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, plus the initial consultation to be undertaken across the next few months.

The report also considered a review of the Local Council Tax Reduction Scheme for 2025/26 and made recommendations to be presented to Council in September 2024 in this regard (for copy of report, see file of minutes).

Councillor R Bell, Deputy Leader of the Council and Cabinet Portfolio Holder for Finance highlighted that every 1% percent on council tax generated around £2.8 million of additional council tax revenue. Every 1% of pay award agreed by the national local government employers, of which the Council had no control over, increased costs by around £2.9 million. Therefore two thirds of the income raised from a 2.99% council tax increase next year would be swallowed up by the forecasted 2% pay award, if indeed the pay award could be contained at that level.

The forecasts in the report were based on a range of prudent and realistic financial planning assumptions. The council could not raise sufficient income locally to meet the unavoidable cost pressures faced each year, unless additional government funding was received. Councillor R Bell had written to the Secretary of State on the matter and the new MP's for County Durham had been fully briefed. The Council and the wider. sector clearly required more funding and more certainty which could only come from the receipt of a multi-year settlement and a truly fair funding settlement. As suspected, the Council would be faced with a one year settlement next year and would not be in a position to get a multi-year settlement until after the comprehensive spending review due in 2025. The impact of the choices made would be presented by the Chancellor to Parliament on the 30 October. Despite the financial challenges, the report set out details of the local council tax reduction scheme and proposes that Cabinet recommends to Council that the protection be continued. The decision would come at a cost, £42 million in terms of last council tax revenues compared with virtually every other council, but on balance it was simply the right decision, for at least for next year. The position would need to be reviewed in a years’ time in terms of the Council’s ability to sustain this position in the face of the financial challenges faced.

The Leader of the Council echoed the points made by Councillor R Bell and said the budget next year would once again be extremely difficult to manage given the continued, significant, and unavoidable cost pressures being experienced. Looking ahead to 2026/27, the Council were faced with £1.6 million of additional cost pressures linked to the statutory requirement to introduce a weekly food waste collection service, but had no confidence that the new burden would be fully funded. There was little cause for optimism at this stage, that the Council would see any increases to funding so desperately needed based on current announcements from the new government. The Council had and would continue to lobby for more funding and for a fair share of the funding, along with other councils from across the region. Without further investment the council would only be able to afford to deliver statutory minimum levels of service. The Council faced a £21.7 million challenge to balance the budget next year and a further £23.7 million challenge the year after that, with a £64.1 million challenge in total forecasted across the next four years. That was despite an MTFP planning assumption that Council Tax be increased by 2.99% each year. Given the scale of those challenges, it was more important than ever before to have a well managed medium term financial planning process to help us address the challenges. The Council could not succumb to the temptation of using reserves to push away the problem and avoid difficult decisions. This was not a sustainable budget strategy to adopt and not something the Joint Administration would entertain. Reserves could only be used where it was prudent to do so. The recommendation to retain the local council tax reduction scheme without a cap on support was the right thing to do given the hardship faced by so many residents.

Councillor A Shield, Cabinet Portfolio Holder for Equality and Inclusion speaking specifically about the local council tax reduction scheme highlighted that there were currently just over 53,800 local council tax reduction claimants in County Durham. Some 20,000 (38%) were of the state pension age and 33,000 (62%) were of working age. Almost 83% of the working age claimants received the maximum local council tax reduction scheme support. The scheme was forecasted to be circa £67 million in the 24/25. £25m of this related to claimants of pensionable age and £42m related to claimants of working age. Whilst the Council could be extremely proud to be one of the few local authorities in the UK to offer full local council tax reduction, there needed to be an acknowledgement that the ongoing severe financial issues affecting the County Council. Post the May 2025 elections, the incumbent administration would need to carefully consider the financial capability of maintaining this essential benefit support to all sectors of our society.

Councillor M Wilkes, Cabinet Portfolio Holder for Neighbourhoods and Climate Change said that the Council needed the government to recognise that the work carried out by local authorities was critical to people's lives but there was a need to provide the funding, otherwise the Council would simply be providing the statutory minimum service, adding that without a minimum investment, of about £2 billion into local government next year, more councils will be issuing Section 114 bankruptcy notices.

The Council were well run, financially stable thanks to the difficult decisions being made. However, the additional cost pressures that all Councils faced were not sustainable. As well as running services, the Council were spending enormous amounts of time working on plans to save money, many of which were no longer about efficiencies. This took resource away from getting on with the day-to-day running of services. It was pleasing to note that the Council were continuing to lobby the government for funding. Whether this was successful remained to be seen, particularly after the unacceptable vote to scrap the winter fuel allowance, which would add further pressure onto the Council and struggling residents.

Resolved:

That the recommendations in the report be approved.