Report by Director of Finance

The Director of Finance submitted a report setting out for approval the 2026/27 Budget and Medium-Term Financial Strategy.  The report also provided an update on the results of the budget engagement exercise, changes to the Budget arising from the publication of the Final Local Government Finance Settlement 2026/27 published on 9 February 2026, as well as other changes that had arisen since the Policy Committee had recommended the Budget to Council at its meeting on 16 February 2026 (Minute 59 refers).  The following documents were attached to the report:

• Appendix 1 - Medium Term Financial Strategy 2026/27 - 2028/29;
• Appendix 2 - Summary of the Proposed General Fund Budget 2026/27 - 2028/29;
• Appendix 3 - General Fund Revenue Budget by Service 2026/27 - 2028/29;
• Appendix 4 - Detailed General Fund Budget Changes 2026/27 - 2028/29;
• Appendix 5 - The Housing Revenue Account Proposed Budget 2026/27 - 2028/29;
• Appendix 6 - The Dedicated Schools Grant Budget Proposals 2026/27;
• Appendix 7 - The General Fund and HRA Capital Programmes 2026/27 - 2028/29;
• Appendix 8 - The Flexible Use of Capital Receipts Strategy 2026/27;
• Appendix 9 - Fees and Charges Proposals from April 2026;
• Appendix 10 - Equality Impact Assessment of the Budget Proposals;
• Appendix 11 - Summary of the Response to the Budget Engagement.

The report noted that the 2026/27 Budget and MTFS 2026/27-2028/29 reflected the changing landscape in which Councils were now operating, including the impact of funding reform and the announcement of a three-year Local Government funding settlement from Central Government.  The most significant impacts on the Budget and the MTFS included demand pressures and placement costs in adult and children’s social care and Special Education Needs arising from increased demand, complexity and market challenges.

The 2026/27 Budget & Medium-Term Financial Strategy recommended to Council by Policy Committee on 16 February 2026 had been based on the Provisional Local Government Finance Settlement published on 17 December 2025, and the report to Council had been updated to reflect announcements made as part of the Final Local Government Finance Settlement published on 9 February 2026.  The updates reflected an increase of £1.347m in 2026/27, rising to £2.125m in 2028/29 in the Homelessness, Rough Sleeping and Domestic Abuse grant which had enabled the removal of previously planned savings in homelessness support services, and confirmation that the Government would fund 90% of the accumulated High Needs Block SEND deficit as at 31 March 2026, subject to the Department for Education’s approval of a local SEND reform plan.  Based on current forecasts this one-off grant was estimated to reduce the Council’s cumulative deficit by £44m, with the Council needing to fund the remaining 10% of the deficit in 2028/29.

The report explained that the underpinning rationale of the Medium-Term Financial Strategy was to deliver a balanced and affordable 2026/27 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 were not 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 the priorities set out in the Council Plan.

The report set out the budget and MTFS assumptions which included Council Tax increases of 2.99% plus an Adult Social Care precept of 2.0% for each year 2026/27-2028/29, delivery of £17.935m of efficiencies and increased income across 2026/27-2028/29, a net draw from earmarked reserves totalling £7.302m in 2026/27, a housing rent increase for 2026/27 of 4.8% in line with approved government policy of CPI + 1% and rent convergence starting at £1 per week in 2028/29 increasing to £2 per week in 2029/30, General Fund capital investment of £140.858m and Housing Revenue Account capital investment of £232.141m over the five-year period 2026/27 to 2030/31, and an initial allocation of £1.500m of transformation funding for each year from 2026/27 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 following motion was moved by Councillor Terry and seconded by Councillor Leng and CARRIED:

Resolved -

That, having due regard of the results of the budget engagement exercise (as outlined in Appendix 11 of the report) and Residents Survey, the 2026/27 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:

(1)       The Council’s General Fund Budget Requirement of £199.662m for 2026/27 and an increase in the band D Council Tax for the Council of 2.99% plus an additional 2.00% Adult Social Car Precept, representing a band D Council Tax of £2,223.18 per annum, an increase of £105.66 per annum excluding precepts from Police and Fire, as set out in paragraph 2.4 of the report;

(2)       The proposed savings and efficiencies of £9.657m and increased income and fees and charges of £2.366m, required to achieve a balanced budget for 2026/27 as set out in Appendices 2 and 3;

(3)       The overall savings and efficiencies of £14.781m and increased income, fees and charges of £3.154m currently proposed within the MTFS, and gross three-year growth changes to service and corporate budgets of £68.401m as set out in Appendices 3 and 4;

(4)       The budgeted net drawdown from earmarked reserves in 2026/27 totalling £7.302m, as set out in paragraph 10.2;

(5)       The Housing Revenue Account budget for 2026/27 of £58.925m as set out in Appendix 5 and the average increase of 4.8% in social dwelling rents from April 2026, and the move to full cost recovery for landlord cleaning and lighting service;

(6)       The allocation of £124.259m Dedicated Schools Grant (DSG) as set out in Appendix 6;

(7)       The General Fund and Housing Revenue Account Capital Programmes totalling £140.858m and £232.141m respectively over the next five years, as set out in Appendices 7a and 7b;

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

(9)       The Fees and Charges set out in Appendix 9;

(10)     The Equalities Impact Assessment as set out in Appendix 10.