Agenda item

Cabinet received a report setting out the draft 3-year revenue budget and 4-year capital programme for Buckinghamshire Council.  This included updates on the latest estimated funding position, service budget pressures and the key financial risks facing the Council in the future.

 

The Council Tax Resolution report would be presented as a separate report as part of the final budget in February 2022 and would contain the final information from the other precepting authorities leading to the total Council Tax for the area, which full Council was required to approve.  The Cabinet report did not include special expenses.  Discussions were ongoing to agree special expenses budgets for 2022/23, and these would also be presented alongside the final budget.

 

RESOLVED –

 

(1)               That the draft revenue budget and capital programme for 2022/23 (Appendices 1-3) be approved.

(2)               That the outcome of the budget consultation (Appendix 4) be noted.

(3)               That the proposal to seek delegation from Council to Cabinet for up to £100m of new capital schemes to be added to the capital programme, through Prudential Borrowing, and where robust financial business cases have been made, be supported.

(4)               That it be noted that a supplementary report, the formal Council Tax Resolution, will accompany the final budget submitted to full Council.

(5)               That the current risks associated with the draft budget proposals be noted.

Cabinet received a report setting out the draft 3-year revenue budget (2022/23 to 2024/25) and 4-year capital programme for Buckinghamshire Council.  Local Government funding remained very uncertain in the medium term due to proposed changes to the Local Government funding regime and the implementation of key Government policies in regard to Adult Social Care reform and the ‘Levelling Up’ agenda.  The Spending Review had laid out the Government’s funding totals and priorities for the period 2022/23 to 2024/25.  However, actual allocations to individual authorities, through the Provisional Local Government Settlement, only covered 2022/23.

 

Changes to the revenue budget were largely focussed around changes in service demand and income (both service and corporate), the wider economic impacts of the ongoing Covid-19 pandemic, and the recognition of the ongoing risks relating to the pandemic and the wider Local Government funding regime.

The Leader introduced the report and stated that significant uncertainty remained over the future course of the Covid-19 pandemic, with the potential impacts of the current Omicron variant, and potential new variants currently unknown. Further lockdowns and national or local restrictions would impact both on the day to day operation of the Council, the duration of the pandemic and potentially the scale and pace of the recovery of local, national and global economic activity. The draft budget might be subject to significant change before the final budget was presented to Cabinet and full Council as the consequences of the Omicron variant become more apparent over the coming weeks and months.

 

The draft budget proposed had been built on the proposed Council Tax base and assumed a 1.99% increase in basic Council Tax and a 2% increase for the Adult Social Care Precept (including 1% carried forward from 2021/22), giving a total increase of 3.99%.  The draft budget included the one-off use of £1.36m of General Fund balances to produce a balanced budget and mitigate risks in 2023/24.

 

The Capital programme covered 4 years as many schemes span across multiple financial years.  The Council currently had borrowing headroom of £100m whereby schemes that were brought forward with a robust and financially viable business case could be added to the Capital Programmes subject to Cabinet approval.

 

The Cabinet report explained the significant impacts that the global impact had on the operations of the Council during 2021/22, including significant decreases in service income levels whilst expenditure pressures, especially in Care Services, had been increasing at unprecedented rates. The draft budget reflected the latest estimates for the ongoing impacts of Covid-19 and the future recovery on income streams and normalisation of demand growth for critical front-line services which the post-Covid ‘new normal’ would bring.

 

At the end of quarter 1 of 2021/22 most direct Government grant support to the Council for the ongoing impacts of the pandemic had ceased. However, this situation was subject to change as the Government’s response to the ongoing pandemic developed and changed, as evidenced by the announcement of additional Business Grants to support sectors adversely affected at the current time.  Given the ongoing pandemic the budget was still significantly impacted by Covid-19 but started to reflect a recovery and normalisation of budgets by 2024/25.

