Agenda item

A report that provides details of the budget reduction requirement and the Administration’s budget proposals for 2024/25 and a forecast of the 2025/26 position having regard to the Provisional Local Government Finance Settlement. The report also presents the financial forecasts for the remainder of the Medium-Term Financial Strategy period 2025/26 to 2028/29.

The Cabinet considered a report of the Director of Finance which provided members with the budget reduction requirement and the Administration’s budget proposals for 2024/25 and a forecast of the 2025/26 position having regard to the Provisional Local Government Finance Settlement (PLGFS) published on 18 December 2023. The report also presents the financial forecasts for the remainder of the Medium-Term Financial Strategy (MTFS) period 2025/26 to 2028/29.

The submitted presented the Council’s Revenue Budget for 2024/25 together with the budget reduction requirement and the Administration’s budget proposals for 2024/25 including Council Tax intentions. It also provides a forecast of the 2025/26 position and the financial forecasts for the remainder of the MTFS period, 2026/27 to 2028/29. A version of the Revenue Budget 2024/25 and 2025/26 and Medium Term Financial Strategy 2024/25 to 2028/29 had been presented to the Governance, Strategy and Resources Scrutiny Board’s meeting on 25^th January 2024. The Board scrutinised the report and the other reports on the agenda that formed a core part of the Council’s strategic financial planning framework.

Section 1 presented an introduction to the report and explained the report format. Section 2 sets out 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 of the report presented Local Government Finance developments which have an impact on 2024/25 and future years budgets. It also highlighted the Chartered Institute of Public Finance and Accountancy (CIPFA) Financial Resilience Index, the CIPFA Financial Management Code.

Section 4 presented the Local Government Finance Policy Statement 2024 to 2025 which set out the Government’s intentions to assist financial planning for Councils. It also detailed the impact of the 2024/25 PLGFS which had been the sixth consecutive one-year Settlement. This included key information in relation to overall funding levels, Council Tax referendum limits and grants for 2024/25.

Section 5 presented the 2023/24 revised budget and year end forecasts. The 2023/24 revenue budget forecast outturn position (detailed at Table 5 in the report) highlighted a current unfavourable projected variance of £16.2m; which would need to be financed from reserves. This represented an addition to the general contribution from reserves of £9.5m approved by Council in March 2023, plus contributions from other earmarked reserves for specific projects/initiatives of some £7m. This meant that the total contribution from reserves in 2023/24 would be in the order of £34m: a situation that was not sustainable and which had significantly reduced the financial resilience of the council.

Section 6 of the report presented a range of expenditure pressures that contributed to the budget gap. In total they contribute £28.7m, an increase of £13.9m compared to the forecast presented to Full Council on 1st March 2023. The expenditure pressures for 2025/26 were projected at a further £23m. The main pressures arise from pay, expenditure on Council buildings, increased demand and prices for Children’s Social Care service provision and an increased demand for temporary accommodation.

Section 7 sets 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 a reduction in expenditure of £2.1m in the 2024/25 budget forecast compared to the March 2023 forecast, of which £1.4m relates to bus reform expenditure deferred until 2025/26. The final levies position will be confirmed during February 2024.

Section 8 presented the impact of the PLGFS announced on 18^th December 2023 in respect of central Government Grants. It also provides a commentary on the grants announced by or derived from the PLGFS. There was, it was noted, no significant change from the assumptions reported to Council in March 2023.

Section 9 sets out how the Locally Generated Income from both Business Rates and Council Tax will support the Council budget. The PLGFS confirmed referendum limits for general purpose Council Tax will remain at 3% each year from April 2024 without the need to hold a referendum. In addition, the threshold for Adult Social Care Precept (ASCP) will remain at a maximum of 2% each year from April 2024. There remains a requirement to evidence that the funds generated from this precept are used for Adult Social Care expenditure. The section sets out:

A.   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 has increased from a forecast £50.2m to £56.3m as the Council continues to benefit from the GMCA Business Rates Retention Pilot Scheme. Most of the increase relates to increased transitional payments and a reduction in the provision in respect of appeals. The GMCA is entitled to part of this increase in Business Rates Income, currently estimated at £1.2m. The Business Rates income figure reflects the information contained within the NNDR1 Government submitted on 31 January 2023.

