Agenda item

To submit a report by the Director of Function (Resources)/Section 151 Officer.

The report of the Director of Function (Resources)/Section 151 Officer setting out the  detailed revenue budget proposals for 2023/24 for the Executive’s final review and agreement was presented.

Councillor Robin Williams, Portfolio Member for Finance, Corporate Business and Customer Experience reported that the Executive is required to agree a number of key matters in respect of the 2023/24 budget. This will then allow the final recommendations to be presented to the Full Council at its meeting on 9 March, 2023. The matters requiring agreement are the Council’s Revenue Budget and resulting Council Tax for 2023/24; the Council’s updated Medium Term Financial Strategy and the use of any one-off funds to support the budget.

The Executive proposed a budget for 2023/24 of £172.438m which based on the provisional AEF of £123.555m would require an increase of 5% in Council Tax and the use of £1.758m of the Council’s general balances to balance the budget. The approach taken of combining savings with increasing the Council Tax and using balances to achieve a balanced budget was endorsed as part of the public consultation process on the Council Plan and was also supported by the Corporate Scrutiny Committee when it considered the initial budget proposals at its meeting on 19 January, 2023. The budget also includes a propsed increase in the Council Tax Premium for second homes to 75% the income from which will be used to increase the supply of affordable housing. However, on 24 February the Employers announced the initial pay offer to the Union in respect of the non-teaching pay award. The offer is a flat rate increase of £1,925 to all employees with an increase of 3.88% to all employees on spinal column point 43 and above and a 3.5% increase for Chief Officers and the Chief Executive. It is estimated that this will increase costs by approximately 7% compared to the 3.5% that was allowed for in the initial budget proposal and will therefore place an additional £2m as a pressure on the budget. Having considered how to fund this additional cost, and having concluded that finding savings worth £2m at this late stage in the budget setting process is impractical and that increasing Council Tax by 10% to cover the cost is unacceptable in the current economic climate the Executive proposes that the Council’s reserves be used to meet this cost in 2023/24 as the only realistic option. The Portfolio Member highlighted that this option is possible because the Council’s finances have been prudently managed over recent years thereby building up reserves to a level that allows the Council to meet such costs without further detriment to services or the public. Having a sufficient level of reserves not only enables the Council’s immediate needs to be met but places it in a better position to be able to deal with future challenges. He was therefore happy to propose the budget to the Executive.

The Director of Function (Resources)/Section 151 Officer said that he was required to set a budget that reflects what are considered to be the costs of providing the Council’s services for the following year and to report the same to the Council. The high rate of inflation has been a significant factor in the 2023/24 budget setting process and although a projected provision for inflation was made in the initial draft budget proposal, the budget has had to be adjusted for the draft final proposal because of the higher than budgeted for non-teaching pay offer. Setting the budget is always a balance between projecting  the Council’s costs as accurately as possible without making over provision which would lead to a higher than required Council Tax increase. The Section 151 Officer referred to minor changes in the final budget settlement announced on 1 March comprising of additional funding within the settlement which benefited Anglesey by £2,000 and the transfer into the settlement of a grant of £107k to assist the North Wales Fire Authority meet increased pension costs; the Fire Authority has increased its levy by a similar amount resulting in a zero net effect on the Council’s budget. 

While the Council has sufficient resources in reserve to enable it to use some of those monies to balance the budget for 2023/24, this is not a sustainable strategy in the long-term. The Medium Term Financial Plan updated for 2024/25 and 2025/26 in Table 4 of the report which is  based on assumptions regarding inflation, pay and the local government settlement that may  change as 2024/25 draws nearer  indicates that there will be a need to make significant reductions in the net revenue expenditure budget in 2024/25 (over £6.5m); although this could be partly offset by the further use of reserves it only postpones the need to make budget reductions in 2025/26. The situation does improve in 2025/26 with only a small shortfall in funding projected but this is dependent on the continued strategy of increasing Council Tax by 5% per annum. Hopefully the economy will recover this year to the extent that it allows the Westminster Government to increase its allocation to Welsh Government and that in turn translates to an improved settlement for councils in Wales; if not then 2024/25 is likely to be a challenging year financially.