 

The Government’s Spending Round 2021 had included some significant spending announcements of interest to Local Government.  Key to these were:

·                     The capping of the Adult Social Care Precept at 1% for the next 3 years (1% generates c£3.6m p.a. whilst Adult Social Care growth and cost pressures currently total c£10.0m p.a.);

·                     The basic Council Tax referendum threshold to remain at 2%;

·                     An Adult Social Care Grant (funded from the 1.25% increase in National Insurance contribution from both employers and employees) was proposed. This was worth an additional £0.2bn in 2022/23, £1.4bn in 2023/24 and £2.0bn in 2024/25 to Local Government and was to fund the implementation of Care reforms and the move towards a fairer and more sustainable cost of care. It was assumed that this would fully cover new and additional costs;

·                     An additional £4.8bn over 3 years (£1.6bn p.a.) of funding would be provided to Local Authorities to cover the costs of pay, inflation, supporting families, Cyber Security and other expenditure pressures such as social care costs;

 

Estimates of the impact of these announcements on the Council’s funding and future expenditure had been included in the draft Revenue Budget.  Further clarity on the local impact of these announcements had been received as part of the Provisional Local Government Finance Settlement although this only provided 2022/23 allocations to individual authorities.  The proposed changes tod Local Authority funding regime could significantly impact the distribution basis from 2023/24 onwards, and the ongoing impact of Care Reform was still unknown. As such, funding for 2023/24 onwards remained a high-level estimate and contained significant risk.

 

On 16 December 2021, the Secretary of State had published the Provisional Local Government Settlement. Key items of note from this announcement were as follows;

(a)               The settlement was for one-year only. This was due to the impending changes to the Local Government funding regime, which are expected to be implemented in 2023/24.

(b)               The referendum threshold for basic Council Tax (excluding ASC Precept) had been confirmed at 2%.

(c)                The ASC Precept was confirmed at a maximum of 1%, and the applicability of the additional 1% carried forward from 2021/22 was also confirmed.

(d)               Nationally more than £1bn extra funding for Social Care had been announced. This included confirmation that 2021/22 Social Care grants continued and funding to prepare for the implementation of Social Care reforms.

(e)               A new ‘Services Grant’, which included compensation for the additional costs incurred as a result of the additional 1.25% levy on employers National Insurance costs.

(f)                 The Lower Tier Services grant was continued for another year.

 

Overall, the Council’s allocations resulted in a reduction of £1.01m in ongoing grant funding compared to planning assumptions, which was partly offset by a one-off gain of £993k on New Homes Bonus in 2022/23 only.  The current New Homes Bonus scheme was due to end in 2023/24.  It was usual practice to only use one-off funding sources for one-off expenditure items, such as capital projects and revenue investments, as they were not a sustainable funding stream, and did not support financial sustainability.

 

Overall, the draft budget included growth pressures of £25.7m in 2022/23 increasing to £56.2m by 2024/25, with offsetting savings / efficiencies and income increases of £17.5m in 2022/23 rising to £42.2m by 2024/25.  The overall revenue budget, with each portfolio’s element expanded, can be found in Appendix 1, with the key proposals being as follows:

·                     An increase of 1.17% in the Council Tax base as a result of a return towards pre-pandemic levels of house completions, and a small decrease in Council Tax Reductions awarded. With increases to basic Council Tax (1.99%) and the Adult Social Care Precept (2%) this represents an increase of £18.6min Council Tax receipts in 2022/23;

·                     The stabilisation of Business Rates receipts as a result of a recovering economic activity;

·                     Increases in corporate contingencies to mitigate the increased risk (especially for Social Care costs and market sustainability) arising from the pandemic and future changes to Local Government funding;

·                     Additional investment in both Adults (£31.6m by 2024/25) and Children’s Social Care (£4.4m by 2024/25) budgets to address the continued increases in demand, inflation and the complexity of the cases managed;

·                     An increase in expected income levels from parking of £3.2m by 2024/25 (following a reduction of £5.2m in 2021/22);

·                     An increase in expected income levels from Leisure services of £2.3m by 2024/25, including the impact of the Chiltern Lifestyle Centre opening (Leisure income reduced by £1.9m in 2021/22);

·                     An increase in property income of £5.3m by 2024/25, including new opportunities arising (Property income budgets reduced by £2.0m in 2021/22);

·                     The addition of £10.0m in Home to School Transport budgets to reflect increased complexity in Special Need provision, increased demand and lost income;

·                     The delivery of a further £14.1m savings from the creation of the Unitary Council.

