Agenda item

Mr D. Harrison CC, Leader of the Council, and Mr H. Fowler, Lead Member for Resources, have been invited to attend for this and all other MTFS items listed below.

 

The Commission considered a report of the Director of Corporate Resources which provided information on the proposed 2026/27 – 2029/30 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 9’ is filed with these minutes.

 

The Chairman welcomed the Leader of the Council, Mr. D. Harrison CC, and Cabinet Lead Member for Resources, Mr. H. Fowler CC, to the meeting for this item.

 

In presenting the report the Leader explained that his administration was tackling the issue of flooding in Leicestershire and was allocating additional financial resources to the problem. The Leader also emphasised the importance of the efficiency review being undertaken by Newton Impact and stated that he was confident that it would produce significant savings. The Leader said that he was in favour of tax cuts where possible.

 

Arising from discussion, the following points were made:

 

(i)     Cabinet would be considering the budget proposals at its meeting on 3 February 2026. The detailed report relating to those proposals was aimed to be published on Thursday 29 January 2026. The comments from the Scrutiny Commission would be fed into that report. The report would be accompanied by a statement of assurance from the Section 151 Officer. Members raised concerns that it was difficult to scrutinise the MTFS at the Scrutiny Commission meeting when all the details were not available, and questioned whether this was normal procedure. In response it was explained that the exact timings depended on a variety of factors and changed from year to year. It was not unusual for assumptions to be changed between the draft budget published in December and the final budget. The level of changes this year was in line with previous years.

 

Revenue Budget and Growth

 

(ii)         In response to questions about the level of confidence there was in the savings the efficiency review would produce, it was explained that whilst the review had to date identified savings opportunities, the exact amount of savings was not yet clear as the review was still in progress. Companies such as Newton Impact tended to focus on larger savings which would take longer to develop and then appear in the budget. The areas for savings that Newton were currently investigating had been set out at a cross-party working group which had taken place on 26 January 2026. A briefing note regarding those savings would be circulated to group leaders. Newton Impact were expected to complete their review in March 2026. At this point it would be clearer as to whether service cuts would be required. The Leader emphasised that he hoped to avoid making service cuts.

 

(iii)        Members pointed out that at a meeting of the Scrutiny Commission on 8 September 2025 the Leader had indicated that he had some savings in mind. Members asked for further detail and queried whether these savings were in addition to the savings proposed by Newton Impact. The Leader re-iterated his confidence that the savings would come forward but explained that he could not provide the detail until his budget proposals were set out in the Cabinet report. The Cabinet Lead Member for Resources stated that the long-term trajectory for the Council’s finances was promising, and whilst he understood the eagerness of some members to know exactly where savings were to be made, it was a long process and required patience in the short term.

 

(iv)       There was not a specific target number of savings for Newton Impact to identify but the aim was for them to help reduce the budget gap as much as possible.

 

(v)         Leicestershire County Council was part of the National Joint Council pay negotiating process for all local authorities in England. In response to a question from a member as to whether any consideration was being given to withdrawing from the national pay negotiations, and instead the Council negotiating pay with its own staff in order to save money, it was confirmed that no conversations had taken place in this regard. Were the Council to decide that it did wish to withdraw from the national pay negotiations, it could be a lengthy process involving consultation with staff and unions, and any savings would not come to fruition until later in the MTFS period. A member raised concerns about the impact this approach could have on staff morale.

 

(vi)       The government had carried out a fair funding review aimed at redistributing local government funding in England based on up-to-date assessments of need, rather than outdated data. The results had been implemented in the provisional local government finance settlement for 2026/27 and some local authorities had seen a significant increase in their funding. In response to concerns raised by members that Leicestershire County Council had not benefitted from the fair funding review, it was explained that the draft MTFS considered by Cabinet in December had included some assumptions about the level of increase in funding arising from the funding review, and the table at paragraph 9 in the report set out the funding increases over and above that, so the funding uplift was larger than it appeared, though Leicestershire would remain one of the lowest funded areas.

 

(vii)      The reset of the Business Rates retention system meant that the income to the Leicester and Leicestershire Business Rates Pool would reduce and the pool would be dissolved for 2026/27. This had been taken into account when the draft MTFS had been prepared and the income from Business Rates had not been included for any of the MTFS period.

Savings

 

(viii)    The proposed MTFS included a contingency of £8m each year for specific key risks that could affect the financial position on an ongoing basis. Members queried whether the £8m was enough given the level of the deficit and the growth in social care spending. In response it was explained that the MTFS had £130 million growth built into it to cover issues such as social care. The £8 million was in addition to that to cover in-year changes.

 

(ix)       Care had to be taken when projecting growth for the budget. Whilst it was not desirable to predict an artificial budget gap that never actually materialised, it was not helpful to be too optimistic and therefore not plan appropriately for additional spending.

 

Reserves

 

(x)         The Council’s previous strategy had been for the budget equalisation reserve to support the first two years of financial gaps in the MTFS, but based on current projections the equalisation reserve was only sufficient to support 2026/27 and 2027/28 in part. Members expressed strong concerns about this and queried how financial gaps would be filled if the budget equalisation reserve was used up. In response it was explained that the best option was for savings to be found to balance the budget, and after that consideration would need to be given to council tax levels. The Council was by law required to set a balanced budget for each year and members were assured that officers had confidence that the budget would be balanced for 2026/27.  Using the budget equalisation reserve was a last resort and was not sustainable over the longer term. The Council was trying to get back to a position where the budget equalisation reserve covered two years of the MTFS. The budget equalisation reserve was not the only reserve held by the County Council; there were other earmarked reserves held for specific purposes.

 

(xi)       SEN spend was forecast to be significantly more than the high needs block funding received, therefore the Council’s policy was to set aside some funding towards covering that deficit. A member queried Leicestershire County Council’s approach to the SEN deficit and whether other authorities were taking the same approach. However, it was not always transparent how other authorities were managing it. The Government had indicated that from 2028/29 they would absorb some SEND costs but this support was not unlimited. It was not clear how the government would fund this support and what financial risk would remain for the County Council.

 

(xii)      As of 31 March 2026 there would be £8m remaining in the budget to be used to invest in transformation projects to achieve efficiency savings and also to fund severance costs. The £1.4 million fee for Newton Impact would have already been paid by that point so would not need to be included in the 2026/27 budget.

 

Capital Programme

 

(xiii)    The Council directly owned and managed properties, including Industrial, Office and County Farms as part of the Investing in Leicestershire Programme (IiLP). A member questioned whether it was appropriate for the Council to invest in this type of capital when it was struggling to fund capital for its own Council services. In response it was emphasised that annual income returns were currently around £9 million and capital appreciation was also a benefit to the Council. The Leader and Cabinet Lead for Resources confirmed that they supported the Programme and the funding invested in it each year.

 

(xiv)    In response to a question from a member, it was explained that there was no known link between the council tax levels a local authority chose to set, and the success of a local authority in obtaining capital grants from central government. Council Tax was already taken into account in the funding formula.

 

Budget Consultation

 

(xv)     A consultation had taken place regarding the public’s views on the savings plan and the appetite for Council Tax increases. The consultation had closed on 18 January 2026 and the number of responses received was similar to the previous year. The responses were still being collated and analysed and a summary would be included with the report for Cabinet which would be published on 29 January 2026.

(xvi)    The draft MTFS took into account a projected increase in the National Living Wage which some Council employees were on. The Chair queried whether this would be funded by service cuts or using reserves, but in response it was explained that the budget did not allocate funding specifically in that way. The wage increases would be funded by a combination of an increase in government funding, a council tax increase, and savings.

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 3 February 2026.