Agenda item

The Cabinet considered a report of the Corporate Director of Resources which provided an update on the development of MTFP(13), covering the period 2023/24 to 2026/27 and on the development of the 2023/24 revenue budget in the light of the Chancellor of the Exchequer’s Autumn Statement in November and the provisional local government finance settlement published on 19 December 2022.

The report included updated financial forecasts, building on the figures previously considered by Cabinet in October 2022, together with the outcome of the MTFP(13) budget consultation process (for copy of report see file of minutes).

In Moving the report Councillor R Bell, Deputy Leader and Portfolio Holder for Finance thanked the officers for the report which provided a comprehensive overview of the announcements made in the Autumn Statement in November and the provisional local government finance settlement published in December.

The updated figures in the report included provision for increased inflationary pressures including the impact of CPI and the national living wages increases next year which had a significant bearing on Adult Social Care contracts in particular.  The cost pressures in Adults and Children’s social care which were by far the largest budgets the Council had were enormous.

In overall terms the Council faced spending pressures of £81.9m for next year which included around £19.5m pressure for pay inflation with £7m of this relating to the shortfall in the current budget following this year’s local government pay award.

The cost pressures from energy price inflation remained volatile but the budget provision remained in line with the figures factored into the October Cabinet report.

The Autumn Statement announcements and the local government Finance settlement which was better than expected including the additional council tax raising powers the Council had been provided with and the delay in the implementation of the adult social care reforms were all to be welcomed.

The additional funding being provided by the government next year where Durham would receive an additional £39.8m of funding plus the council tax raising powers would undoubtedly help to address the significant cost pressures being faced and in particular the additional £1.44m from government to enhance the council tax support funding was very welcome to those feeling financial hardship.

The financial modelling included in the report assumed the implementation of all savings that were set out in the October report to Cabinet and which had been subject to consultation and Councillor Bell thanked those who took part in the consultation exercise.

Should all the savings developed to date ultimately be agreed next month the total identified savings across the MTFP13 planning period would be £18.6m with £12.7m falling into next year.

The forecasts factored a council tax increase in line with the government's expectations where the council tax core referendum limit had been increased to 2.99% from next year and the adult social care precepting powers had an additional 2% next year and the year after.  The clear expectation from government was that these additional flexibilities were taken.  There was a strong recommendation from the Council’s section 151 that these flexibilities were taken.

In Seconding the report Councillor A Hopgood, Leader of the Council reiterated that final decisions on the budget and Council Tax were to be taken at full Council on 22 February 2023. 

The report built on the information considered by Cabinet in July and October and updated the financial forecasts for next year and beyond.  It included the outcome of the consultation on the budget strategy and savings proposals that were set out in the October report and the outcome of the review of reserves that had been undertaken.

The report identified a number of necessary revisions to previous medium-term financial planning assumptions and built in updated forecasts for pay and price inflation and other unavoidable budget pressures in addition to the outcomes of the local government finance settlement and the Autumn statement.

While the updated MTFP forecasts were still extremely challenging the additional funding announced over the next two years allied with the increased council tax raising powers the Council had been given and the delay in the implementation of the social care reforms had reduced the scale of the challenge in terms of balancing budgets in the short term.  However, the scale of the challenges faced in terms of the unavoidable cost pressures should not be understated.

There was a clear expectation from government that local authorities would take up the additional council tax raising powers given to them and there was significant uncertainty over the funding which would be received beyond 2025-26.

The updated forecasts show that even if the Council maximised its council tax raising powers over the next four years which it would still have a £41m shortfall to bridge over the next four years with £25.6m or this falling next year

While increasing the council tax was a decision that should not be taken lightly, not increasing council tax was not a sustainable or prudent strategy to adopt and would not be in line with the government expectations nor in line with the advice from the Council’s s151 officer.

Resolved:

That the recommendations in the report be approved.