Agenda item

Purpose of Report

 

To seek approval for, and make recommendations to the Council regarding:

 

·        Revenue Budget 2025/26 and Medium Term Financial Strategy to 2027/28

·        Capital Five Year Spending Plan

·        Treasury Management and Capital Strategy

·        Housing Revenue Account Budget 2025/26 and Medium Term Financial Plan

Considered – A joint report of the Chief Executive and the Corporate Director Resources setting out the financial issues and risks for North Yorkshire Council and asking the Executive to make recommendation to the Council regarding the Revenue Budget for 2025/26, the Council Tax for 2025/26 and the Medium Term Financial Strategy (MTFS) for 2026/27 to 2027/28.

 

The Executive Member for Finance and Resources, Councillor Gareth Dadd, introduced the report and thanked the Corporate Director Resources and his team for their work on the budget.  The financial settlement and longstanding issues over income and demand had made this one of the most difficult MTFS and budgets to put together for this council and its predecessors.  He referred to the removal of the £14.3m Rural Services Delivery Grant, which had been introduced in recognition of the higher costs of service delivery in rural areas, whilst this had been partly offset by some additional grants and funding, the net effect of the grant loss would be in excess of £21m per annum, leading to a worsening position in funding terms of £6m per annum. 

 

Councillor Dadd reported that when assessing the Council’s position the government had assumed that council tax would be put up by the maximum amount, which was considered to be unfair as average earnings were below that of other areas and average council tax was already higher.  He went on to make the following key points:

 

·       Efficiencies and savings of £34m for next year were being made, with a planned accumulated sum of £63m by 2027/28, but this would not be enough and in less than 2 years after the end of the MTFS the Council would run out of useable reserves. 

·       A total of £90m of savings had been made as a result of Local Government Reorganisation, but the benefits of this would deplete over time.

·       There was no alternative to a proposed increase of 4.99% for Council Tax, an assumption of 2.99% increase had been made for future years.   

·       The Council would continue to prioritise spend for the most vulnerable including the council tax reduction scheme and growth in social care for adults and children.

·       The proposed spending review by government ahead of next year’s settlement presented a risk for future years

 

The Corporate Director Resources, Gary Fielding, drew Members’ attention to the following key points:

 

·       The table at paragraph 2.7 outlined a projected shortfall of £4.9m in 2025/26, increasing to £34.4m in 2027/28 at the end of the MTFS.  This was predicated on an assumption that there were no changes to funding formulas, which was unlikely.  The table also showed a significant amount of growth, but this was offset by increased demand for services, increasing costs, which included waste harmonisation and investment in council housing funded through the second homes premium.

·       Council approval was also required for the Council Tax Reduction Scheme, attached as an Appendix to the Addendum report circulated the previous day, and there was an additional recommendation for Executive on this.

·       Paragraph 4.3.10 set out the proposed Council Tax increase of 4.99%, which consisted of 2.99% for Council Tax and 2% for the Adult Social Care precept. Paragraph 4.3.13 referred to the second homes premium, which was expected to raise £10.6m and a report would be taken to Executive in February on this.

·       Paragraph 4.5.3 provided details of opening balances as at 1 April 2025, useable reserves were anticipated to run out 2 years after the end of the MTFS if no corrective action was taken

·       Section 4.6 provided details of the financial outlook and detailed three areas which had been logged as threats:

o   combination of the Spending Review and Funding Reform by the government

o   the SEND system was unsustainable and details of how the government would address this were awaited

o   the demand for and high cost of specialist places for adults and children

·       Section 4.7 gave details of savings and where they were coming from.

·       Section 4.8 provided information on the two main areas where the Council was investing: £59.2m for HAS Care and Support Hubs and £5m for property maintenance to address legacy estates issues across all eight councils, including the rationalisation agenda.

·       Section 7 included information on equality implications and confirmed that the majority of savings would not impact on the frontline, but were linked to LGR back office and structural changes

 

The Corporate Director then drew specific attention to his Section 25 statement set out at paragraph 8.9 – 8.11 which confirmed confidence in the financial position as set out in the report.

 

He then drew attention to a typographical error in Appendix C – 6,111 should be amended to read 3,687, all other figures were correct.  An additional recommendation (e) had been omitted, as detailed in the recommendations below, to enable a transfer of up to £10m if required following the final local government finance settlement.

 

Councillor Bryn Griffiths requested details of projected savings as a result of changes to the Home to School Transport policy, including information on the drivers for changes to the policy and it was agreed that a written response would be provided.  Councillor Griffiths also requested details on what cost benefit analysis had been done in relation to the proposal to reduce locality grants.  In response Councillor Gareth Dadd advised it was for local members to do their own evaluation of the best way to spend the money and it would not be possible to undertake an analysis of the thousands of schemes which had bene supported.

 

The Executive Member for Culture, Arts and Housing, Councillor Simon Myers, then introduced the Housing Revenue Account (HRA) stating that the Council had inherited 8,300 council homes as part of LGR, and the Council had committed to develop 500 new council homes.  Funding was being obtained to bring 2,700 homes up to modern standards of energy efficiency.  Whilst the HRA would go into a slight deficit until 2030 due to the requirement to build more homes and upgrade existing homes, it was expected to go into surplus again after that.  It was proposed that rents be increased by 2.7% to enable investment in the necessary upgrading and energy efficiency works.  Gary Fielding confirmed the financial arrangements in relation to the Warm Homes Social Fund bid for energy efficiency improvements.

 

Councillor Gareth Dadd then introduced the Capital Plan report, which detailed £940m of possible investments, and the Treasury Management and Capital Strategy report.

 

Resolved (unanimously) –

 

That Executive recommends to Council

 

i)            That Executive notes and agrees the delegation arrangements referred to in Section 11 of the Revenue Budget and MTFS report that authorise the Corporate Directors to implement the Budget proposals contained in this report for their respective service areas and for the Chief Executive in those areas where there are cross-Council proposals, be noted and agreed.

 

ii)          That Executive have regard to the Public Sector Equality Duty (identified in Section 7 and Appendix I) in approving the Budget proposals contained in the Revenue Budget and MTFS report.

 

iii)         That in regard to the Revenue Budget and MTFS report, the following be recommended to Council:

 

a)    That the Section 25 assurance statement provided by the Corporate Director, Resources regarding the robustness of the estimates and the adequacy of the reserves (paragraph 8.11) and the risk assessment of the MTFS detailed in Section 9 are noted;

 

b)    An increase in Council Tax of 4.99% (basic 2.99% and Adult Social Care 2%) resulting in a Band D charge of £1,939.54 – an increase of £92.18 (paragraph 4.3.7 and Appendix D);

 

c)     That, in accordance with Section 31A of the Local Government Finance Act 1992 (as amended by Section 74 of The Localism Act 2011), a Council Tax requirement for 2025/26 of £494,205,207.33 is approved (paragraph 4.3.10);

 

d)    That a Net Revenue Budget for 2025/26 of £640,918k (Appendix G) is approved

 

e)    That in the event that the level of external funding (including the Local Government Finance Settlement) results in a variance of less than £10m in 2025/26 then the difference is to be addressed by a transfer to / from the Strategic Capacity Reserve with such changes being reflected elsewhere in the report

 

f)      That the Corporate Director – Children and Young People’s Service is authorised, in consultation with the Corporate Director, Resources and the Executive Members for Schools and Finance, to take the final decision on the allocation of the Schools Budget including High Needs, Early Years and the Central Schools Services Block (paragraph 3.1.15).

 

g)    That the Medium Term Financial Strategy for 2026/27 to 2027/28, and its caveats, as laid out in Section 3.0 and Appendix G is approved in line with the proposed council tax option.

 

h)    That the Corporate Director – Environment is authorised, in consultation with the Executive Members for Highways & Transportation, Managing our Environment and Open to Business, to carry out all necessary actions, including consultation where considered appropriate, to implement the range of savings as set out in Appendix B (ENV 1 to 34).

 

i)      That the Corporate Director – Community Development is authorised, in consultation with the Executive Members for Open to Business and Culture, Arts and Housing, to carry out all necessary actions, including consultation where considered appropriate, to implement the range of savings as set out in Appendix B (CD 1 to 13).

 

j)      That the Corporate Director – Health and Adult Services is authorised, in consultation with the Executive Members for HAS, to carry out all necessary actions, including consultation where he considers it appropriate, to implement the range of savings as set out in Appendix B (HAS 1 to 10).

 

k)     That the Corporate Director – Children and Young People’s Services are authorised, in consultation with the Executive Members for CYPS, to carry out all necessary actions, including consultation where he considers it appropriate, to implement the range of savings as set out in Appendix B (CYPS 1 to 6).

 

l)      That the Corporate Director – Resources, in consultation with the Executive Members for Finance & Resources and Corporate Services, to carry out all the necessary actions, including consultation where he consider it appropriate, to implement the range of savings as set out in Appendix B (RD 1 to 8 and CM 1 to 2).

 

m)   That the Chief Executive is authorised, in consultation with the Executive Members for Central Services, to carry out all necessary actions, including consultation where he considers it appropriate, to implement the range of savings as set out in Appendix B (CS 1-10).

 

n)    That any outcomes requiring changes following Recommendations g), h), i), j), k) and l) above be brought back to the Executive to consider and, where changes are recommended to the existing major policy framework, then such matters to be considered by full Council.

 

o)    That £5,000k be added to the Corporate Property Maintenance budget in 2025/26 on a one-off basis as set out in paragraph 4.8.5 to address urgent needs and that a scheme is produced to aid decision making on allocation of this sum with the design of the scheme being delegated to the Corporate Director in consultation with the Executive Member for Finance and Property.

 

p)    That the proposed policy target for the minimum level of the General Working Balance is £32m in line with Appendix F and paragraph 4.5.3.

 

iv) The Executive also agreed to recommend the following to Council:

 

a)    Approval of the refreshed Capital Plan summarised at paragraph 3.3

 

b)    The Treasury Management Strategy Statement Annex 1, consisting of the Annual Treasury Management Strategy (Section 1), Capital Prudential Indicators (Section 2), Borrowing Strategy (Section 3) and Annual Investment Strategy 2025/26 (Section 4), including in particular:

 

i.                an authorised limit for external debt of £643.7m in 2025/26;

ii.              an operational boundary for external debt of £623.7m in 2025/26;

iii.             the Prudential and Treasury Indicators based on the Council’s current and indicative spending plans for 2025/26 to 2027/28;

iv.             a limit of £60m of the total cash sums available for investment (both in house and externally managed) to be invested in Non-Specified Investments over 365 days;

v.              a Minimum Revenue Provision (MRP) policy for debt repayment to be charged to Revenue in 2025/26;

vi.             the Corporate Director – Resources to report to the Council if and when necessary during the year on any changes to this Strategy arising from the use of operational leasing, PFI or other innovative methods of funding not previously approved by the Council;

 

c)     The Capital Strategy as shown at Annex 2 of the Treasury Management and Capital Strategy Report;

 

d)    That the Audit Committee be invited to review Annex 1 and 2 and submit any proposals to the Executive for consideration at the earliest opportunity

 

e)    Recommends to Council the approval of the HRA budget for 2025/26 as set out in paragraph 6.3, being a net deficit of £3.901m which will be drawn from the HRA working balance;

 

f)      Recommends to Council the approval of the HRA Medium term financial plan for 2026/27 and 2027/28 and the 30-year HRA Business Plan, as set out in paragraph 6.3 and Appendix B respectively;

 

g)    Agrees an increase of 2.7% be applied to social, affordable and hostel rents from 1 April 2025 and recommends this to the Council for approval;

 

h)    Agrees an increase of 2% be applied to shared ownership rents from 1 April 2025 and recommends this to the Council for approval.

 

i)      Recommends to Council the approval of matched funding to support the Warm Homes Social Fund Wave 3 up to a maximum of £28.9m with a report back to Executive to approve a revised spending plan in the event of a lesser grant award.

 

j)      That the Executive recommends to Council that the Council Tax Reduction Scheme at Annex A is approved for 2025/26.