Agenda item

Budget Setting 2023/24 - Final Draft Revenue Budget Proposals

To present the report of the Scrutiny Manager and the Director of Function (Resources)/Section 151 Officer.






The report of the Scrutiny Manager was presented for the Committee’s consideration. The report outlined the context to the 2023/24 Budget setting process along with the key issues and questions for Scrutiny in evaluating the Executive’s final revenue budget proposals. The report of the Director of Function (Resources)/Section 151 Officer to be presented to the 2 March, 2023 meeting of the Executive setting out the detailed revenue budget proposals for 2023/24 for final review and agreement ahead of the 9 March meeting of Full Council was attached at Appendix 1.


Councillor Robin Williams, Portfolio Member for Finance, Corporate Business and Customer Experience presented the report saying that it follows on from the initial draft revenue budget proposals presented to this Committee at its meeting on 19 January which comprised of a proposed budget for 2023/24 of £172.438m which in light of the provisional AEF of £123.555m required an increase of 5% in Council Tax and the use of £1.758m of the Council’s general balances to balance the budget. The Council is facing a number of risks going forward in the form of inflation, high energy costs, pay settlements, the demand for services and a potential reduction in the amount of income generated by fee charging services such as leisure, planning and car parking as the cost of living crisis continues to affect households. The public consultation undertaken on the Council’s strategic aims showed a positive response to the proposed budget approach of combining a Council Tax increase with implementing savings and using Council reserves to produce a balanced budget and this approach was also endorsed by Scrutiny. Apart from the changes detailed in section 4 of the report and the minor adjustments to the budget which these have required, the one significant change impacting on the budget since the presentation of the initial draft proposals arises from the announcement late last week of an initial pay offer to the Council’s non-teaching staff for 2023/24 which amounts to an average increase of in the region of 7%; this has been put forward by the employer as a “full and final offer.” Given that the 2023/24 draft budget allows for a pay increase of 3.5%, this places an additional £2m as a pressure on the budget. The Executive has considered how this additional cost can be funded and proposes that it be met through the use of reserves deeming the identification of £2m of unplanned for savings at this late stage unrealistic and a higher increase in Council Tax as unacceptable in the current economic climate. The Portfolio Member whilst he highlighted the importance of having sufficient reserves in hand to meet such additional costs emphasised that reserves should not however be used on a random basis; they should be regarded as rainy-day money to be drawn upon to deal with unexpected events and/or emergencies. The prudent management of the Council’s finances in recent years has allowed reserves to be built up and those resources are now available to help support both the Council and the Island’s residents through the current difficult times. Taking a prudent and cautious approach will not only enable the Council to address immediate needs but will also ensure its financial security for the future. The Executive therefore recommends as its final proposals that the budget be set as outlined in the Section 151 Officer’s report; the Council Tax increase be maintained at 5% and the Council’s reserves be utilised to meet any shortfall between the provisional and final settlements.


The Director of Function (Resources)/Section 151 Officer reported 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 late announcement of the pay offer meant that the budget had to be reviewed and additional provision made to cover the cost of the offer. He advised that the use of reserves to balance the budget reduces the level of reserves available and is not a sustainable solution to the Council’s financial situation in the long-term meaning that decisions will have to be made in that respect in 2024/25. However, the current level of reserves does offer the option of their being used again in  a more limited way in 2024/25 to balance the budget should that be necessary and is dependent on a number of factors including  the rate of inflation, the level of pay settlements and the local government settlement for 2024/25.That assessment must be made early in the new financial year in order to allow sufficient time to plan for the budget and any service reductions that may be required as well as holding a discourse on the level of Council Tax increase. The Section 151 Officer said that while he was comfortable with the use of reserves to balance the 2023/24 budget as the level of reserves the Council holds at present allows that to be done without placing the Council in any financial risk, there remains a great deal of uncertainty as regards the 2024/25 financial year which the Council will have to plan for in the coming year.


In the subsequent discussion, the Committee considered the final draft budget proposals from the following perspectives and sought assurance of the Section 151 Officer and Portfolio Member for Finance on the matters raised –


·      The prospects for inflation in the coming year with the assumption being that a falling inflation rate will reduce the likelihood and/or justification for high pay settlements thereby reducing the pressure on the Council budget.

The Committee was advised that predicting the rate of inflation is difficult especially as low inflation over recent years has not materially affected the budget whereas the current rate of 10% has had a significant impact. A number of scenarios with regard to inflation have been considered taking into account Bank of England forecasts and the likeliest outcome has been factored into the provision for inflation in the 2023/24 budget. While inflation is projected to fall towards the end of 2023 and into 2024, the situation will become much clearer when the Council comes to prepare its 2024/25 budget, and this is also likely to drive pay settlements. Local Government staff on the lowest pay scales have received two years of generous pay increases which if coupled with reducing inflation would make it more difficult for workers to demand high pay rises.


