Agenda item

Mr N. J. Rushton CC, the Leader of the Council and Mr L. Breckon CC, Lead Member for Resources, have been invited to attend for this and all other MTFS related items below.

The Commission considered a report of the Director of Corporate Resources which provided information on the proposed 2024/25 – 2027/28 Medium Term Financial Strategy (MTFS) as it related to Corporate and Central items.  The report also provided an update on changes to funding and other issues arising since the publication of the draft MTFS and provided details of a number of strategies and policies related to the MTFS.  A copy of the report marked ‘Agenda Item 8’ is filed with these minutes.

The Chairman welcomed the Leader of the Council, Mr N. J. Rushton CC, and Cabinet Lead Member for Resources, Mr L. Breckon CC, to the meeting for this item.

In presenting the report the Director commented that this was the hardest budget he had ever had to present so far and that unfortunately the forecast was that the pressures on the County Council and local government generally would likely continue for the foreseeable future.  In the last three years, the Council had been able to balance at least two years of the MTFS when this had been presented for approval.  Unfortunately, this had not been possible this year and for the first time, the budget next year could only be balanced with the use of reserves.  Members noted that for 2025/26 the Council had a £33m funding gap and urgent action was therefore needed to address this.

The Director reported that since the report had been circulated, the Government had announced an additional £600m for local government, £500m of which would be to support social care services.  It was not yet clear how much would be specifically allocated to Leicestershire, but this would be confirmed following the final local government finance settlement which was expected in early February.  Members noted that whilst the additional money was welcomed, this would simply be used to reduce the Council’s current shortfall.

Arising from discussion, the following points arose:

Corporate and Central Items

(i)               The Council budget for income from ESPO was approximately £800,000 for the current year, with a stretch target of £900,000 for 2024/25.  It was on track to meet ese targets.

(ii)              The contingency for inflation and national living wage was expected to be used each year. This was currently an estimate and so was held centrally until the pay award, and other factors had been confirmed.  It would then be allocated to departments as appropriate.   Members noted that the contingency was reviewed and reset each year.  Any amount not spent would be released to departments in year.

Earmarked Reserves

(iii)            Concern was raised regarding the cumulative deficit of £112m, forecast for the final year of the MTFS, in the dedicated schools grant (DSG) High Needs budget.  It was noted that the Government had implemented a statutory override but that this was temporary until 2026.  It was not yet clear whether this would be extended.  Members noted that this was a national issue and that there was some uncertainty as to how the Government intended to deal with this.  At present the deficit was held off the Council’s balance sheet but without the statutory override in place, it would be a liability that would need to be paid by the Council.

(iv)            The Director reported that much was being done within the Children and Family Services Department to address the rise in demand and costs associated with SEN Services.  Good progress was being made and a targeted reduction in annual spend of £10m had been set.  However, the DSG would still not meet the level of spend in this area which was entirely demand led. 

(v)             Some members commented that this issue had been considered by the Council’s Corporate Governance Committee the previous week as part of its consideration of the external audit of the Council’s accounts.  The external auditors had highlighted this as the biggest risk facing the Council but had recognised that this was not an issue unique to Leicestershire and had assessed the County Council as being in a much stronger financial position than most others in managing this.  A member commented that councils simply didn’t have the resources to address this deficit which nationally was in the region of £4.6billion given its limited ability to raise additional income through council tax and suggested that this was therefore a matter for the Government.

Capital Programme

(vi)            The Council would be receiving additional funding following cancellation of Phase 2b of HS2.  This would largely be for additional highway maintenance works.  The amounts would be relatively small in the first two years (approximately £2m and £2.5m) but this was expected to increase thereafter.  The actual allocations to be received in future years had not yet been confirmed by the Government.

(vii)          A Member commented that the Leicester City Mayor’s unwillingness to support a level 3 devolution deal for Leicester and Leicestershire meant that the people of Leicestershire were losing out on significant infrastructure funding.  The combined county authority involving Nottingham City, Nottingham County, Derby City and Derbyshire County Councils (D2N2) would receive £1.1 billion in funding over the next 10 years [subsequently confirmed to be 30 years].  Not participating meant that Leicestershire would not have access to that funding or have the ability to bid for other funding made available by Government for combined authorities in year although it would be difficult to assess the actual level of lost funding

(viii)         The Leader agreed that the Council had been disadvantaged by not securing a level 3 devolution deal.  The legislation required Leicester City and Leicestershire County to be considered as a functional economic area and so the County Council could not secure such a deal without the support of the City Council Mayor.  The possibility of joining the D2N2 deal at a later date was mentioned.  The Leader pointed out that, even if that were to be agreed, it would come with risk as the County Council would hold a minority vote.  Therefore, all that was currently available was to secure a level 2 deal which still subject to the agreement of the City Council and Rutland Council.

(ix)            A Member questioned how the Council strategically planned for local infrastructure, particularly schools and SEND provision which were sometimes located some considerable distance from where people lived.  The Director confirmed that a corporate group had been established some time ago to plan for all types of infrastructure across the County which was needed to meet identified growth.  This included early discussions with district councils as they developed their local plans to ensure these were mindful of the costs of delivering such infrastructure.  Members noted that SEND provision was subject to some specific considerations including whether there were adequate numbers of children with similar needs living in a particular area that would mean building provision in that area would be viable. 

(x)             Officers through the Children’s Social Care Investment Programme were looking to increase inhouse provision of residential homes.  This would not meet all demand and some outsourcing would always be necessary to meet the varied and complex needs of some children.  The commissioning approach within the Children and Family Services department was also therefore being improved and strengthened. 

(xi)            The Council developed area strategies to collect contributions from multiple developers for specific areas for the range of infrastructure requirements required.  The Director confirmed that this was being developed in coordination with district councils and was considered a key factor in ensuring appropriate section 106 funding was secured to meet the costs of delivery.

(xii)          It was recognised that a significant issue for the County Council was the viability of housing and the push by developers to seek to reduce section 106 developer contributions.  The Leader commented that the Council no longer had sufficient capital resources to build infrastructure and so it would in future be reliant on section 106 funding coming in before works could start.  This would unfortunately mean that the use of existing assets would be stretched as forward funding and the early delivery of schemes was no longer financially possible.  A Member suggested that a briefing on the development of area strategies would be of benefit for all members. 

Budget Consultation

(xiii)         Members noted that 450 responses to the consultation had been received and challenged whether this could be considered representative of the residents of Leicestershire.  It was noted that a light touch consultation had been undertaken and a more detailed exercise was held every four years which provided more detailed feedback.  The responses received, although few, were in line with comments previously received.

RESOLVED:

(a)  That the comments now made be submitted to the Cabinet for consideration at its meeting on 9^th February 2024;

(b)  That an all member briefing be arranged regarding the development of area strategies to support future infrastructure planning.