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The Chairman explained that this was an early consideration of Budget content, with the formal presentation of the draft Budget to come following Christmas. Councillor Mark Cory, Portfolio Holder for Resources, introduced the Budget preview and explained that the Council still had a budget gap to close. The Fair Funding review statement from Government was still awaited, and was expected on 17 December 2025. A public consultation had been held, and the Administration would continue to discuss matters with elected members to gain their views. The draft Budget was more explanatory than in previous years, with more information on what the Council did, and how it operated. The process was explained, with Senior Leadership Board and Budget squads doing deeper ‘Fit for the Future’ [FfF] work. Owing to financial pressures, the Council’s budgeting had to be as tight as possible. There was an additional £2.5m pressure on the Budget which needed action to address it. The financial situation was now much clearer, with the Council on track to balance its Budget, whether LGR occurred or not.
Anna D’Alessandro, Chief Finance Officer and Section 151 Officer, describer the draft Budget as being detailed, robust and deliverable. The Council faced an unprecedented situation, with LGR, changes in government funding, much information from experts, but often contradictory. The Council had decided to maintain its early assumptions. More people had been involved in the Budget process, to increase ownership. This included elected members and heads of service, with the process starting in June. Pressures on the Budget had been reviewed and challenged, whilst savings had been identified and deliverability assessed, including RAG [Red/Amber/Green] ratings. A line-by-line review had been conducted on the assets in the Council’s programme, with £40m capital receipts from asset disposal being applied. A forensic application of capital receipts would mean they would be applied where most effective. A review of all fees and charges would ensure that fair prices were set and that reserves would not be overused. The Council was prepared for the outcome of the Fairer Funding review, to ensure the Budget would be balanced. The assumptions used were believed to be as robust as possible, but the Fairer Funding statement was needed before information, such as a funding table, could be brought forward.
A Panel member praised the draft Budget report as being well-written and appearing to be Green Book compliant. The assumptions were described as acceptable, except with some doubt regarding assumptions on the expected staff pay award and on interest rates. The role of reserves and the Council’s approach were described as being prudent. The RAG rating system used was welcomed, but some concern voiced that ‘all green’ ratings were overly optimistic, with some worry that the approach to risk could be more robust. Issues raised included lessons learned as to why the FfF Programme had not had more of an effect and a request for an explanation of the payment to a third party in relation to Northern Gateway.
The Chairman suggested that a focused briefing could be given by the Finance Team on Northern Gateway, rather than examining it at this meeting.
The Chief Finance Officer explained that the Council had set out ratings spilt between Red, Amber and Green for the RAG ratings relating to risk, stating that she was confident that they were deliverable. The points relating to Amber and Red had been identified in case the Fairer Funding settlement went badly and additional savings then became necessary. The Portfolio Holder stated that only the ‘Green’ ratings had been laid out at this stage, as a good settlement was expected from government, but the ‘Amber’ and ‘Red’ options had been put together in case they were needed.
Not all previous aims of the FfF programme had been met but ownership and accountability were now emphasised in its processes to make them more in-depth. Lindsay Barker, Deputy Chief Executive, pointed out that 5.3 of the report showed that there had been a 67% achievement of savings set out, and reasons given for the shortfalls, with information on future FfF savings.
A Panel member criticised the Budget process, saying that it was being carried out as a bottom-up process, without cost savings from FfF and with increases to charges and disposals to address the shortfalls. The Panel member stated that staffing numbers were increasing, and that a bottom-up process would not lead to savings. The Panel member claimed that there had been some allowable sleight of hand used in accounting for MRP, and asked what effects would be experienced if the Council did not achieve the income from disposals that it expected. Another Panel member voiced the view that what had been described as ‘sleight of hand’ was simply the application of accounting rules, and asked how the figures shown in Table Eight of the report had been calculated, and for information on the assets being proposed for disposal, along with the projected income from the disposals.
