Agenda item

The Cabinet considered a report of the Corporate Director of Resources which provided an update on the development of the 2024/25 budget and the Medium Term Financial Plan (MTFP(14)) covering the period 2024/25 to 2027/28. The report also considered a review of the Local Council Tax Reduction Scheme for 2024/25 and proposed changes to the Council Tax Discretionary Discounts and Premiums Policy (for copy of report see file of minutes).

In Moving the report, Councillor R Bell, Deputy Leader of the Council and Portfolio Holder for Finance thanked officers for the thorough report, which updated the financial forecasts agreed at County Council in February and outlined the significant financial challenges faced and consideration of options for balancing next year’s budget and beyond.

Councillor R Bell explained that the assumptions on Council Tax increases included in this report were for financial planning and forecasting purposes, although the implications of ultimately not making decisions in line with the assumptions was made clear in the report.

Every 1% on council tax generated around £2.7 million of additional council tax revenues – or to put it another way, if the Council did not maximise its council tax raising powers, as expected by the Government, then the financial challenge deficit faced increased by £2.7 million for every 1%.

The Local Government Finance settlement last year provided some much needed additional investment and greater certainty in terms of government funding for 2023/24 and 2024/25, however, there remained significant uncertainty beyond 2024/25.

This funding and the additional revenue generated from expected increases in the Council Tax, fell well short of the unavoidable cost pressures faced. The Council could simply not raise sufficient income locally to meet the unavoidable cost increases faced each year, therefore unless additional government funding met the shortfall, difficult choices were always going to be required under the current system of funding. The Council had, and would continue to call for the current system, including the Council tax to be reformed.

Those on low incomes were currently afforded significant protection through the Council Tax Reduction Scheme, which is proposed to be retained again next year. This decision did come at a cost in terms of lost council tax revenues compared to virtually every other council, however, on balance, particularly in relation to the current cost of living crisis, it was simply the right decision for next year. The position would once again be reviewed in a years time to enable the Council to reflect on the administrative burden being created through multiple changes in circumstances for those households on Universal Credit.

Balancing the budget next year and across the next four years would be challenging based on the forecasts, however, it was vital that the Council plans for the medium term. It was noted that many authorities had fallen foul of not planning sufficiently well ahead, of not taking the tough decisions, taking far too high commercial risks and using reserves to unsustainable levels.

The report set out a range of measures that could be implemented to help close the £12 million shortfall in next years budget. The new savings proposals, which totalled £6.6 million and once again sought to protect front line service delivery as far as possible, were being published to allow consultation to commence as soon as possible. Full details were set out at Appendix 3 to the report.

Councillor R Bell feared that the financial uncertainty would continue beyond 2024/25 and would not be resolved until after a General Election until the publication of the final details of the Fair Funding Review.

The Council and the wider sector clearly needed more certainty and that would only come from receipt of a multi-year settlement.

In Seconding the report, the Leader of the Council said that the MTFP forecasts and the challenges faced in balancing the budget for next year would be difficult to manage once again.

The continued significant unavoidable costs pressures including the impacts of National Living Wage increases, enduring demographic pressures in Children and Young Peoples services, the Employers Pay Offer, had once again outstripped budget estimates this year, and were placing a huge strain on budgets next year.

Local government funding levels beyond 2024/25 were very uncertain which made accurate forecasting beyond next year extremely difficult. Cuts would inevitably need to be made going forward without further investment to help the sector.

The forecasts in the report showed that there was a funding gap of around £12 million next year and around £51 million over the next four years. It is more important than ever that the Council had a well-managed medium term financial planning process to help us address the challenges.

The report set out a clear path for setting a balanced budget in February next year and the Cabinet had been working with officers to develop some initial savings plans for consultation, which could help move us close to achieving a balanced budget next year, albeit that there was still a funding gap of nearly £7 million next year even if all the proposals were implemented.

The proposed changes to Council Tax premiums, were only for consultation at this stage. The Cabinet would reflect carefully on the feedback received before making any final decisions closer to budget setting time in February next year.

Using reserves to push away the problem and avoid difficult decisions was not a sustainable budget strategy to adopt and not something the administration would entertain. Reserves would only be used when it was prudent to do so and only to help smooth in more sustainable budget solutions.

Given the position, it was inevitable that savings would be required and these could impact on service delivery in the future. The proposals in this report sought to maximise income raising opportunities and prioritise efficiencies in non-front line service delivery.

Councillor Bell had, and would continue to lobby government directly for the additional financial support and continue to call on the government to undertake a fundamental review of the local government finance system – including the council tax – as the current system disadvantaged Durham and was inherently unfair in our opinion.

The report set out a recommendation for cabinet to recommend the retention of the Local Council Tax scheme without a cap on support. This was the right thing to do given the hardship faced by so many residents particularly at this time due to the continued squeeze on household incomes.

Referring to paragraph 149 of the report, Councillor M Wilkes, Cabinet Portfolio Holder for Neighbourhoods and Climate Change, highlighted that Durham was one of only two councils in the region to have increased its council tax recovery rate over the last decade. The Council were top, which not only demonstrated the amazing work that officers were doing, but also that protection of those on the very lowest incomes was morally the right thing to do, made economic sense and saved the County’s poorest residents as much as £350 and kept Council collection costs down.

Councillor Wilkes was also very proud that the Council were continuing to protect its most vulnerable residents.

Resolved:

That the recommendations in the report be approved.