Councillor Robert Ll. Jones, Chair of the Corporate Scrutiny Committee reported on the Committee’s deliberations at its meeting on 28 February, 2023 with regard to the final draft budget proposals and he thanked the Section 151 Officer and his staff and the Portfolio Member for Finance for the work that had gone into the budget setting process and for their input at the Corporate Scrutiny Committee’s budget meetings. He confirmed that the Committee had questioned the Officers and Portfolio Member for Finance on the ability of the budget to respond to service pressures and demand; the impact of the proposals on the citizens of Anglesey or any protected groups and the use of funding released as a result of changes in levies and contributions to joint services after the initial budget proposal was set. The Committee had also considered the acceptability of a 5% increase in Council Tax. Having been provided with assurances and advice by the Officers and Portfolio Member, the Committee had resolved to recommend the proposed budget of £172.548m for 2023/24 including a 5% increase in Council Tax and the use of monies from general balances to fund any gap between the provisional settlement and the final settlement.

The Director of Function (Resources)/Section 151 Officer clarified that since the publication of the final budget report for the 28 February meeting of the Corporate Scrutiny Committee the budget proposal has been adjusted upwards to £174.569m to reflect the non-teaching pay offer which is the budget the Executive is being asked to recommend to the Full Council. 

Members of the Executive spoke to say how difficult the process of setting the 2023/24 budget had been and how important it is to have adequate reserves which has meant that the Council is able to balance the budget for 2023/24 without resorting to further cuts in services or a larger increase in Council Tax. Although it was acknowledged that using reserves to balance the budget is a risk the Executive is mindful of the impact of the cost of living crisis on households and recognises that there must be careful planning ahead of the 2024/25 financial year to see what more can be done to protect the residents of Anglesey. To this end it was suggested that there must be an improved settlement for local government to help this and other councils meet their statutory obligations, keep up with pay and inflation and to maintain and/or improve services. It was also noted that having to plan in a context of uncertainty about future funding settlements is difficult and that moving to a more consistent budget setting framework spanning three years instead of one would better help councils face future challenges.

The Portfolio Member for Finance, Corporate Business and Customer Experience thanked the Director of Function (Resources)/Section 151 Officer and the staff of the Finance Service for their work on the budget setting process along with  the other budget/finance related reports on this meeting’s agenda which sentiments were echoed by the Executive.

It was resolved –

·                To agree the final details of the Council’s proposed budget as shown in Section 4 of Appendix 1 and Appendix 2 of the report.

·                To note the Section 151 Officer’s recommendation that the Council should maintain a minimum of £8.6m general balances.

·                To note the comments made by the Section 151 Officer on the robustness of the estimates made, as set out in Section 5 of Appendix 1.

·                To recommend a net budget for the County Council of £174.569m and resulting increase in the level of Council Tax of 5.00% (£68.40 – Band D) to the Full Council, noting that a formal resolution, including the North Wales Police and Community Council precepts will be presented to the Council on 9 March, 2023.

·                That any differences between the provisional settlement and the final settlement will be adjusted for by using the general contingency which is included in the 2023/24 budget, or by making a contribution to/from the Council’s general reserves in order to set a balanced budget.

·                To authorise the Section 151 Officer to make such changes as may be necessary before the submission of the final proposals to the Council.

·                To agree that any unforeseen pressures on demand led budgets during the financial year will be able to draw upon funding from the general contingencies budget.

·                To request the Council to authorise the Executive to release up to £250k from general balances if the general contingencies budget is fully committed during the year.

·                To delegate to the Section 151 Officer the power to release funding from the general contingency up to £50k for any single item. Any item in excess of £50k not to be approved without prior consent of the Executive.

·                To confirm that the level of Council Tax Premium for second homes increases to 75% and for empty homes remains at 100%.