The Portfolio Holder confirmed that the first disposals would be brought before the Scrutiny Panel in January 2026, with examples having already been shown to the Members’ Estates Group. Patrica Barry, Interim Head of Corporate Landlord, explained that the reports coming to the Panel in January would be confidential, due to the commercial sensitivities involved, including the report on the overall approach and disposal programme. The Chairman informed the Panel that it could consider whether it wished to look at the entire programme in the future as part of its consideration of the Panel’s work programme.
The Chief Finance Officer gave her view, as Section 151 Officer, that she was confident that any delays in specific disposals could be addressed by accelerating other disposals, and that targets would be met. This followed strong challenging of the assumptions upon which the programme was being built.
A number of Panel members agreed that it would assist the Panel to receive the MRP profile as soon as possible. Regarding the numbers in Table Eight, the Chief Finance Officer explained that these were established on a complex base, using a forensic approach. The base spreadsheet had not been included, but this could be circulated to the Scrutiny Panel following the meeting, or a specific briefing held on this subject. A Panel member gave the opinion that a summary explanation as to where the figures originated would be sufficient. Wayne Layton, Financial Planning and Budget Specialist, stated that the Council had over 100 schemes involving MRPs, and that the CIPFA [Chartered Institute of Public Finance and Accountancy] Code dictated how these should be paid down, with key information being when these were incurred, on what asset types and for what amounts. The different scheme types were explained, and the Council had engaged a CIPFA-qualified accountant to examine how to pay down the biggest debts first. A briefing session to explain this was offered for the future. The Chairman accepted the offer of a briefing session or briefing note for members. The Financial Planning and Budget Specialist then gave an explanation of the interest savings calculated regarding the Council’s MRP plans and projections. A member asked for more information on the planned savings that were judged to be at higher risk levels. The Financial Planning and Budget Specialist answered that this, and answers to questions about the approach to capital receipts and borrowing could be explained within a future briefing.
At this At this point, Councillor Thomas Rowe left the meeting.
A Panel member suggested that the Panel looked at Annexes One and Two, regarding changes from the previous year, stating that Tables Three and Four were confusing, and that Table Three showed reserve use at £11.3m in this year, with no significant reduction laid out for future years. The Panel member stated a calculation that the plans showed an expected £6.8m reduction in reserves and asked for confirmation as to how much expenditure was expected to exceed income within the year, going on to state the view that an error had been made in using the wrong figures for calculations, between incremental and cumulative figures. The Chief Finance Officer underlined that Table Four showed incremental figures, rather than a cumulative view, as the best way to show year-on-year changes. The initial figures were explained, and had been adjusted to be more prudent. Changes from updated information and assumptions were covered, such as the pay award assumption being 2%, but the pay award then being 2.5%. The figure given for reserve use was just the overall shortfall identified, but the settlement from government was required in order to give certainty. The Financial Planning and Budget Specialist clarified that the only cumulative figures shown were those for the General Fund Reserves B/F. A Panel member expressed disbelief at this.
The Panel discussed the views and information given about Tables Three and Four. The Chief Financial Officer explained that, by accepting the top line, the Council had to apply the budget gap to its reserves in order to balance the budget, though there would be options to increase income or reduce costs instead. The Financial Planning and Budget Specialist added that Table Four started with t £3.3m deficit, with £400k in extra payroll spending and an additional £3m in budgetary pressures. Future years were shown and a cumulative balance of the General Fund Reserves was given year by year. A Panel member argued that the table was too complicated, that the savings line was cumulative, and that the Medium Term Financial Forecast [MTFF] was misleading and should be ignored, even being mindful of the legal duty on the Council to show an MTFF.
The Leader of the Council cautioned that elected members should not damn the work of officers if they happened to disagree with it, but acknowledged that this work should be readable and understandable and undertook to look at how the next draft might be presented to be more understandable for members. The Chairman noted the existence of disagreement regarding the figures for future years did not affect the figures shown for 2026-27.
