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 incorporating the initial draft Revenue Budget proposals for 2024/25 was presented for the Executive’s consideration.

Councillor Robin Williams, Deputy Leader and Portfolio Member for Finance presented the report saying that Welsh Government’s provisional settlement showed an increase of £169.8m in the overall level of funding for Wales equivalent to a 3.1% increase in cash terms  The draft settlement has resulted in a 2.5% increase for Anglesey (0.6% below the Welsh average and the 17^th highest increase from the 22 authorities) which after the main budget changes have been taken into account leaves a funding deficit of £14.391m before any change in Council Tax. Bridging this gap through Council Tax alone would mean raising Council Tax by 30% which the Executive believes is unacceptable and unrealistic. The Executive is therefore proposing that the shortfall be made up by a combination of budget savings of £4.773m (funding of schools at 2.5% below inflation, workforce reductions, other budget savings as per Table 4 and Appendix 3 of the report and use of Council Tax Premium to support service costs), the use of £4.425m of reserves (£1.6m from General Balances and £2.825m from Earmarked Reserves) and a Council Tax increase of 9.78% plus an additional 1.12% to fund the increase in the Fire Service Levy (noting that based on the latest information, this could  change)  making a total rise of 10.9%. This would take the Band D charge (excluding Police and Town/Community Council precepts) to £1,592.37, an increase of £156.51 or £3.01 per week.

Councillor Robin Williams whilst emphasising that the level of increase int the Council Tax is not something the Executive is comfortable with referred to the difficult financial context and uncertain financial climate which has made preparing the provisional revenue budget for 2024/25 a challenging task. The Council is legally required to deliver a balanced budget and despite the proposed Council Tax increase which is at a similar level to indicative increases by other authorities, Anglesey remains one of the lowest Council tax charging authorities in Wales having exercised prudent financial management in previous years which has strengthened its financial position and is helping it deal in the short-term with the challenges it is facing. The draft Budget proposals if approved, will subsequently go out to public consultation for a two-week period.

The Director of Function (Resources)/Section 151 Officer took the opportunity to explain the budget setting process and the options available to the Council in setting a balanced budget which is a legal requirement and he highlighted the limits and constraints on the sources of funding open to the Council. The majority of the Council’s funding comes from Welsh Government in the form of the Revenue Support Grant which the Council can spend as it wishes to meet local needs and priorities. The grant is distributed according to a funding formula based on various datasets including population, number of people in receipt of benefit and school pupils etc which determines how much funding a council receives. Anglesey’s share of the funding for 2024/25 has increased by 2.5% which is significantly below the rate of inflation and does not meet the increased costs of providing the Council’s services in the forthcoming year having regard also to the increased demand for services such as children and adults’ social care and homelessness as more people access those services. Many of the costs facing the Council including teachers’ pay, non-teaching staff pay, pensions, energy, National Living Wage, Fire Service Levy etc. are beyond its control and whilst the budget does include fees and charges there are limits on how much these can be increased with there being a cap on some fee increases. The only other avenues of funding available to the Council are the funds it holds in reserve and Council Tax. The Council cannot begin to calculate the amount it needs to generate from Council Tax until it knows how much funding it will receive from Welsh Government which was not announced until 20 December, 2023. As in 2023/24, the budget proposals for 2024/25 include the use of Council reserves to help meet the funding shortfall and together with budget savings, limit the increase in Council Tax as far as reasonably possible, and whilst this approach will help the Council in setting a balanced budget for 2024/25 it is not sustainable in the long-term and does not address the underlying issue as regards the sufficiency of funding to be able to deliver services in line with costs and demand. Using money the Council has in reserve to make up the budget shortfall also weakens the Council’s financial resilience and its ability to deal with future financial challenges especially as the 2025/26 financial year is likely be as, if not more challenging in terms of the amount of funding expected from Welsh Government, and the choices and decisions that will consequently have to be made to enable the Council to balance its budget and avoid becoming insolvent.

The Head of Democracy provided a summary of Scrutiny’s response to the provisional 2024/25 Budget proposals and issues discussed at the meeting of the Corporate Scrutiny Committee on 16 January 2024 and he confirmed that following debate, the Committee had endorsed the budget proposals comprising of an initial draft budget of £184.219m, budget reductions  of £4.773m, use of  £4.425m of reserves, an increase in the second homes premium from 75% to 100% and a 10.9% increase in Council Tax to include a 1.12% increase to cover the Fire Service Levy.

The Executive acknowledged the drafting of the 2024/25 Budget as having been an extremely challenging task with the scale of the funding deficit facing the Council being far greater than that experienced during the initial period of austerity with difficult decisions having to be made around service reductions and Council Tax. Executive Members described the challenges faced by their individual portfolio areas and while pressures in adults’ and children’s social care as a result of an ageing population, rising demand and more complex needs are well documented, the effect of reduced funding including uncertainty around grant funding on non-statutory services such as Leisure which is valued by Anglesey residents not only for sports but for health and well-being benefits, was also emphasised. Executive Members referred to the proposals as the product of long discussion over many months and emphasised that they were not being put forward lightly. The combination of budget reductions, use of reserves and Council Tax increase is deemed to be the most reasonable solution in terms of minimising the impact and protecting services for the most vulnerable. Executive Members accepted that the current situation is not sustainable and questioned the Officers on the risks to the Council being able to continue to maintain performance and to deliver services to the same level and quality if budgets are not increased accordingly.

The Chief Executive referred to councils if not the wider public sector as facing a funding crisis and emphasised the impact which the Council’s budget decisions have on other public sector bodies such as the Health Board and the Police. Whilst many of the statutory services which the Council is required to provide in relation to children and adults’ social care and homelessness are driven by demand to which the Council must respond regardless of budget others are preventative in nature and help reduce pressures on health and policing. These are the services that are at risk because of budget cuts or reductions in grant funding meaning that the pressures will be displaced to other areas in the public sector with more people reaching crisis point sooner. There are a range of non-statutory services which the Council provides from leisure centres to public conveniences and economic development which affect quality of life and which those people who do not have requirements on education or social care have expectations of as Council Taxpayers and contributors. Whilst the risk to these services must be managed in 2024/25 the issue in 2025/26 is the extent to which the Council can comply with statutory requirements in the delivery of its services. If the funding gap continues or increases then Welsh Government and regulators will need to rethink the statutory thresholds or those will be missed by councils thereby creating risk for the older population and those dependent on the Council’s services. Budget reductions also have implications for staff morale and well-being as well as the standard of delivery if the workforce reduces. Decisions to increase pay and pensions without providing councils with additional funding to finance those increases mean fewer staff on better pay and pensions and smaller teams to deliver services.

It was resolved –

·      To approve the initial proposed budget for 2024/25 of £184.219m.

·      To approve a proposed increase in Council Tax of 9.78%, plus 1.12% to cover the Fire Levy making a total of 10.9% and taking the Band D charge to £1,592.37.

·      To formally propose an increase in the premium on second homes from 75% to 100%.

·      That £4.425m be released from the Council’s general balances and earmarked reserves in order to balance the 2024/25 revenue budget.