Agenda item

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

The report of the Director of Function (Resources)/Section 151 Officer which set out the financial performance of the Council’s services at the end of Quarter 4, 31 March 2025 was presented for the Executive’s consideration.

Councillor Robin Williams, Deputy Leader and Portfolio Member for Finance and Housing presented the report which projects an overall £3.873m underspend for 2024/25 including Corporate Finance and the Council Tax fund, equating to 2.15% of the Council’s net budget. He reported that the draft outturn position is a marked improvement on the Quarter 3 forecast with the analysis of variances in Table 5 of the report showing a positive movement of £3.11m. The main contributors to the improved position include a £936k underspend in Adult Services  due chiefly to additional grant income, staff vacancies, savings from a new utilities contract and increased income from fees and charges particularly in Highways, Planning and Adult Services.

Councillor Robin Williams noted that changes to eligibility rules for business rates on self-catering accommodation have resulted in many properties reverting to Council Tax thereby increasing the number of properties subject to the second home premium. In anticipation of a large number of potentially successful appeals against these decisions, as well as the  reassessment of properties that meet the new thresholds and return to the business rates register, £900k of surplus funds has been set aside in an earmarked reserve for possible refunds in 2025/26.

The draft outturn position and reported underspend and its impact on the Council’s general balances strengthen the Council’s financial position and will allow greater flexibility when planning the 2026/27 revenue budget. A further report will be presented to the Executive once  the draft Statement of the Accounts for 2024/25 has been completed.

The Director of Function (Resources)/Section 151Officer noted that recent investments in Council buildings aimed at reducing carbon emissions have led to a significant reduction in energy costs in Quarter 4.

Regarding the underspend on the Council’s overall budget for 2024/25, he explained that many of the contributing factors were one-off in nature, such as additional grants unlikely to recur, temporary staff vacancies and increased income driven by heightened demand which may fall back in 2026/27.  He emphasised that the Council’s underlying financial position and  the challenges it faces remain largely unchanged by the developments in 2024/25. The projected budget outturn for 2024/25 will bolster the Council’s general balances, offering  more options when planning the 2026/27 budget but it does not resolve the underlying pressures particularly in Adult and Children’s social care. Children’s Services are projected to report an overspend of £1.948m in 2024/25 despite substantial investment by the Council when setting the budget. Further funding for these services has been included  in the 2025/26 budget with the hope that it will help maintain expenditure within resources. The Council’s general balances have also benefited from additional Welsh Government funding for increased employer contributions for teachers’ pensions along with support for pay,   social services and homelessness pressures. Since provision for pension and staff costs had already been included in the budget, these amounts were added to the general balances.

Looking ahead, while Welsh Government is set to receive an above inflation funding increase as a result of the Westminster Government’s spending review, if this follows the historical pattern and is directed primarily towards the Health Service, it could result in a real terms reduction of 1.4% for Welsh local government funding in 2027/28 and 2028/29 according to an assessment by Wales Fiscal Analysis. Incorporating this forecast into the Council’s financial model over the next three years before any tax increases suggests  a potential funding  gap of over £15m. While the Council’s general balances can help mitigate the impact in the short-term, once these reserves are used the Council will face difficult decisions on reducing expenditure.

The Chair commented that numerous representations have been made to Welsh Government emphasising that councils would be better able to plan strategically if unanticipated grant funding, often received late in the financial year and  significantly altering the financial position, was instead incorporated into the Revenue Support Grant. He also highlighted the benefit of multi-year financial settlements in providing councils with funding certainty beyond a single year.

Councillor Robin Williams referred to the Audit Wales assessment of the Council’s financial sustainability, which concluded that the Council does not currently have a formal strategy in place for its long term financial sustainability. He noted that  planning for the longer term is challenging  when budgets are set on an annual basis. He added that while the Council’s immediate financial situation may appear healthy it potentially faces a £15m funding gap over the next three years which could deplete its reserves unless  measures to reduce expenditure are identified and implemented.

It was resolved –

• To note the position set out in Appendices A, B and C to the report in respect of the Authority’s financial outturn for 2024/25.
• To note the summary of contingency budgets for 2024/25 detailed in Appendix CH.
• To note the monitoring of agency and consultancy costs for 2024/25 detailed in Appendices D and DD.
• To note that the estimated balance of the Council’s general balances as at 31 March 2025 stands at £18.166m.