Agenda item

Revenue Budget 2023/24 and Medium Term Financial Strategy (MTFS)


Considered – The joint report of the Chief Executive and the Corporate Director - Strategic Resources setting out the financial issues and risks for the new North Yorkshire Council and asking the Executive to make recommendations to the County Council regarding the Revenue Budget for 2023/24, the Medium Term Financial Strategy (MTFS) for 2024/25 to 2025/26, Council Tax for 2023/24, the Capital Five Year Spending Plan, and an updated Treasury Management Strategy for the financial year 2023/24.


County Councillor Gareth Dadd introduced the report and thanked Gary Fielding and his team for their work on the budget, and for the production of the detailed report. The circumstances in which the Budget had been prepared, with the fluctuations in the financial markets, rising inflation and fetching eight budgets into one, had made this a difficult task.


Revenue Budget for 2023/24, the Medium Term Financial Strategy (MTFS) for 2024/25 to 2025/26, & Council Tax for 2023/24


Gary Fielding, Corporate Director for Strategic Resources introduced the report, beginning by thanking those involved in the preparation of the documents for their hard work and collaboration to get to the current position, in particular the Section 151 officers from the district and borough councils.


With bringing eight councils into one, there will be always be issues that arise, but it was felt that the new unitary authority is in a good position to confront these. He commented that there had never been a situation as financially challenging as the current one, even taking into account the events of the last 10 years, with austerity and having to recover from the Covid-19 pandemic. Last year was the largest single deficit for the County Council of circa £11m, but with North Yorkshire Council set to take on a projected £30m in year deficit next year as the unitary council, it remained a massive financial challenge. The £30m deficit is broken down to £18m worth of structural deficits inherited from the eight predecessor councils (made up of £11m from the county council and £7m from the district and borough councils) and a projected £12m shortfall due to inflation. It was noted that these inflationary pressures are likely to continue as are the pressures that are currently on council services.


Gary continued by detailing the £53m in extra cost pressures to be faced next year by North Yorkshire Council compared to this time last year. Examples of this include a rise in energy costs, from £6m spent in 2021/22 amongst the eight councils, increasing to an expected spend of £15.5m in 2022/23 and an estimated £31m in 2023/24. This substantial increase in energy will affect all services, but in particular Leisure services. In social care, despite an extra £18m of Government funding for next year, spending is forecast to increase by £33m, with £15m of that having to be found from core budgets. Another area of extra pressure is the provision of home to school transport, jumping from £30m in 2022/23 to increase by an extra £5.6 million for 2023/24.


The Equality Impact Assessment was highlighted and the implications set out, as well as the Section 25 statement, to offer a view of the robustness of estimates used in the Revenue Budget 2023/24 and the associated level of balances/reserves, in particular section 8.11.


Gary concluded his remarks by stating he was content that the new council was in as good a place as it can be and not in immediate danger of a Section 114 notice unlike other local authorities. The next 12 months would be key to deliver lasting, sensible and deliverable savings proposals, with the use of Reserves and Balances buying time to come forward with opportunities to transform services over the next financial year.  Savings of circa £70m need to be targeted over the next 3 years with an immediate focus on a very significant reduction to the in-year deficit in 2024/25. A dynamic approach will be needed and close working relations, but planning has already started to look ahead to this.


County Councillor Bryn Griffiths noted the very difficult times ahead, particularly if the economic situation deteriorates, but asked a question about the table at section 2.6 and the projected reduction in Business Rates (NNDR) income. Gary Fielding responded that the forecast in the table was a reflection of business rates changes nationally and an expectation of putting less reliance on bringing in income through business rates in the future, with more businesses offered concessions that is likely to continue.


County Councillor Steve Mason asked about community infrastructure levy (CIL) charge funds and the ability of Ryedale District Council to use funds received as CIL to be distributed as grants against a strict application criteria until 31st March 2023 as a sovereign council. He asked if Ryedale were forced to stop their CIL grant scheme, what guarantees would local residents have that the money available would still be spent in their local area? County Councillor Gareth Dadd responded that if district councils such as Ryedale came forward seeking approval for proposals to spend money received as CIL, this would be considered when they are received. He also noted that North Yorkshire Council will become the sole authority from 1st April 2023 and would have to deal with the ramifications if there was little or no CIL funds available yet a new school was required. Gary Fielding added that the Pickering starter units had received general consent which remains in place, with this including a £200k headroom to factor in inflation. However, the costs of the scheme had now gone above this headroom limit and the scope of the scheme may have to be revisited.


County Councillor Paul Haslam congratulated the Finance team on the work undertaken in preparing the report, before asking about section 10 and ensuring the appropriate audit and governance arrangements are in place around climate change to measure and monitor progress to ensure it is maintained towards the target of net carbon neutrality by 2030 (or as close as possible). In response, Gary Fielding noted the carbon footprint of the council is being regularly monitored to check it is reducing, and it was important as there will be big opportunities to reduce the environmental, operational and financial effect of these. He noted securing external funding will be of even greater importance as part of the new council to support transforming the energy efficiency of some of the property assets to get to carbon neutral. County Councillor Gareth Dadd added there may be an element of an ‘invest to save’ approach in a number of property assets to carry out carbon reduction works if a robust business case is presented.


Richard Flinton noted the monitoring of financial savings from climate change policies would be included on a savings scoreboard, with the progress of projects taking place in the Environment team and the performance monitoring arrangements.


