Agenda item

Mrs D. Taylor CC, the Acting 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 2025/26 – 2028/29 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 Acting Leader of the Council, Mrs D. Taylor CC (in remote attendance), and Cabinet Lead Member for Resources, Mr L. Brecon CC, to the meeting for this item.

 

In presenting the report the Director commented that the Council faced uncontrollable pressures which would lead to significant savings having to be made despite the Council having sought to recover the maximum amount of council tax possible as permitted by the Government.  Next year, the MTFS was predicated on the need to use some of the Council’s reserves to balance the budget.  Thereafter the deficit was forecast to grow significantly to £95m as a result of service demand and inflationary pressures, despite significant work and savings having been made in previous years across all service areas.

 

The Director emphasised that the main determinants for the Council’s future financial health very much rested with the Government and its approach to things like local government funding reform, SEND funding reform and the national living wage.  There were a growing number of authorities now needing additional Government support.  The Council would continue to prioritise its financial resilience, however, the Director emphasised that it was difficult to predict the future direction of the Council in the longer term given the level of uncertainties faced.

 

Arising from discussion, the following points were made:

 

Revenue Budget and Growth

 

(i)           Members expressed significant concern at the growing level of challenges faced by the Council.  A member commented that it would be impossible given limits on the Council’s ability to generate income, that this would cover its forecasted expenditure, particularly taking account of rising levels of growth in the demand for services, increasing costs and national insurance, and pay and price inflation. 

(ii)         It was suggested that uncertainty around future Government funding had made planning for this MTFS particularly difficult.  It was noted that the Government was undertaking a spending review which would be concluded in June. Following this, it was thought the Government would be able to provide greater clarity around future funding streams.  This should also be accompanied by reforms to the local government finance system, a consultation already having been launched on this issue. 

(iii)        Members questioned what other approaches the Government might take to address pressures on local government finances. The Director reported that there appeared to be some acknowledgement that service standard reforms would be needed, as well as the removal of the cap on council tax, both of which would help to enable councils to become more self-sustainable. 

(iv)       The Lead Member was challenged about what the Cabinet’s strategy would be to address the budget deficit.  The Lead Member confirmed that consideration had and would continue to be given to service delivery methods, and the level of service provided. It was acknowledged that lower level services were already being provided in Leicestershire at a cheaper cost due to its low funding position.  However, the Councils performance had always demonstrated that these were delivered effectively and efficiently and to a good standard.  Further the Council had secured specialist external support from organisations like Newton Europe that would continue to drive change across a range of services. The Lead Member assured members that whilst not sufficiently developed to be included in the current MTFS, further savings were being identified across all departments.  However, he reiterated that there were still a number of factors outside the Council’s control and dependent on the Government’s funding approach and how it delivered local government finance reform. 

(v)         The MTFS took account of the previously approved increase in council tax by 4.99%, the maximum amount permissible for 2025/26, including the adult social care precept.  A member suggested that the report had not made it clear that the Council had little choice but to do this.  It was noted that whilst there would be no restrictions on future grants, the Government had emphasised that there would be an assumption that all councils would in future raise council tax to the maximum amount.  It was further noted that a council tax rise of only 2.99% had been accounted for in future years because of the uncertainty around future referendum limits and whether additional the adult social care precept would still be available.

(vi)       A Member commented on the impact rising council tax levels could have on residents that were already affected by rising costs.  It was noted that the Council’s MTFS consultation included questions regarding the potential impact of rising council tax.  Feedback was currently being assessed and would be captured as part of the final MTFS to be submitted to the Cabinet. 

(vii)      It was noted that not increasing council tax to the maximum amount would have placed the Council in further difficulty and could have prevented it from being able to provide some services to its most vulnerable residents.  The Director agreed it was a difficult balance to strike, but highlighted that some authorities that had not previously raised council tax by the full amount were now in crisis and seeking this year to increase this significantly beyond the 5% cap.