·                     £6.9m of service transformation savings in Adult Social Care;

·                     Additional income from the introduction of Green Waste charging in the Wycombe area (to bring this in line with the rest of the County) will generate £1.1m of extra income, which will be partly offset by the additional HRC facilities within the Princes Risborough area;

·         Invest to Save initiatives are being extended within Children’s Social Care to support the recruitment and retention of permanent Social work staff;

·         Reduction of funding for Community Boards to £2m p.a.

·         Savings of £3.8m are being delivered by 2024/25 through retendering and other delivery initiatives within Home to School Transport services.

 

Details of proposed budget changes were set out at Appendix 3 to the Cabinet report which included for an increase in basic Council tax of 1.99%, and a proposed Adult Social Care Precept of 2% to be levied in 2022/23, including 1% carried forward from 2021/22. It was proposed that the 1% maximum Adult Social Care Precept would be levied in 2023/24 and 2024/25.  In line with Government requirements this additional £7.3m of funding would be allocated to offset the £10.0m growth pressures in Adult Social Care budgets.

 

Within the draft budget were contingency budgets, that were held to mitigate future budget risks and to fund future pay increases and increases in pension contributions following the triennial pension revaluation.

 

The forecast General Fund balance as at the end of 2022/23 after the recommendations in the draft budget was expected to be £47m.  This balance represents circa 10% of the net operating budget which helped mitigate financial risks. This would be reduced in 2023/24 due to the one-off use of £1.36m to balance the budget proposals. The position would be revisited in the next budget setting process.  Whilst this budget provides the best available estimates for the period 2022/23 to 2024/25 as previously reported there was significant risk around future income, cost and funding projections. The external environment was continuously monitored, and significant and material changes would be reported and included within the final budget presented to full Council on 23 February.

 

Following agreement of the Climate Change Strategy at Cabinet in October 2021 the financial implications had been added to both the Capital Programme and the revenue MTFP.  Beyond these specific elements of the strategy there were also local portfolio activities within Business as Usual functions, including the supply chain, which would help to reduce the Council’s impact on the environment.

 

Cabinet was informed that the capital programme covered the period 2022/23 to 2025/26, in the recognition that capital projects were often multi-year projects and the uncertainty arising from the pandemic could be managed in other ways.

 

A Capital programme review had been conducted which covered the existing Capital programme, new capital bids and the prioritisation of those bids for inclusion in the programme to get to a recommended capital programme. The Corporate Capital Investment Board had been consulted to provide a steer on the approach to prioritisation.  The review had helped to get an understanding of what opportunities existed for reducing, reprofiling or removing projects where they were uncommitted, and to quantify the capital resources available.  Following the review the affordable housing action plan had been updated to reflect a programme of works that could be funded from s106 agreements.

 

The Capital programme and the priorities within it would be reviewed and revisited as part of the MTFP process for 2023/24 onwards.  As for 2021/22, it was proposed that Cabinet should make a recommendation to Council in February 2022 to delegate to Cabinet to add up to £100m worth of schemes to the capital programme during the year, to be funded through prudential borrowing, and subject to a robust business case being approved.  This would enable additional priorities, such as regeneration and housing projects, to come forward and be added to the capital programme once positive business cases were fully developed. The prudential borrowing facility might also be used to provide capital loans to the Council’s property company Consilio, our joint venture property company Aylesbury Vale Estates and the Enterprise Zone should there be a financially viable and robust business case.

 

The overall Capital programme and each Portfolio’s element of the Programme were set out at Appendix 2.  Key highlights within the draft programme were:

(i)                 £37.9m to support Economic Growth & Regeneration;

(ii)               £136.4m on schools, and school improvement projects;

(iii)             £117.9m on Strategic Highways maintenance including;

(iv)              £61.6m on major highway resurfacing schemes;

(v)                £17.7m on Plane & Patch (smaller planned and reactive repairs);

(vi)              £8.5m on Footway repairs;

(vii)            £8.4m on Street Lighting repairs, replacement and maintenance;

(viii)          £8.0m to reduce flooding on our roads.

