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 2024/2025 for the Executive’s final review and agreement was presented.

Councillor Robin Williams, Deputy Leader and Portfolio Member for Finance reported that the Executive is required to agree a number of key matters in respect of the 2024/25 budget. This will then allow the final recommendations to be presented to the Full Council at its meeting on 7 March, 2024. The matters requiring agreement are the Council’s Revenue Budget and resulting Council Tax for 2024/2025; the Council’s updated Medium Term Financial Strategy and the use of any one-off funds to support the budget.

The Executive in January 2024, initially proposed a budget for 2024/25 of £184.219m which was based on the provisional AEF of £126.973m, this would require an increase of 10.9% in Council Tax and the use of £4.425m of the Council’s general balances to balance the budget.  In setting the budget, the Executive recognised the need to protect front line services and increasing budgets to meet an increased demand in Adult and Children’s services.  The budget proposals included capping the inflation increase for the delegated school’s budget by 2.5% which reduced the budget by £1.25m, included a saving target of £1m to be generated from workforce reductions, the postponement of the use of the Council Tax premium to fund housing projects for one year, saving £1.2m and other budget savings and income generation projects of £1.327m.  He noted that despite the short timescale between the publishing of the initial budget proposal and the date of the deadline for setting the Council Tax, a public consultation process was undertaken which included consultation within the Town and Community Councils Forum, Young People’s Forum, Older People’s Forum, Schools Finance Forum together with an on-line consultation process.

The Portfolio Member said that thereafter the UK Government has announced that Councils in England would receive an additional £600m in funding in 2024/25.  This additional funding creates an additional £25m as consequential funding for the Welsh Government and they have confirmed that £10.6m of this additional funding will return the Social Care Workforce Grant to the 2023/2024 level.  The remaining £14.4m has been allocated through the Local Government settlement formula.  The impact of this additional funding is that the Aggregate External Finance increases by £332k.  He noted also that the North Wales Fire Authority have reviewed their final budget proposal which has resulted in a reduction of £87k in the levy that the Council must fund. 

The Portfolio Member for Finance further said that the financial situation is slightly better than was foreseen at the beginning of the initial budget process.  Whilst the school’s budget has been increased, the Executive has decided that the cap on the inflationary increase in schools be reduced from 2.5% to 1.5% which will result in an increase to overall schools’ budget by £498k compared to budget set in the initial proposals.  The increase in Council Tax is also reduced to 9.5%, of which 0.9% relates to the increase in the Fire Authority levy and 8.6% relates to the Council’s budget requirement.  This increases the Band D, Council Tax by £136.44 taking the Band D charge to £1,572.30.  The proposal to reduce the opening hours of Leisure Centres is modified to allow for Amlwch Leisure Centre to remain open until 3.00 p.m., rather than close at 1.00 p.m., as proposed in the initial budget proposals at an additional cost of £12k. 

The Director of Function (Resources)/Section 151 Officer reported that the final settlement has been received by Welsh Government which is £175 higher than is noted within the report.  He said that the main risk to the budget is that there is no pay offer made for NJC staff for 2024/2025; whilst 3.5% pay increase has been included within the budget setting process, any additional pay increase will have to addressed.  Welsh Government have yet to indicate what the Teacher’s pay award will be from September 2024, therefore, there is still considerable uncertainty in respect of pay inflation.   He noted that inflation is less of a risk this year and it is forecast to fall over the year.  High interest rates have been beneficial in respect of the Council’s investments.  He further added that there are also risks to the large number of specific grants from Welsh Government, or other bodies, which provide in excess of £25m additional funding.  The final settlement indicates that the majority of the grants received from Welsh Government will remain at the 2023/2024 level or will be reduced on an all Wales basis.  Initial indications are that the grant funding to schools will be 8% to 10% lower than in 2023/2024.  The proposed budget incorporates a number of assumptions in terms of likely levels of income and expenditure in future years and inevitably a number of financial risks inherent in the proposed budget.  Whilst it is evident that people are struggling with the cost-of-living crisis, the increase in Council Tax may be a risk that people will be unable to afford to pay and debts may increase.  However, the level of collection of the Council Tax has stabilised pre-pandemic levels.  An additional risk will be the increase in the second home premium from 75% to 100%.   The increase may encourage second homeowners to sell or let their properties. 

Having taken into consideration the level of the Council’s general balances, school balances, earmarked reserves and contingency budgets, the Section 151 Officer is content that the Council’s financial position is sufficiently robust to withstand any difficulties that may arise during 2024/2025.  However, whilst the Council has sufficient resources in reserve to enable it to use some of those monies to balance the budget for 2024/25, this is not a sustainable strategy in the long term. The Medium Term Financial Plan updated for 2025/26 and 2026/27 in Table 5 of the report, which is based on assumptions regarding inflation, pay and the local government settlement that may change as 2025/26 draws nearer, indicates that there will be a need to make significant reductions in the net revenue expenditure budget in 2025/26 (over £7m); although this could be partly offset by the further use of reserves it only postpones the need to make budget reductions in 2026/27. The situation does improve in 2026/27 with the expectation that inflation will have fallen back to the Bank of England’s target of 2% and that the funding increase from Welsh Government will match inflation.  The unknown variable will be demand for social care and homelessness services, which can place a significant pressure on budgets should they increase. 

Councillor Dyfed W Jones, Vice-Chair of the Corporate Scrutiny Committee reported on the Committee’s deliberations at its meeting on 27 February, 2024 with regard to the final draft budget proposals.  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 as to what steps the Executive proposes to take to address the forecasted funding gap in 2025/2026 and the potential impact of the proposed 1.5% cap on the inflationary increase for schools.  Further questions were raised as to whether the proposal to reduce the Council Tax increase creates a financial risk for the Council in future and the impact of the proposed 9.5% increase in Council Tax on people who are struggling to pay and whether any support is available for them.

The Portfolio Member for Finance said that the Executive has also decided to release £200k from the general balances to school reserves.  He said that the Executive has agreed that a further £50k will be transferred to the general balances to school reserves resulting in a total of £250k. 

Members of the Executive spoke to say how difficult the process of setting the 2024/25 budget. 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 2025/26 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.   The Executive 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.

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;

·      To note the Section 151 Officer’s recommendation that the Council should maintain a minimum of £9.2m 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 £184.165m and resulting increase in the level of Council Tax of 9.50% (8.6% for Council Services and 0.9% for the Fire Levy) (£136.44 – Band D) to the full Council, noting that a formal resolution, including the North Wales Police and Town/Community Council precepts, will be presented to the Council on the 7 March, 2024;

·      That any minor differences between the provisional settlement and the final settlement be adjusted for by using the general contingency which is included in the 2024/2025 budget 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 £250k be transferred from general balances to schools reserves;

·      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 the prior consent of the Executive;

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