(viii)    A re-set of business rate baselines was expected to be introduced in 2026/27.  It was not yet clear if this would put at risk some of the Council’s growth that had been built up since the system first came into force and now amounted to approximately £10m above the Council’s current baseline. In addition, it was noted that as the Council was part of a business rates pool with the City and district councils it could also potentially lose the growth that it expected to receive back from that pool.  Members noted that the amount at risk was between £6m and £8m.  Whilst a transitional period would likely be provided for, details about this were not yet known.

(ix)       The Governments White Paper on Local Government Reform had been published after the draft MTFS had been prepared. Given current levels of uncertainty regarding the planned reforms, the MTFS had not included any reference to this in terms of cost and benefits at this time.  The Director assured Members that if the position became clearer over the coming weeks, the final MTFS to be presented to the Cabinet and full Council could be amended to include some further information about this. 

(x)         It was noted that the decision to undertake local government reorganisation would be regarded as a matter of local choice and therefore the cost of implementing this would need to be met locally.  In previous reorganisations the Government had not allocated any additional resources to support this.

 

Savings

 

(xi)       The MTFS included £33m worth of savings to be delivered over the next four years.  Despite this a budget deficit of £95m had been forecast.  The Director emphasised that whilst the longer-term deficit was a concern, the bigger concern would be addressing the expected £40m deficit in 2026/27, as there would not be a lot of time to deliver the savings necessary to address this. If not addressed in year, this added to budget pressures faced in later years.

 

(xii)      A Member questioned why only limited savings had been identified in the current MTFS.  It was noted that savings were being developed and that detailed business cases would be brought forward over the coming year. The Commission was assured that this was a constant process which Chief Officers were working on with their Lead Members.  A review of the Council’s Strategic Plan was also underway which would provide further direction.  

Reserves

 

(xiii)    The budget equalisation reserve had increased significantly. This was allocated to cover future year budget gaps and to reflect increased pressured on the High Needs element of the Dedicated Schools Grant, taking account of the current statutory override which was due to come to an end in March 2026. The Government had not yet confirmed if this would be extended so there was some degree of uncertainty around this.

(xiv)    The current level of reserves were expected to decrease over time as the Council expected to have to dip into this to cover future budget gaps, pending further savings being identified and delivered, and more funding being received from the Government.

Capital Programme

 

(xv)     A Member raised concern that funding had not been allocated within the capital programme to replace the current Records Office.  It was noted that the Council had been given notice by The National Archives that its future accreditation status was dependent on it having a clear and deliverable plan to address current issues around the storage of, and access to records by May 2026.  Given that time was of the essence, it was questioned why this had not been accounted for. The Director explained that the Records Office was managed under a partnership arrangement with the City and Rutland Councils and that the Council was in discussions with both authorities to find an agreed way forward.  It was noted that the capital programme included an allocation for ‘future developments’ and that when an approach had been agreed some of this funding could be used towards this. The Record Office was named as a Future Development of the Adults and Communities capital programme that had been discussed at the relevant scrutiny committee.   

(xvi)    The Lead Member commented that he and the Lead Member for Adults and Communities were aware of the implications of the Council losing its accreditation but that discussions with partners needed to be held in the first instance and a joint approach agreed if possible. It was suggested that a time limit should be imposed on those discussions to ensure the Council could progress alone to ensure it met the May 2026 deadline.

(xvii)  Members raised concerns that delays in the delivery of capital projects resulted in rising costs which affected the Council’s overall capital programme.  Members questioned how delays were managed and challenged to ensure these were avoided and mitigated where possible. The Director confirmed that arising from the Melton Mowbray Distributor Road project, a review of how the Council undertook large capital schemes had been carried out and improvements made to the Council’s internal processes. All projects were kept under regular review and contractors challenged wherever possible over delays. It was acknowledged that projects which were funded by multiple parties (such as developer funding, Funding from the DfT and Homes England etc.) were often more complicated and difficult to manage.

RESOLVED:

 

(a)  That the report and information now provided be noted;

(b)  That the comments now made be submitted to the Cabinet for consideration at its meeting on 7^th February 2025.