Further to Minutes 46 and 61 of the Policy Committee meetings held on 18 December 2024 and 17 February 2025 respectively, the Director of Finance submitted a report on the Budget and Medium-Term Financial Strategy (MTFS) for the three years 2025/26 – 2027/28.  The report provided an update on the results of the subsequent budget engagement exercise, changes arising from the publication of the Final Local Government Finance Settlement 2025/26 as well as other changes that had arisen since the report to Policy Committee in December 2024.  The following documents were attached to the report:

• The Medium Term Financial Strategy 2025/26 - 2027/28
• Summary of the Proposed General Fund Budget 2025/26 - 2027/28
• General Fund Revenue Budget by Service 2025/26 - 2027/28
• Detailed General Fund Budget Changes 2025/26 - 2027/28
• The Housing Revenue Account Proposed Budget 2025/26 - 2027/28
• The Dedicated Schools Grant Budget Proposals 2025/26
• The General Fund and HRA Capital Programmes 2025/26 - 2027/28
• The Flexible Use of Capital Receipts Strategy 2025/26
• Fees and Charges Proposals from April 2025
• Equality Impact Assessment of the Budget Proposals
• Summary of the Response to the Budget Engagement
• Summary of the Residents’ Survey 2024

The Ministry of Housing, Communities and Local Government (MHCLG) had published the Final Local Government Financial Settlement 2025/26 on 3^rd February 2025. Most of the figures had remained the same as the Provisional Settlement (18^th December 2024), however there was one change that impacted on the Council’s net budget: the Employer National Insurance Contribution Grant was announced as £1.572m, which was an increase of £0.035m from what had been estimated.  Allocations in respect of the Public Health Grant for 2025/26 had been announced on 7^th February 2025. In 2025/26 the Council’s allocation was £11.604m. As the grant was ringfenced any increase/decrease to the Council’s grant allocation would be offset by a corresponding increase/decrease in expenditure. Therefore, the MTFS assumed a nil impact on the bottom line.

The underpinning rationale of the Medium-Term Financial Strategy was to deliver a balanced and affordable 2025/26 budget, to ensure that the Council’s finances were robust and sustainable over the medium term and that, in the longer term, the Council’s finances would not be reliant on the unsustainable use of one-off reserves or funding. The Strategy was informed by the Council’s Vision: “to help Reading realise its potential and to ensure that everyone who lives and works here can share the benefits of its success”, as well as its Corporate Plan priorities.

The report explained that Reading Borough Council was not immune to national issues. The 2025/26 Budget and MTFS 2025/26-2027/28 reflected the changing landscape in which Councils were now operating and was based on another one-year Local Government funding settlement from Central Government. The most significant impacts on the Budget and the MTFS included demand pressures, exacerbated by the impact of the cost of living crisis, in particular, increased placement costs in adult and children’s social care services arising from increased demand, complexity and market challenges; the cost of temporary accommodation arising from increased homelessness presentations due to landlords moving out of the private rented sector and pressures on Housing Benefit resulting from the significantly increased demand in temporary accommodation and supported accommodation for which Housing Benefit subsidy was not 100% recoverable.

The Budget and MTFS assumptions included:

a)  Council Tax increases of 2.99% plus an Adult Social Care precept of 2.0% for each year 2025/26-2027/28;

b)  Delivery of £16.135m of efficiencies and increased income across 2025/26-2027/28;

c)  A net draw from earmarked reserves totalling £3.945m in 2025/26, as set out in paragraph 10.2 of the report;

d)  A housing rent increase for 2025/26 of 2.7% in line with approved Government policy of CPI + 1%;

e)  General Fund capital investment of £155.487m and Housing Revenue Account (HRA) capital investment of £178.261m over the 5 year period 2025/26 to 2029/30;

f)    An initial allocation of £1.500m of transformation funding for each year from 2025/26 to 2029/30 to support delivery of efficiency savings assumed within the MTFS, taking the total transformation funding to £29.229m across the whole life of the Delivery Fund.

The Dedicated Schools Grant High Needs Block was anticipated to be £26.503m in deficit by 31^st March 2025. Further details were set out in paragraphs 2.8 to 2.11 and in Appendix 6 of the report.

This report had been prepared with reference to the following documents:

·     Medium Term Financial Strategy 2025/26-2027/28 Update Report agreed by Policy Committee (18^th December 2024)

·     Autumn Budget 2024 – HM Treasury (30^th October 2024)

·     Final Local Government Finance Settlement 2025/26 – MHCLG (3^rd February 2025)

·     2025/26 Budget & Medium-Term Financial Strategy 2025/26-2027/28 Report approved by Policy Committee (17^th February 2025)

The following motion was moved by Councillor Terry and seconded by Councillor Leng and CARRIED:

Resolved –

That, in relation to the report on the 2025/26 budget and Medium-Term Financial Strategy to 2028, due regard be taken of the results of the budget consultation exercise (as outlined in Appendices 11 and 12 of the report) and the 2025/26 General Fund and Housing Revenue Account budgets, Capital Programme and Medium-Term Financial Strategy as set out in Appendices 1-10 be approved, whilst noting the following:

(a)         the Council’s General Fund Budget Requirement of £178.109m for 2025/26 and consequent increase in the band D Council Tax for the Council of 2.99% plus an additional 2.00% Adult Social Care Precept, representing a band D Council Tax of £2,117.52 per annum, an increase of £100.64 per annum excluding precepts from Police and Fire, as set out in paragraph 2.4 of the report;

(b)     the proposed efficiency and invest to save savings of £7.065m and additional income of £7.277m in 2025/26 required to achieve a balanced budget for that year as set out in Appendices 2 and 3 to the report;

(c)     the overall savings proposed within the £16.135m (£11.559m savings and efficiencies and £4.576m additional income) and three-year growth changes to service budgets of £50.190m as set out in Appendices 3 and 4 to the report;

(d)     the budgeted net draw down from earmarked reserves in 2025/26 totalling £3.945m, as set out in paragraph 10.2 of the report;

(e)      the Housing Revenue Account budget for 2025/26 of £57.304m as set out in Appendix 5 and the average increase of 2.7% in social dwelling rents from April 2025;

(f)      the allocation of £117.432m Dedicated Schools Grant (DSG) as set out in Appendix 6 to the report;

(g)     the General Fund and Housing Revenue Account Capital Programmes totalling £155.487m and £178.261m respectively over the next five years, as set out in Appendices 7a and 7b to the report;

(h)     the Strategy for the use of flexible capital receipts to deliver future transformation and ongoing savings as set out in Appendix 8 to the report;

(i)      the Fees and Charges set out in Appendix 9 of the report;

(j)     the Equalities Impact Assessment as set out in Appendix 10 to the report;

A recorded vote having been required, the voting was as follows:

For the motion:  32

Councillors Asare, Ayub, Barnett-Ward, Cross, Davies, Dennis, Eden, Edwards, Emberson, Ennis, Gavin, Gittings, Griffith, Hacker, Hornsby-Smith, Hoskin, Juthani, Keeping, Lanzoni, Leng, Lovelock, McEwan, McGrother, Mpofu-Coles, Naz, Rowland, D Singh, Stevens, Tarar, Terry, Woodward and Yeo.

Against the motion:  9

Councillors Cresswell, Goss, McCann, McElroy, Mitchell, Nikulina, R Singh, White and Williams.

Abstentions:  3

Councillors Moore, O’Connell and Thompson.