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 financial performance of the Council’s services at the end of Quarter 4, 31 March 2023 was presented for the Executive’s consideration.

Councillor Robin Williams, Portfolio Member for Finance presented the report and provided some context saying that the Council set a net budget for 2022/23 with net service expenditure of £158.365m to be funded from Council Tax income, NDR and general grants. This included a total for general and other contingencies amounting to £3.110m. The budget for the Council Tax Premium was increased by £0.436m to £1.950m. A balanced budget was set with an agreed Council Tax rise of 2%. As for the previous year services were not required to make savings. The increase of 9.2% in funding from Welsh Government was a welcome increase but did require the Council to commit to budget increases in a number of areas including social care and homelessness. Welsh Government support for Covid related expenditure also ended. The overall financial position for 2022/23 including Corporate Finance and the Council Tax Fund is a projected underspend of £1.212m which is 0.76% of the Council’s net budget for 2022/23.

Councillor Robin Williams said that although the outcome at year end is positive and improves the Council’s financial position it has been helped by a number of one-off items that have contributed to the underspend. These include non-recurring Welsh Government grants, better than budgeted for income levels, the use of earmarked reserves and a high level of staff vacancies without which the position would have been very different with an overspend of £2.867m being reported which would have created a significant gap in the budget going into 2023/24. Most of the financial advantages which have bolstered the Council’s financial position at the end of 2022/23 will not re-occur to the same extent in 2023/24 meaning the Council will still be facing financial pressure in 2023/24 and beyond. Councillor Williams reiterated that as Portfolio Member for Finance he had always taken a prudent approach to the budget taking a long-term view, maintaining reserves, and not rushing decisions in the face of calls to not raise Council Tax. He highlighted that Anglesey remains one of the lowest charging authorities in Wales for Council Tax and is the lowest in North Wales. Increasing the Council Tax is done to balance the budget from one year to the next and not for the sake of it.

The Director of Function (Resources)/Section 151 Officer referred to continuing uncertainties in relation to the 2023/24 and 2024/25 financial years. Although the underspend means that the position of the Council’s balances at £10.2m moving forward, is £1.4m above the minimum recommended value of 5% of the net revenue budget for 2023/24 having taken account also of the £3.8m committed as funding of the 2023/24 budget, there remain unresolved issues around staff pay increases with non-teaching unions having rejected the pay offer for 2023/24 and teachers pay having been settled to August 2023 only with no certainty about what will be agreed thereafter or whether Welsh Government will fund any additional increase. Inflation if it remains high will impact on the Council’s costs in 2023/24 and into 2024/25 and could also lead to calls for higher pay rises which would create additional pressure in the run up to setting the 2024/25 budget. The position for 2024/25 appears challenging and although no indicative figures have yet been provided the suggestion is that additional funding to the level of 2023/24 will not be provided even though the Council still faces rising costs and increased demand for services. The Council’s balances will afford some mitigation against these pressures but once used, they cannot be used again leaving the possibility that cuts in expenditure may be required to balance the budget in 2024/25. While the financial position is therefore not as good as it looks, the Council is better placed than many authorities to manage the challenges ahead and the processes it has in place to monitor the financial position on an ongoing basis will assist the Executive in its decision making.

The Executive’s members acknowledged the challenges facing the Council in the next few years and thanked the Section 151 Officer for his candid evaluation of the situation. Members noted that discussions regarding budgets, balances and Council Tax are really about the services the Council is able to provide at a time when the call on those services especially homelessness prevention, children’s social care and older people’s care is growing. These are the essential services that provide support for some of the most vulnerable individuals within communities which the Council has sought to protect when considering the financial data and setting the budget. Reference was also made to the position of schools with it being noted that no school on the Island is currently in deficit. Given the financial prognosis, questions were asked about the likelihood of that situation changing in 2023/24 and beyond.

 The Director of Function (Resources)/Section 151 Officer advised that the extra funding provided to schools by Welsh Government as Covid support together with school closures and reduced expenditure during that period has helped bolster the finances of some schools which might otherwise have gone into deficit. Schools have also used the additional funding to help pupils catch up on their learning. While the balances of school reserves now stand at £6.7m, a significant proportion of that sum has been earmarked by schools in 2023/24 to balance their budgets and avoid having to make cuts; this scenario is likely to be repeated in 2024/25 as budgets tighten meaning that the £6.7m of balances will soon reduce. Some schools have only slim balances and a few primary schools especially will struggle to balance their budgets. For some schools the funding formula works to their disadvantage in not providing a sufficient allocation to cover the level of staffing they require for their mix of age groups and way those have to be organised. The Authority is working with those schools at risk of deficit to develop a planned use of balances in 2023/24 but foresees that they will have to make budget reductions in 2024/25 and that more schools will find themselves in a similar position as the financial situation becomes more challenging.

The Chair commented that although services have not been required to make savings for the previous two years, the Council has had to find budget reductions over the years of austerity meaning that it has not been able to invest in services in that time in the way it would have liked. Whilst education and schools have been protected as far as possible, they are now coming under increasing pressure. It is therefore important that there is awareness of the sacrifices made as well as a realisation that the cost pressures along with the demand on services are now greater and are increasing. She said that there is a case to be made for lobbying Welsh Government for better funding and, given that councils were critical in responding to the pandemic and were praised as the fourth emergency service at that time, she hoped that they would be seen as worth fighting for and should be funded fairly and to a level that enables them to carry out their responsibilities and maintain services.

It was resolved to note the following –

·                The position set out in Appendices A and B of the report in respect of the Authority’s financial outturn for 2022/23.

·                The summary of Contingency budgets for 2022/23, detailed in Appendix C.

·                The monitoring of agency and consultancy costs for 2022/23 in Appendices CH, D and D.