Agenda item

The Cabinet considered a report of the Corporate Director of Resources which provided an update on the development of the 2025/26 budget and the Medium-Term Financial Plan (MTFP(15)) covering the period 2025/26 to 2028/29, including updated financial planning assumptions (for copy see file of minutes).

In Moving the report Councillor R Bell, Deputy Leader of the Council and Cabinet Portfolio Holder for Finance provided an update to the MTFP 15 forecasts considered in September and an overview of the announcement made in the Chancellor's budget. Updated estimates of the cost pressures faced next year were set out in the report. These would need to be accommodated in the budget, including an initial assessment of the impact of the increase in the National Living Wage, which was higher than the Council had previously forecasted. Estimates of the increase in employers National Insurance costs showed a deterioration in the Council’s position by around £2.5m for 25/26. The figures included in the report were based on a 2.99% increase in council tax.

The Leader of the Council seconded the recommendations in the report. Councillor Hopgood explained that the challenges faced in balancing the budget next year and across the next four years would be difficult to manage. The final position faced in 2025/26 was more fluid as the Council awaited the provisional Local Government Finance settlement allocations.

Unavoidable costs pressures faced from the impacts of National Living Wage increases, the changes to Employers National Insurance costs, the enduring demographic and cost of placement pressures in Children and Young Peoples Services and Local Government Pay assumptions were all significant factors which placed a huge strain on budgets into next year and beyond. The higher National Living Wage increases for next year had necessitated the need to amend assumptions on the expected local government pay settlement next year.

Officers were working hard to finalise the forecasts and it was important to understand that spending pressures could well increase at the next update in January.

Funding levels in 2025/26 and beyond remained uncertain, although it was encouraging that the funding arrangements were being looked at with a view to redistributing funding to authorities like Durham who faced lower tax raising capacity and higher levels of demand as a result of higher levels of deprivation.

The forecasts in the report showed a funding gap of around £25.6 million next year, and around £69.8 million over the next four years. This would be a hugely significant challenge given that over the last 14 years the Council had to accommodate a funding gap of around £270 million to date.

The report included details of £15.8 million of savings proposals across the next four years, £14.7 million of which could be delivered next year. These could help reduce the funding gap faced next year to around £10.9 million and the overall gap to around £54 million over the next four years.

It was important to continue to review everything to drive out efficiencies and limit the impact on front line services, however, the scale of the challenge faced, based on the forecasts presented, would inevitably impact on front line services unless the underlying funding position of the council changed significantly.

It had been confirmed that permission to apply an Adult Social Care precept next year had been given. This was not yet factored into budget planning assumptions. The income generated from this plus the forecast additional Social Care Grant would be less than half of the unavoidable budget pressures needed to accommodate the budgets for Adults and Childrens Social care which placed significant pressure on the discretionary services provided.

It was a significant source of concern that based on these budget forecasts the council would be facing a budget deficit of £29.2 million in 2026/27.

The savings proposals in this report once again sought to maximise income raising opportunities and prioritise efficiencies in non-front line service delivery as far as possible.

Lobbying the government for additional financial support would continue, as would holding the Government to their commitment to undertake a fundamental review of the local government finance system, including how authorities are compensated for low council tax raising capacity. It was well documented that the current system disadvantaged places like Durham and this was inherently unfair.

Councillor Wilkes, Cabinet Portfolio Holder for Neighbourhood and Climate Change commented that the National Insurance increases had put the Council, and many others in more financial difficulty and there was a need for government to provide funding instead of asking Council’s to cut services and increase Council Tax.

Resolved:

That the recommendations in the report be approved.