Agenda item

The Cabinet considered a report of the Corporate Director of Resources which provided comprehensive financial information to enable Cabinet to agree the 2023/24 balanced revenue budget, an outline Medium Term Financial Plan MTFP(13) 2023/24 to 2026/27 and a fully funded capital programme to be recommended to Council on 22 February 2023 (for copy of report see file of minutes).

Councillor R Bell thanked the Corporate Director and his team for the report and the culmination of a huge amount of work. The report provided a comprehensive overview of the budget pressures faced, the announcements made in autumn statement and provisional local government finance settlement in December. Councillor R Bell referred to the enormous cost pressures faced in Adult and Children’s social care which were unavoidable and excluded pay inflation. Councillor R Bell reiterated his previous comments made regarding the low tax raising capacity faced by the Council, a matter he had consistently raised with the government, most recently during the Local Government Finance Settlement. The Council were also seeing significant and cost pressures in Home to School Transport costs. Budget pressures faced from gas and electricity prices had subsided since previous estimates. In overall terms, the Council faced spending pressures of £78.9m next year which included around £19.5m for pay inflation, with £7m of this relating to the shortfall in the current budget following the local government pay award. Councillor R Bell asked Cabinet to note that the majority of costs were inflationary, and demand driven and not choices the Cabinet had. The Council had an ambitious capital programme of £122m of new investment added. This included further significant investment in schools, highways infrastructure and in towns and villages which amounted to a capital programme of £778m over the next four years and built upon on the significant planned investment in leisure centres and other buildings, by far the largest level of capital investment ever seen by the Council. Additional funding by government next year, plus the council tax raising powers would help in dealing with the financial situation. The uncertainty from 25/26 onwards meant that there could be significant challenges ahead. The budget proposals included increases in line with clear government expectations. The council would need to continue to be flexible and agile as it moved forward. Protection was offered for the most vulnerable residents across the County.

The Leader of the Council thanked officers for all their work in preparation of the budget proposals. The budget for 2023/24 was dominated by unavoidable inflationary pressures. However, the Council was still able to set a balanced budget and in doing so accommodate a substantial capital programme, the largest the Council had ever seen. This was a clear demonstration of the scale and ambition of the Joint Administration. Overview and Scrutiny had been involved at each stage of the budgetary process and the report included feedback from those meetings and from wider engagement with national non-domestic ratepayers, Trade Unions, and the Area Action Partnerships. The Council found itself frustrated lagging behind the national average for core spending power per dwelling. The scale of the challenges faced by unavoidable cost pressures from inflationary increases in pay, waste and transport contracts, national living wage increases and home to schools’ transport budgets were unprecedented and could not be understated.  There was significant uncertainty over funding beyond 2025/26 and this, together with unavoidable inflationary and demographic pressures, remained a significant risk for Medium Term Financial Planning in future years. Using reserves was not a sustainable position and could only be accommodated on a short-term basis. Increasing council tax was a decision was not taken lightly considering the cost of living at the present time. Not increasing Council Tax was not a sustainable or prudent strategy to adopt and would not be in line with government expectations and advice from the Council’s Section S151 officer. The Leader explained that the 2023/24 budget and MTFP position would be much worse if Council Tax was not increased. In the absence of more funding being made available by government it was effectively a binary choice of implementing Council Tax increases or increasing the cuts to vital public services. It was important to recognise those on low incomes in County Durham were afforded significant protection through the Council Tax Reduction Scheme which had been endorsed by the Council. Support was also available to financially vulnerable houses through different means. Having implemented the review of reserves set out in the January cabinet report increased the corporate capacity to balance the budget in future years. It was important to follow the advice of the S151 officer particularly around adequacy of reserves. The Leader had consistently said over the last nine months that it was important that the Council have a well-managed MTFP process, planned well ahead, where tough decisions can be taken on Council tax and savings, against a backdrop of not using reserves to unsustainable levels.

Councillor J Shuttleworth, Cabinet Portfolio Holder for Rural Communities and Highways highlighted that everyone faced financial challenges. It was important to present a balanced budget focussed on priorities in the County. The budget proposals set out in the Cabinet report placed the Council in a much better position than many other Councils across the Country and across the North East.

Councillor M Wilkes, Cabinet Portfolio Holder for Neighbourhoods and Climate Change explained that the public would expect the Council to use some reserves at these difficult times, to look at savings whilst protecting frontline services and increase income. The Council were doing all of this and more. The Council and its officers had worked extremely hard over the last year or so to remove waste and the Council were in a better position as a result. Despite the savings made, despite the use of reserves and despite income generation, the Council were still asking residents for a core council tax rise. It was clear that the Council tax system was completely broken and there was an urgent need to look at a proportional system which rested with the Government.

Resolved:

Upon a recorded vote being taken Cabinet unanimously agreed to

recommend to full Council, approval of the recommendations set out in the report.