County Councillor Simon Myers spoke about the proposal to raise council tax by 4.99% and stated that although he disliked increasing council tax, giving the increased cost of living, he also realised the gravity of the financial situation the new Council would face. He felt members would be failing in their long-term duty to residents if they did not raise council tax in order to deliver essential services, in particular to those who are vulnerable. County Councillor Gareth Dadd responded that he made the proposal to recommend to Full Council that council tax is increased by 4.99% with a heavy heart, and it was going to be tough to balance the need to provide services with the propensity of people to pay. He also noted that £2m had been allocated to prioritise limited funds to those who need it as part of the Council Tax Reduction policy.


Councillor Myers also asked about the proposal he had received from supporters of the ‘20s Plenty’ initiative to spend £1m to start implementing a 20mph speed limit in urban areas across North Yorkshire, and if this was taken forward, where the money would come from to fund it? County Councillor Gareth Dadd responded by setting out the choices that would be required, such as to cut £1m from another directorate to find the money, or that the funds could be found by dipping into reserves to fund a new 20mph speed limit, but this would be saving the financial problems for another day.


Gary Fielding concluded by noting that discussions were ongoing about the special expenses proposed for the Harrogate and Scarborough town councils and that the council tax rise proposed is only for the North Yorkshire Council element of the annual bill and there were future decisions to be taken by the PFCC and parish and town councils on their precept to note.


Gareth Dadd summed up the opportunities for savings that Local Government Reorganisation presented, and although the next 12 months in particular would be tough for the new authority as the section 25 statement made clear, the future could be bright. He noted that there may be technical changes made to the report ahead of consideration by the County Council.


Resolved -


That the Executive recommends to the County Council:


a)      That the Section 25 assurance statement provided by the Corporate Director, Strategic Resources regarding the robustness of the estimates and the adequacy of the reserves (paragraph 8.12) 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 weighted average charge of £1,759.96 – an increase of £83.64 (paragraph 4.3.8 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 2023/24 of £427,729,811.74 is approved;


d)      That a Net Revenue Budget for 2023/24, after use of reserves, of £623,458k (Section 5.0 and Appendix H) is approved;


e)      That in the event that the level of overall external funding (including from the final Local Government Settlement) results in a variance of less than £5m in 2023/24 then the difference to be addressed by a transfer to / from the Strategic Capacity Unallocated Reserve in line with paragraph 4.2.3 with such changes being made to Appendix F as appropriate.


f)        That the Corporate Director – Children and Young People’s Service is authorised, in consultation with the Corporate Director, Strategic 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 3.1.16).


g)      That the Medium Term Financial Strategy for 2023/24 to 2025/26, 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 and Open for Business, to carry out all necessary actions, including consultation where considered appropriate, to implement the range of savings as set out in Appendix B (ENV1 to 6).


i)        That the Corporate Director – Community Development is authorised, in consultation with the Executive Member for Planning for Growth, to carry out all necessary actions, including consultation where considered appropriate, to implement the range of savings as set out in Appendix B (CDS 1).


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 3).


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 5).


l)        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 to 3).


m)     That any outcomes requiring changes following Recommendations 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.


n)      That the proposed policy target for the minimum level of the General Working Balance is £62m in line with Appendix E.


o)      That £900k be provided annually to provide for a Member Locality Budget at £10k per annum per Member as set out in paragraph 4.8.2.


p)      That £50k be provided annually for each Area Constituency Committee to commission works they feel appropriate for their local areas as set out in paragraph 4.8.3 and to delegate authority to the Corporate Director, Community Development in consultation with the Executive Member for Planning for Growth to determine application of the scheme.


That the Executive notes and agrees the delegation arrangements referred to in Section 11 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.


That the Executive confirms introduction of a council tax premium of 100% on second homes following consultation subject to the legislation receiving Royal Assent as currently drafted.


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


North Yorkshire Council Capital Five Year Spending Plan


Gary Fielding introduced the report by setting out the consolidation of work that had been undertaken in developing a capital programme to bring eight councils into one. This was an ongoing piece of work, but it was a starting position for the new council, with further work needed to consider the exciting opportunities around property rationalisation, place shaping, regeneration and linking in with the Council Plan and objectives.


County Councillor Gareth Dadd noted the disappointment that only one of the Levelling Up Fund Round 2 bids submitted in North Yorkshire, for £19m to improve Catterick town centre by Richmondshire District Council, had been successful.


Resolved –


The Executive is recommended to:


a)      Approve the consolidated Capital Plan summarised at Appendix A;


b)      Note the next steps in transitioning to the new unitary council; and


c)       Agree that no action be taken at this stage to allocate any additional capital resources (paragraph 6.7)


Treasury Management


Gary Fielding introduced the report by noting it was an important strategy to have in place to be legally compliant and following best practice.


Resolved - That Executive Members recommend to the Council: -


a)      The Treasury Management Strategy Statement at Annex 1, consisting of the Annual Treasury Management Strategy (Section 1), Capital Prudential Indicators (Section 2), Borrowing Strategy (Section 3) and Annual Investment Strategy 2023/24 (Section 4), including in particular;


            i.       an authorised limit for external debt of £652.1m in 2023/24;


           ii.       an operational boundary for external debt of £631.1m in 2023/24;


         iii.       the Prudential and Treasury Indicators based on the Council’s current and indicative spending plans for 2023/24 to 2025/26;


         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 2023/24;


         vi.       the Corporate Director – Strategic 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;


b)      The Capital Strategy as attached as Annex 2;


c)       The Debt Recovery Policy set out at Annex 3;


d)      That the Audit Committee be invited to review Annex 1, 2 and 3 and submit any proposals to the Executive for consideration at the earliest opportunity.


Supporting documents: