Agenda item

A report that provides details of the budget reduction requirement and the Administration’s budget proposals for 2025/26 and a forecast of the 2026/27 position having regard to the Provisional Local Government Finance Settlement (PLGFS). The report also presents the financial forecasts for the remainder of the Medium-Term Financial Strategy (MTFS) period 2026/27 to 2029/30.

The Cabinet considered a report of the Assistant Director of Finance that provided members with the budget reduction requirement, the Administration’s budget proposals for 2025/26, a forecast of the 2026/27 position having regard to the Provisional Local Government Finance Settlement (PLGFS) published on 18^th December 2024 and the subsequent Final Local Government Finance Settlement (LGFS) published on 3^rd February 2025. The report also presented the financial forecasts for the remainder of the Medium-Term Financial Strategy (MTFS) period 2026/27 to 2029/30.

The submitted report presented the Council’s Revenue Budget for 2025/26 together with the budget reduction requirement and the Administration’s budget proposals for 2025/26 including Council Tax intentions. It also provided a forecast of the 2026/27 position and the financial forecasts for the remainder of the MTFS period, 2027/28 to 2029/30.

A version of the Revenue Budget 2025/26 and 2026/27 and Medium Term Financial Strategy 2025/26 to 2029/30 - based on the Provisional Local Government Finance Settlement (PLGFS) received on 18^th December 2024, had been presented to the Governance, Strategy and Resources Scrutiny Board on 29^th January 2025. The Board scrutinised the report and the other reports on the agenda which formed a core part of the Council’s strategic financial planning framework and recommended them to Cabinet.

Section 1 presented an introduction to the report and explains 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 presented the Local Government Finance Policy Statement which sets out the Government’s intentions to assist financial planning for Councils. It also details the impacts of the 2025/26 Provisional and Final LGFS which was the seventh consecutive one-year Settlement. This included key information in relation to overall funding levels, Council Tax referendum limits and grants for 2025/26.

Section 4 presented the 2024/25 revised budget and year end forecasts. The starting point for preparing the 2025/26 revenue budget estimates was the underlying base budget of £289.1m. The 2024/25 revenue budget forecast outturn position highlighted a current unfavourable projected variance of £14.2m; which will need to be financed from reserves. This was in addition to the general contribution from reserves of £10.8m towards the 2024/25 budget approved by Council in February 2024, plus contributions from other Earmarked Reserves for specific projects/initiatives of some £4.6m. This meant that the total contribution from reserves in 2024/25 would be £29.5m: a situation that was not sustainable and which had significantly reduced the financial resilience of the Council.

Section 5 summarised the proposed budget for 2025/26 and provided the context for the strategy adopted. It provided a budget forecast whereby £1.05m could be used to replenish reserves (a more detailed breakdown of the indicative budget for 2025/26 can be found at Appendix 7. To the report).

Section 6 presented a range of expenditure pressures that would contribute to the budget gap. In total they contributed £41.2m to the 2025/26 position, an increase of £18.1m compared to the forecast presented to Full Council on 28^th February 2024. The expenditure pressures for 2026/27 were projected at a further £29.9m. The main pressures arose from pay, expenditure on Council buildings, increased demand and prices for Children’s and Adults’ Social Care service provision and an increased demand for temporary accommodation. This section of the report also outlined the forecast impact of the payment of levies and contributions to the Greater Manchester Combined Authority (GMCA) and the Environment Agency (EA).

Section 7 presented the impacts of both the Provision and Final LGFS announced on 18^th December 2024 and 3^rd February 2025 respectively with regard to central Government Grants. This has resulted in a net increase of some £18.4m in resources from that forecast at Budget Council in February 2024.

Section 8 sets out how the Locally Generated Income from both Business Rates and Council Tax will support the Council budget. The LGFS confirmed referendum limits for general purpose Council Tax would remain at 3% each year from April 2025 without the need to hold a referendum. In addition, the threshold for Adult Social Care Precept (ASCP) would remain at a maximum of 2% each year from April 2025. There remained a requirement to evidence that the funds generated from this precept are used for Adult Social Care expenditure. This section of the report also sets 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 has increased marginally from a forecast £55.2m to £58.6m as the Council continues to benefit from the GMCA Business Rates Retention Scheme. The GMCA is entitled to part of this benefit, currently estimated at £1.2m. The Business Rates income figure reflects the Council’s NNDR1 Government return submitted on 31^st January 2025.

The Council Tax position for 2025/26, advising that:

·         The Council Tax Base is 59,501, up from 59,380 in 2024/25 and slightly under the position assumed in February 2024.

·         A 2.99% general purpose Council Tax increase is proposed together with a 2% increase for the Adult Social Care Precept.

·         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 LGFS.

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

·         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 £122.2m in 2025/26.

·         The Greater Manchester Police and Crime Commissioner precept was confirmed on 27 January 2025 with an increase of £14 for a Band D Council Tax.

·         The Greater Manchester Mayoral General Precept (including Fire Services) was confirmed on 7 February 2025. 

·         Saddleworth Parish Council agreed its precept on 27 January 2025 and Shaw and Crompton Parish Council agreed its precept on 28 January 2025. Confirmed figures are presented in the report.

