Agenda item

To consider the strategic overview of the draft Medium Term Financial Plan 2024-27.

The Committee considered a report, set out at Agenda pages 17 to 28, which provided the strategic context for the Committee’s scrutiny of the Budget setting process for 2024/25.

Imogen Shepherd-Dubey (Executive Member for Finance) and Graham Ebers (Deputy Chief Executive and S151 Officer) attended the meeting to present the report and answer Member questions.

The report stated that the Council, along with other local authorities across the country faced unprecedented challenges in setting a balanced budget for 2024/25. Inflation had continued to cause financial challenges in a number of areas: utilities, construction, pay, contracts for services amongst many other rising costs linked to a Consumer Price Index (CPI) which remained in excess of 6%. Conversely, the Council’s primary source of income, Council Tax, was capped at 2.99% and other key lines of income such as car parking and leisure continued to be affected by the long-term impact of Covid 19. The Council remained the lowest funded unitary authority in the country. There were are also extreme pressures on statutory services as a result of numerous issues, including; refugees, a requirement to supply increasing homes under the Planning Framework, the cost of living crisis and a particularly local incidence of rising costs relating to SEND (special educational needs and disabilities).

The report stated that these issues would inevitably manifest into growth bids which would be presented to the Committee for consideration. The Committee was asked to consider these proposals in the light of the unprecedented challenges facing the Council. The Committee was also asked to consider new initiatives aimed at reducing the current Revenue budget gap of c£5m and the Capital funding gap of c£34m.

A further report was included later in the Agenda which provided details of the Council’s level of reserves held to address specific and general risks. This report explained the pressure on reserves across the sector and the assurance provided by the provision of adequate reserves as part of setting a safe Budget. Although the Council’s level of reserves was reasonably high, it was not immune from the significant increase in unit costs and levels of demand relating to statutory services.

The report stated that this Strategic Overview report would be followed by more detailed, service-specific, Revenue and Capital reports to the Committee between 30 October 2023 and 16 January 2024. The final Budget would then be submitted to the Executive and Council on 24 February 2024.

In the ensuing discussion, Members raised the following points and questions.

What assumptions were made in the MTFP for inflation? It was confirmed that the MTFP summary included £11m for inflation. This included provision for the annual pay award at 4% and Adult Social Care inflation at 6%. The remaining elements were a combination of factors, similar to previous reports. It was noted that the pay award provision was insufficient, so that would have to be picked up next year. The £11m provision could be broken down with a background summary for each budget line.

Could the base budget be included in the figures in order to provide a framework for any proposed growth or savings? It was confirmed that the individual bid templates had been amended to show the base budget. This could also be provided for the MTFP summary.

In relation to the Capital Summary - £228m was re-profiled into 2024/25. What was the make-up of this figure? It was confirmed that the £228m had already been approved in the Capital Programme and re-profiled. By way of context, the Community Investment Fund had been agreed by Council at £200m. This was the approved allocation, not necessarily permission to spend. The £228m was a mixture of existing reserves (part of the working balance) and new borrowing. New borrowing only took place when needed – this minimised exposure to the current high interest rate environment.

The budget assumptions in the report set out a £5m gap in 2024/25, a further £5m gap in 2025/26 followed by a £1m gap in 2026/27. What was the reason for this levelling off? It was confirmed that the levelling off related to a modest assessment of the impact of inflation in Year 3. It was clear that a paradigm shift was required if local authorities were to continue into the future. This required a greater focus on prevention and self-sufficiency.

There were clearly major growth pressures in Children’s Services and Adult Social Care – what steps were being taken to manage these cost pressures? It was confirmed that initiatives such as the two new SEND schools were positive. Members would receive more details when the detailed service reports were submitted. Members would be able to raise the question of options for the sale or reconfiguration of capital assets.

In relation to overspending service areas, what steps were being taken to bring those services back on budget? It was confirmed that a range of measures were being implemented including not filling vacant posts (vacancy factor) in order to generate in-year savings. Services were looking at a range of options around doing things differently in order to become more efficient and effective. Details of the savings achieved in 2023/24 would be provided to Members as part of the Budget Scrutiny process.

RESOLVED That:

1)     Imogen Shepherd-Dubey and Graham Ebers be thanked for attending the meeting to present the report and answer Member questions;

2)     the unprecedented financial challenges faced nationally by Local Government and the subsequent impact on Wokingham Borough Council, together with the particular challenges for the Borough, be noted;

3)     the imperative for responsible financial management be recognised and supported;

4)     further challenge to MTFP proposals and identification of ideas to address the current financial shortfall, be developed through the Budget Scrutiny process;

5)     the Reserves report, included in the agenda pack, and how the level of reserves is a key component to the strategic approach to financial management and the overall MTFP, be noted.