·      The extent to which the proposals respond adequately to service pressures and challenges.

The Committee was advised that the pressure on services is twofold and arises from inflation and the resulting rise in costs for which provision has been made in the budget and is also the main reason for the £16m increase in the budget from last year, and from demand. A best assessment of demand in Adults’ and Children’s Services as the services under most pressure has been made and factored into the budget. While the 2022/23 Quarter 3 revenue budget monitoring report to the 2nd March meeting of the Executive shows services collectively to be on budget Adults’ Services and Children’s Services are overspent and when one off items such as vacant posts, grant funding and use of reserves are stripped away, then the true financial position of services is significantly worse. This has been taken into consideration in drafting the 2023/24 budget. The main risk currently is the impact on families of the cost-of-living crisis which in turn could translate into increased demand on Social Services and Housing Services as people struggle with housing costs. Should the economy start to recover then it is hoped that these pressures will then ease.


·      Whether the proposals will have a detrimental effect on the citizens of Anglesey or any protected groups and the ways in which the Council supports those who may be experiencing difficulties.

The Committee was advised that when the budget is put together, funding is allocated to services including those that provide for vulnerable residents and each service makes an assessment of its likely needs for the following year. The budgets for Adults’ Services and Children’s Services as those that support those most in need groups have been increased by approximately £6m across both services for 2023/24 to enable them to make provision to the new increased level of demand and additional investment has also been made in the 2023/24 budget for the homelessness service. Although the budget raises Council Tax, anyone experiencing difficulties in paying their Council Tax can seek help through the Council Tax Reduction Scheme or the Council Tax Discretionary Relief Scheme. The Council does seek to protect social care services for vulnerable adults and children as far as it can when drafting the budget.


·      The proposed use of funding released as a result of changes in levies and contributions to joint services after the initial budget proposals were presented as outlined in section 4.4 of the report. Clarification of the proposed increase in Economic Development capacity was sought including what it was for.

The Committee was advised that the proposed £69k investment in the Economic Development Team will fund one post and will help the Team make the most of economic development and grant funding opportunities e.g. the development of a Freeport and schemes such as the Shared Prosperity Fund and the Levelling Up Fund which require an increased input by the Council. In response to a further query about the reduction in the balance of earmarked reserves from £24.46m at the beginning of 2022/23 down to a forecasted level of £9.973m at the end of the financial year, the Section 151 Officer clarified the movement in reserves during the year and confirmed that he would provide a written schedule of the same to the member making the query.


Councillor Dafydd Roberts, Chair of the Finance Scrutiny Panel commented to the effect that the Panel was happy with the proposed use of funding released as a result of changes in levies and contributions to joint services.


·      Increasing the Council Tax by 5% in order to realise the proposals of the Executive for 2023/24.

The Committee was advised that there were two options as regards determining the level of Council Tax - either propose a lower Council Tax increase as part of the budget for 2023/24 and utilise more of the Council’s reserves and/or make more savings to make up the gap in the budget which could pose a risk to the Council’s financial position longer term, or make less use of the Council’s reserves and increase Council Tax by a higher amount. The Executive takes the view that it cannot justify raising Council Tax by more than 5% at this time especially as many people are experiencing financial hardship so it has sought a balance between implementing savings, increasing Council Tax and drawing on the Council’s reserves in setting the 2023/24 budget.


·      How the Council might address any further surprises given the announcement of a higher than budgeted for pay offer for non-teaching local government staff

The Committee was advised that pay increases for teaching staff are usually funded by Welsh Government so if the teachers’ pay award from September 2023 is above the 3.5% allowed for in the budget the Council would expect to receive funding towards meeting the cost. However, the Council is potentially facing a number of other risks as documented in the report and should any of those materialise then it would have deal with them as best it could at the time.


Having scrutinised the Executive’s final budget proposals and having considered the assurances given and clarifications provided with regard to the delivery of essential services and support for vulnerable groups, the Committee collectively was satisfied that the final draft revenue budget proposals were fair and that the combination of savings, Council Tax increase and use of reserves as proposed was reasonable in the circumstances and allowed the Council to set a balanced budget.


It was resolved to support and recommend the following to the Executive in order to create a balanced budget –


·         A proposed budget of £174.569m for 2023/24

·         A proposed increase of 5% in the Council Tax

·         The use of monies from general balances to fund any gap between the provisional and final budget settlements.

(Councillor Aled M. Jones abstained from voting)


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