B.   The Council Tax position for 2024/25, advising that:

                                          i.    The Council Tax Base is 59,380, up from 58,500 in 2023/24 and broadly in line with the position assumed in March 2023. o A 2.99% increase in general purposes Council Tax increase is proposed together with a 2% increase for the Adult Social Care Precept.

                                        ii.    An increase of 4.99% would not require a Council Tax referendum as it would be within the referendum criteria issued by the Government in the PLGFS.

                                       iii.    The Council proposes to continue to provide no Council Tax Empty Property Discount and increase the Empty Property Premium from 1st April 2025.

                                       iv.    Total Council Tax to be generated for use by the Council based on the Tax Base and the 4.99% increase (including the adult care social precept) is £116.2m in 2024/25.

                                        v.    The Greater Manchester Police and Crime Commissioner precept was confirmed on 30 January 2024 with an increase of £13 for a Band D Council Tax. o The Greater Manchester Mayoral General Precept (including Fire Services) will be confirmed on 9 February 2024.

                                       vi.    Saddleworth Parish Council agreed its precept on 18 December 2023 and Shaw and Crompton Parish Council agreed its precept on 30 January 2024. Confirmed figures are presented in the report.

Section 10 of the report outlined the impact of Collection Fund (the ringfenced account within which Council Tax and Business Rates are managed). The 2023/24 Collection Fund forecast outturn projection as outlined in the month 8 financial monitoring report produced a net surplus of £0.75m of which the vast majority was Oldham Council’s share and would be available to support the 2024/25 revenue budget.

Section 11 outlined the review of previously approved 2024/25 and 2025/26 Budget Reductions agreed in the 2021/22 and 2023/24 Revenue Budget Reports and advises that there has been some reprofiling of anticipated benefits.

Section 12 detailed the proposal to use capital receipts flexibly to finance expenditure leading to transformation in the sum of £2.6m for 2024/25 and a further £2.6m in 2025/26.

Section 13 of the report looked at the revision to estimates for the financial years 2024/25 to 2025/26 compared to the position previously reported to Council on 1^st March 2023. This presented a revised budget reduction requirement (before the use of reserves) of £20.6m for 2024/25 and £7.0m for 2025/26. Having regard to the proposed increase in Council Tax,

Section 14 presented the Administration’s approach to balancing the budget for 2024/25 via the budget reduction process. There were a total of 34 proposals presented in accordance with Political Portfolios. These were expected to deliver savings totalling £11.0m and to impact approximately 90 FTEs in 2024/25. The proposals also had an impact on 2025/26 of £4.8m. All the proposals were presented in summary at Appendix 5 and in more detail at Appendix 6. Assuming approval of the 2024/25 budget reduction proposals and taking into account the impact of one-off budget reduction proposals, the budget reduction requirement for 2024/25 reduces to £9.5m and 2025/26 to £2.3m, as set out at Table 17.

Section 15 of the report advised how the budget for 2024/25 would be balanced and the final position for 2025/26 as follows:

a.    The first step in balancing 2024/25 was, however, to increase the budget gap by introducing a contribution to reserves in 2024/25 of £1.2m, payable to the GMCA in relation to 100% Business Rates Pilot Gain.

b.    This increases the budget gap to £10.8m which is then balanced by the use of: £2.5m general reserves (approved as part of the 2023/23 budget); and additional general reserves of £8.3m to balance the 2024/25 budget.

c.    After all the budget adjustments and impact of the use of reserves to balance 2024/25, there remains a budget gap still to be addressed of £11.5m for 2025/26. Section 16 presents the expected level of earmarked reserves at the end of 2023/24 at £36.8m that can support the 2024/25 budget including the Balancing Budget and Fiscal Mitigation reserves for 2024/25.

Section 17 presented 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. General reserves were recommended to be increased from £19m to £30m reflecting the increasingly volatile expenditure pressures that the Council faces and the low tax base from which the Council is able to raise additional income. A strategy will need to be developed in 2024/25 to raise the level of general reserves over the MTFS period and increase the financial resilience of the Council. The Director of Finance is able to provide Members with the necessary assurances in respect of the 2024/2025 but the Council’s financial position in later years is far less certain. A more detailed commentary is provided in Section 17 and at Appendix 9, to the report.