The impact of the Collection Fund (the ringfenced account within which Council Tax and Business Rates are managed). The 2024/25 Collection Fund forecast outturn projection as outlined in the Month 9 financial monitoring report produces a net deficit of £1.2m of which the vast majority is Oldham Council’s share and must be financed from the 2025/26 revenue budget.

Section 9 outlined the proposed savings that are required to balance the 2025/26 budget. There are a total of 25 savings proposals presented in accordance with Political Portfolios. Overall, approximately 120 FTE posts are affected, of which over 80% are currently vacant. The proposals also have a marginal impact on 2026/27 of £0.8m. It also confirms the use of capital receipts flexibly to finance expenditure leading to transformation in the sum of £2.6m for 2025/26 and a further £2.6m in 2026/27. All the proposals are presented in summary at Appendix 3, to the report and in detail at Appendix 4, to the report.

Section 10 outlined the risks and uncertainties inherent in the budget forecast.

Section 11 presented the expected level of Reserves at the end of 2024/25 at £40.4m, which can support the 2025/26 budget including the Balancing Budget and Fiscal Mitigation reserves for 2025/26.

Section 12 sets outs out the proposed fees and charges for the financial year 2025/26.

Section 13 sets out the Medium-Term Financial Strategy covering the financial years 2026/27 to 2029/30.

Section 14 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. It remains the recommendation that general reserves are increased from £20m to £30m over the MTFS period, reflecting the increasingly volatile expenditure pressures the Council faces and the low tax base from which the Council is able to raise additional income. The planned replenishment of £1.05m towards reserves in 2025/26 together with the return of an estimated £3m in respect of the GM Waste Disposal Authority’s reserves is a welcome first step in this direction. However, the strategy will need to be developed further in 2025/26 to continue to raise the level of general reserves over the MTFS period and improve the financial resilience of the Council. The Director of Finance is able to provide Members with the necessary assurances in respect of 2025/26 but the Council’s financial position in later years remains uncertain. A more detailed commentary is provided in Section 14 and at Appendix 5, to the report.

Sections 15 to the end of the report include options to consider, consultation comments and Legal comments in accordance with standard practice.

Given the importance of delivering budget reductions and embedding the programme of transformational change, during 2025/26, there would be a regular 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.

As reported above, the Revenue Budget 2025/26 and 2026/27 and Medium-Term Financial Strategy 2025/26 to 2029/30 were presented to the Governance, Strategy and Resources Scrutiny Board on 29^th January 2025, based on the information available at that time. The Board scrutinised the report and the other reports on the agenda which formed a core part of the Council’s strategic financial planning framework.

The Scrutiny Board considered in detail the Administration’s 25 budget reduction proposals and were content to commend the report to Cabinet at a value of £8.788m in 2025/26 and a further £0.250m in 2026/27. The Scrutiny Board were also content with all other aspects of the report, including the proposed changes to fees and charges and therefore commended these to the Cabinet also.

A further meeting of the Scrutiny Board was held on 6^th February 2025, which considered budget proposals put forward by the main Opposition Parties.

As advised above the Final Local Government Finance Settlement was received on 3^rd February 2025. The results were incorporated into this version of the Revenue Budget 2025/26 and 2026/27 and the Medium-Term Financial Strategy 2025/26 to 2029/30 report. No further significant amendments were anticipated to the version of this report to be presented to Council on 6^th March 2025.

Options/Alternatives considered:

·         Option 1 – that the Cabinet accepts the 2025/26 Council Tax and ASCP increases, the 2025/26 and 2026/27 budget assumptions and resulting financial forecasts presented within the report and the budget position at Appendix 8, to the report.

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

·         Option 3 – that the Cabinet approves and commends to Council all the 2025/26 and 2026/27 budget proposals included in this report and the approach to the use of reserves and balances.

·         Option 4 - that the Cabinet approves the fees and charges for 2025/26 as set out at Appendix 8, to the report.

·         Option 5 – that the 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.

Preferred Option: Options 1, 3 and 4 are the preferred options. Assumptions were based on objective research and the latest available information. The Council has a statutory duty to set a balanced budget and the budget reductions included in the submitted report along with the proposed use of reserves fulfil that requirement.

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 2025/26.

2.    The financial forecasts for 2025/26 and 2026/27 having regard to the Local Government Finance Settlements and associated funding announcements.

3.    The Flexible Use of Capital Receipts at a value of £2.6m for 2025/26 and 2026/27.

4.    A proposed overall 2025/26 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 8-3 of the report.

5.    The 2025/26 Budget Reduction proposals at a value of £8.8m.

6.    The proposed transfer of reserves of £1.05m to improve the financial robustness of the Council.

7.    The proposal to draw on the Collection Fund for major preceptors of £146.0m for Borough Wide services and £122.2 m for Council services.

8.    The proposed net revenue expenditure budget for 2025/26 for the Council, set at £321.7m as outlined in Table 5.1 and at Appendix 7 to the report.

9.    The proposed fees and charges, as set out in the schedule included at Appendix 6, to the report.

10.The level of general fund balances supporting the 2025/26 budget of £18.9m underpinned by the agreed policy on Earmarked Reserves.