This report provides an update to the Council’s Medium Term Financial Strategy.

The Committee considered a report providing an update on the development of the Council’s Medium Term Financial Strategy (MTFS) 2024/25-2026/27 prior to consultation on the Council’s proposed Budget. The following documents were attached to the report:

·         Appendix 1 - Summary of the Proposed General Fund Budget 2024/25 to 2026/27

·         Appendix 2 - Summary of General Fund Budget Changes 2024/25 to 2026/27

·         Appendix 3 - Summary of HRA Budget 2024/25 to 2026/27

·         Appendix 4 - General Fund Capital Programme 2024/25 to 2026/27

·         Appendix 5 - HRA Capital Programme 2024/25 to 2026/27

·         Appendix 6 - Flexible Capital Receipts Strategy

·         Appendix 7 - Equality Impact Assessment

The report noted that Reading Borough Council remained financially stable, however it was not immune to national issues. The update on the development of the MTFS reflected the changing landscape in which Councils were now operating. The most significant impacts on the MTFS update included inflationary pressures across all service areas, in particular children’s and adult social care, high-cost placements in children’s services arising from increased complexity and market challenges, the cost of temporary accommodation arising from increased homelessness presentations and waste disposal.

The report also noted that at the time of writing the Provisional Local Government Finance Settlement had not been announced and so the funding figures in the report were subject to change, however it remained to be seen whether central government would address the financial pressures being felt across the local government sector by increasing the level of funding that councils received.  The MTFS update only included cost pressures that were deemed to be unavoidable.

The report stated that there were significant pressures in the social care system and that the updated MTFS included an increase of £5.750m for Adult Social Care services in 2024/25 to address these pressures, including the commitment to fund care providers at a level that allowed them to pay staff the Living Wage Foundation rate rather than the lower national living wage rate set by central government.  The proposed budget also included an increase in the Brighter Futures for Children (BFfC) contract sum for 2024/25 of £7.525m. This included inflationary increases and a significant growth pressure of £5.941m in respect of placements for Looked After Children due to increases in the costs as well as the age profile and complexity of need and associated costs. This had not yet been agreed and further negotiations on the level of the contract sum were being undertaken.

The report also explained that the MFTS update included an increase of £1.000m in the budget in respect of funding homelessness. This was due to rising private sector evictions and inflation pressures being seen in the cost of Emergency Accommodation.  It was noted that the average nightly rate was £90 in April 2022 compared to £124 in October 2023. There had also been a reduction in the number of available properties to use. Also, an increase of £1.169m had been added to the waste disposal budget to address a combination of inflationary increases to the re3 waste disposal contract and rising costs due to changes in the make-up of waste being presented for disposal. 

The report explained that the MTFS assumed a general Council Tax increase of 2.99% and an additional Adult Social Care precept of 2.00% across all years of the MTFS period 2024/25-2026/27.  It was reported that no announcement had been made with respect to Council Tax referendum principles in the 2023 Autumn Statement. These assumptions would be reviewed in line with any announcements in the Provisional Local Government Finance Settlement. The Council would continue to provide additional support of £75 for residents in 2024/25 who were in receipt of Council Tax Support to further mitigate the increase in Council Tax in the current circumstances. The update also noted that the Business Rate reset originally assumed to happen in 2024/25 would not now take place until 2025/26 at the earliest. Realistically, given the lack of central government announcements and an impending general election, it was unlikely that the reset would be able to be implemented until 2026/27. However, until further announcements were made, given the forecast scale of the impact, it was considered prudent to assume that the reset would occur in 2025/26.

It was noted that there was currently much uncertainty around the future of the New Homes Bonus grant.  However, the MTFS currently assumed that New Homes Bonus would continue for 2024/25 at the same level as 2023/24 at £1.453m. For 2025/26 and 2026/27, it had been assumed that the grant would cease but that the total amount of grant in the national system would remain and be re-distributed using the Settlement Funding Assessment (SFA) methodology, resulting in a reduced funding allocation of £0.613m. No announcements had been made with respect to the New Homes Bonus in the 2023 Autumn Statement. These assumptions would be reviewed following further announcements in the Provisional Local Government Finance Settlement.

Appendices 4 and 5 attached to the report set out the revenue budget including the cost of financing the Capital Programme. On 30 November 2021, the Department for Levelling Up, Housing & Communities had published a consultation about proposed changes to the capital framework for Minimum Revenue Provision (MRP). MRP was the amount that had to be set aside from the revenue budget for the financing of capital expenditure. The original consultation proposed that the changes become effective from April 2023 onwards.  The outcome of the consultation was still outstanding and the MTFS update assumed that the changes would not be implemented.

The report explained that following that following a period of public consultation and the announcement of the Provisional Local Government Finance Settlement a further report would be submitted to the Committee on 19 February 2024 recommending approval of a balanced budget to Full Council in order that it could approve its budget, associated Council Tax level and precept for 2024/25 at its meeting on 27 February 2024.

Resolved

That the Medium Term Financial Strategy Update as set out in the body of the report and the associated appendices be noted, including:

a)    the Council’s General Fund Budget Requirement of £175.268m for 2024/25 and an assumed increase in the band D Council Tax for the Council of 2.99% plus an additional 2.00% Adult Social Care precept, or £95.86 per annum representing a band D Council Tax of £2,016.88 per annum;

b)   that the forecast budget gap of £4.107m in 2024/25 would need to be addressed in order to present a balanced budget to Council in February 2024;

c)    the proposed service savings and efficiencies of £3.719m and additional income of £1.083m currently proposed in 2024/25 and set out in Appendix 2 to the report;

d)   the overall savings currently proposed within the MTFS of £6.369m (of which changes to income, fees and charges is £1.417m);

e)    the Housing Revenue Account budget for 2024/25 to 2026/27 as set out in Appendix 3 to the report;

f)     the General Fund and Housing Revenue Account Capital Programmes as set out in Appendices 4 and 5 respectively;

g)   the Strategy for the use of flexible capital receipts to deliver future transformation and ongoing savings as set out in Appendix 6.