(ix)              £120.5m on Strategic Infrastructure, including HIF schemes;

(x)                £24.0m investment in Waste, primarily on vehicle replacement and a household recycling centre in Buckingham;

(xi)              21.7m to support Housing and Homelessness including affordable housing action plans and disabled facilities grants.

 

All revenue consequences of the Capital programme had been included in the draft revenue Budget.

 

The report also included information on the financial and legal risks and implications associated with the budget setting.  Lastly, Members were informed that a public consultation on priorities and budgets had been conducted between 6 October and 14 November 2021.  Only 308 responses were received, with 292 of these responses being from residents.  A summary of the results was detailed at Appendix 4 to the Cabinet report.

 

During discussion the following points were made:-

 

·         The Cabinet Member for Communities reported that Community Boards funding had been reduced to £2m per annum and that applications over £1000 required contributory funding which should enable localities to focus on projects that would add value to the local community. This was a ‘discretionary’ area of the budget.

·         The Cabinet Member for Health and Wellbeing whilst welcoming the adult social care grant funded from the increase in the National Insurance contributions commented that most of the funding for the first 3-4 years of it would go to the NHS rather than local government so there were still concerns about pressures on services particularly skills shortages and the impact of Covid.

·         Concern was raised about inflation levels which were currently above 5%. This would impact pay pressures and also the costs of the supply chain. This had been offset by the lower levels of inflation in past years.

·         The Cabinet Member for Finance, Resources, Property and Assets referred to the efficiency savings and the targets the Council would need to meet. The Council had undertaken a number of efficiency savings to deliver targets which included for example the Better Bucks Service Review, property rationalisation through becoming a new unitary council and a single revenue and benefits team. There were also a number of property projects in the pipeline to help improve income. Making efficiency savings was a constant challenge for the Council with pressures on adults and children services, a reduction in income and other pressures such as the need to provide affordable housing and to balance this against requests from Parish and Town Councils to gift land for community use.

·         The draft budget included the one-off use of £1.36m of General Fund balances. The Service Director Corporate Finance reported that this should only be used for one-off purposes and not any ongoing permanent costs.  The draft budget was balanced in 2024/25 without any assumed use of General Fund reserves.

·         Members welcomed the key highlights in the capital programme including the £117.9m on strategic highways maintenance projects which included major highway resurfacing schemes. £21.7m would support Housing and Homelessness which was welcomed by the Deputy Cabinet Member for Homelessness.

·         The Minister had announced a one year settlement and it was hoped that next year there would be a 2 year settlement to help long term planning. With Covid there was still a lot of uncertainty. The Department of Levelling Up, Housing and Communities were focusing on their White Paper and addressing regional inequality.

·         The draft budget prioritised climate change to ensure that there was sufficient funding to deliver the Climate Change and Air Quality Strategy to make Buckinghamshire carbon neutral or net-zero for carbon emissions by 2050.

·         A public consultation on priorities and budgets was conducted between 6 October and 14 November 2021. 12.2 Only 308 responses were received, with 292 of these responses being from residents. The consultation was publicised through all the social media and communication channels.

·         Reference was made to the Corporate Plan which was intrinsically linked with the budget and also which would address the pressures and recognise the risks of the Council’s recovery from the pandemic.

 

RESOLVED –

 

(1)               That the draft revenue budget and capital programme for 2022/23 (Appendices 1-3) be approved.

(2)               That the outcome of the budget consultation (Appendix 4) be noted.

(3)               That the proposal to seek delegation from Council to Cabinet for up to £100m of new capital schemes to be added to the capital programme, through Prudential Borrowing, and where robust financial business cases have been made, be supported.

(4)               That it be noted that a supplementary report, the formal Council Tax Resolution, will accompany the final budget submitted to full Council.

(5)               That the current risks associated with the draft budget proposals be noted.