Section 18 established the proposed fees and charges for the financial year 2024/25.

Sections 19 and 20 of the report set out the Medium-Term Financial Strategy covering the financial years 2025/26 to 2028/29 including the plans for the transformation programme, that will begin to help deliver the savings required to balance the budgets in future years.

Section 21 sets out the Council’s Pay Policy Statement in accordance with the requirements of Section 38 to 43 of the Localism Act 2011, which requires full Council consideration and approval.

Sections 22 and the remainder of the report include options to consider, consultation comments and Legal and Procurement comments in accordance with standard practice. Given the importance of delivering budget reductions and embedding the programme of transformational change, during 2024/25, a Delivery Board chaired by the Leader of the Council is intended to regularly review of the progress of existing change programmes against the delivery milestones and financial targets. It will also ensure that there is continuous emphasis on the delivery of change and the achievement of the budget reductions required in line with the three-year strategy. As advised above, the Revenue Budget 2024/25 and 2025/26 and Medium-Term Financial Strategy 2024/25 to 2028/29 was presented to the Governance, Strategy and Resources Scrutiny Board’s meeting on 25^th January 2024 based on the information available at that time. The Board scrutinised the report and the other reports on the agenda that form a core part of the Council’s strategic financial planning framework. The Board considered in detail the Administration’s 34 budget reduction proposals and was content to commend to Cabinet at a value of £11.0m in 2024/25 and a further £4.8m in 2025/26. The Board 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 Director of Finance advised that one major announcement awaited was the Final Local Government Finance Settlement. Once this is received, its impact will be incorporated into the version of the Revenue Budget 2024/25 and 2025/26 and Medium-Term Financial Strategy 2024/25 to 2028/29 report to be presented to the Council on 28^th February 2024.

Options/alternatives considered:

a.    Option 1 – Cabinet accepts the 2024/25 Council Tax and ASCP increases, the 2024/25 and 2025/26 budget assumptions and resulting financial forecasts presented within the report and the budget position at Appendix 7.

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

c.    Option 3 – Cabinet approves and commends to Council all the 2024/25 and 2025/26 budget proposals included in this report and the approach to the use of reserves and balances.

d.    Option 4 – Cabinet approves the fees and charges for 2024/25 as set out at Appendix 10 of the report.

e.    Option 5 - 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 the Cabinet approves and commends to Council:

1.    The policy landscape and context in which the Council is setting its revenue budget for 2024/25.

2.    The financial forecasts for 2024/25 and 2025/26 having regard to the Provisional Local Government Finance Settlement and associated funding announcements.

3.    The Flexible Use of Capital Receipts at a value of £2.6m for 2024/25 and 2025/26.

4.    A proposed overall 2024/25 Council Tax increase of 4.99% for Oldham Council services (2.99% for general purposes and 2% Adult Social Care Precept) resulting in the charges set out at Table 12 of the report.

5.    To approve the introduction of a 100% Council Tax Premium to be levied on empty properties and second homes from 1st April 2025 as set out in paragraph 9.34.

6.    The 2024/25 Budget Reduction proposals at a value of £11.0m with a further £4.8m for 2025/26.

7.    The proposed use of £10.8m of reserves to balance the 2024/25 budget as set out in Table 18 of this report.

8.    The proposal to draw on the Collection Fund for major preceptors of £138.1m for Borough Wide services and £116.2m for Council services (subject to confirmation).

9.    The proposed net revenue expenditure budget for 2024/25 for the Council set at £298.5m as set out at in paragraph 15.6 and at Appendix 8.

10.The proposed fees and charges as set out in the schedule included at Appendix 10.

11.The level of balances supporting the 2024/25 budget to be retained at £19.8m underpinned by the agreed policy on Earmarked Reserves.

12.The draft pay policy statement included at Appendix 12.

13.The delegation to the Cabinet Member for Finance and Corporate Resources and the Director of Finance to make a final decision on the feasibility of a pensions pre-payment if it represents value for money to the Council (Section 6.2-n).