The Panel moved to consideration of Annex Two, with questions being asked regarding the pause to contributions to the corporate landlord repairs reserve, whether there was anything in that reserve and whether maintenance work could be done in-house with enough efficiency to save the £230k shown. The Interim Head of Corporate Landlord explained the detailed analysis done of existing contracts and the capacity of the in-house technical team, which had the ability to take on some of the outsourced works which was not specialised in nature. The Estates Team were confident in the projected savings of £230k. Regarding the £395k proposed saving relating to a pause in contributions to Corporate landlord repairs reserve, projects and work was being moved into the Capital Programme instead.
An explanation was requested regarding the increase in staffing costs due to regrading, as laid out in Annex One. Jess Douglas, Head of People, explained that the Council had had overlapping pay grades for years. This had caused confusion and industrial relations issues. In waste services, drivers had been moved to a pay grade above loaders, which had had knock-on equal pay issues which necessitated further adjustments. This had been a well-documented process and decision aiming to mitigate potential claims against the Council.
Panel members raised queries regarding the proposed increases in fees and charges, and the stating in the report that £11.3m in reserve appropriations was expected for the current year, whereas the report text stated that the overspend for the year was projected to be £6.8m. The Chief Financial Officer explained the appropriations and projections year by year, to 2027-28, and that there had been a £4.4m drawdown on reserves this year to date. It was anticipated that the whole remaining £2.4m would be drawn down from reserves, within the £10.2m laid out for 2025-26, which would become clearer as the Council moved closer to the outturn for this current financial year. The Panel was told that, when producing reports in year, the Finance Team had to project any budget gap as drawdown from resources at the end of the year. It was prudent to assume the Council would do so, but the Council had other measures that it could take to address in-year shortfalls. The approach taken ensured that should the full projected overspend be taken to year end, the Council would have sufficient reserves to cover this if necessary. A fuller report was promised on reserves, with updates on reserve movements and other key information. Caution was expressed by the Chief Financial Officer that surety over the use of reserves lessened as projections moved further into the future, with the £11.3m figure shown to cover the next three years of the MTFF. The Financial Planning and Budget Specialist added that the table provided showed the use of full totals, but that there would be phasing, with the planned use of reserves expected to be in peaks and troughs. Details were promised as part of the full draft Budget for future consideration.
Addressing the Capital Programme, a Panel member welcomed the removal of certain items, compared to previous iterations, but expressed concern that debt was still rising and gave the view that this was unsustainable, questioning the figures provided. The Chief Financial Officer underlined that the Capital Programme and Treasury Management Strategies would be provided with the Budget as legal necessities. These would give the details and show sustainability of the Council’s borrowing. A request was made for officers to provide details on the prudential indicators relating to the Housing Revenue Account Business Plan, with the Chief Financial Officer giving assurance that the HRA Review would form part of the final Budget.
A Panel member opined that the prudential indicators showed that the Council’s approach was not sustainable, with significant spending on major repairs being immediately written down, and then depreciation calculated on the net book values. The Financial Planning and Budget Specialist explained that the HRA did not calculate depreciation in the same way that this was calculated for the General Fund, giving information on the different approaches and assuring that the HRA did correctly account for this. HRA borrowing was against the £1.2bn value of Council assets, with the Council currently borrowing at around 14% of that value and projecting to lower this to 4%. No local authorities paid down HRA borrowing, as asset value continued to rise, whilst debt amounts did not. The Panel member argued that the Council was not accounting for the cost of HRA borrowing and was aiming for 125% cover but was doing this on a ‘before major repairs’ basis. The Portfolio Holder for Resources underlined the expertise of the Council’s consultants, Savills, and their views given to Governance and Audit Committee. The Council followed CIPFA guidance, was not running its HRA incorrectly and was trying to reduce its debt over time by carrying out maintenance. The Chairman agreed that HRA accounting was done differently to commercial sector accounting because of statutory requirements in place.
RESOLVED that the SCRUTINY PANEL found no issues to formally raise with Cabinet at this stage regarding the report on the draft Budget for 2026-27.