Appendix 13 be approved and commended to Council.

14.The delegation to the Director of Finance in consultation with the Cabinet Member for Finance and Low Carbon to make a final decision on the feasibility of a pensions pre-payment if it represents value for money to the Council (Section 8.2-o); be approved and commended to Council.

15.The delegation of the determination of the Council’s approach to the Household Support Fund to the Director of Finance in consultation with the Cabinet Member for Finance and Low Carbon (Section 11.15) be approved and commended to Council.

16.The delegation of the determination of the Council’s approach to the Council Tax Support Fund and the associated discretionary fund to the Director of Finance in consultation with the Cabinet Member for Finance and Low Carbon (Section 11.18) be approved and commended to Council.