Agenda item

(Report and Annexes to follow)

This report sets out the draft General Fund Budget for 2024/25 and Medium-Term Financial Plan (MTFP) ending 2027/28. The MTFP sets out the key work streams for the Council to focus on over this period which, collectively, aim to address the significant shortfall in annual budget projected.

The Overview & Scrutiny Committee - Resources is asked to consider the report and agree any comments or recommendations to be passed to the Executive on the proposed recommendations to Executive and Council as set out in the report.

66.1     The Financial Services Manager highlighted the following details from the report:

·        The proposed 2.99% Council Tax increase; and

·        A Fees and Charges Review that has resulted in a proposed general inflationary increase of an average of roughly 4.5% (excepting the ‘break-even areas’ of licensing, land charges and building control). Car parking will also see an inflationary increase.

66.2     The Chair noted an error in the figure for the proposed car parking charges increase, which is 18%, not the stated 15%. The Financial Services Manager clarified that Annexe 1 contains the correct figure and this would be rectified.

Cllr Nicholson noted a reduction in the Baseline Net Service Cost compared to 2022-23, the saving from reducing the number of Waverley councillors, and stated that he felt car parking costs changes were proportionate.

66.3     Cllr Weldon queried whether the proposed 2.99% council tax increase could be insufficient and asked if undertaking a referendum to facilitate a larger increase was considered. The Chair queried the use of the 4.5% inflation assumption for 2024/25 given that inflation currently sits below 2%.  Officers clarified that they would reexamine the latest CPI figure, though this was unavailable at the time the report was written.

66.4     The Chair asked how the MTFP assumption that government funding would decrease through to 2028/29 could be made given that the bar chart at paragraph 10.5 seems to show an increase in government funding from 2021/22. The Financial Services Manager clarified that future estimates are necessarily projections and that the Fair Funding Guarantee means there can be no certainty as to future rates of funding. It was noted that the bar chart does not account for inflationary cost increases.

The Portfolio Holder for Finance, Assets and Property noted that the recent increases in direct Government funding were responses to significant macroeconomic conditions - specifically the pandemic and cost-of-living crisis - and that Finance officers model what is indicated by central government.

66.5     The Chair asked if the New Homes Bonus had been expected, how it was spent and what the consequences would have been had it not been allocated. The Financial Services Manager stated that the reserve top-ups made in additional revenue contributions to capital is likely drawn from these grants, and that these and additions to the Property Maintenance Fund would not have been achievable without them. It was stated that the 2024/25 Capital Programme would have undergone necessary review without the receipt of the grant, and clarified that using one-off grant monies to alleviate other increases in service costs would create an issue in the base for future years’ budgets.

66.6     Non-voting visiting member Cllr Austin stated that she felt the 4.5% CPI inflation rate is too high given the current rate, queried the graph at paragraph 10.5, and stated that she felt certain passages of the report are subjective or misleading.

66.7     Cllr Davidson stated that he felt MTFPs regularly only cover the following year with shortfall then forecast for subsequent years - he asked what plans are in place to account for risks that may materialise throughout the year and about the status of earmarked reserves. It was stated that there is a proposal to create an earmarked reserve for planning appeals and judicial reviews as are held for changes to business rates and rateable values, and that working balances are held at £3.2 million, though this is under review.

While some earmarked reserves have reduced, often for planned purposes, proposals to replenish them are submitted when necessary or appropriate. This is however dependent on budget and was possible in 2022/23 due to one-off funding. The Chair noted that it appeared to him that reserves were increasing.

66.8     The Portfolio Holder for Finance, Assets and Property referenced the difficulty of economic uncertainty due to government parameters on local authority spending and the lack of the Fair Funding Review, noting that while the New Homes Bonus and the absence of a business rate review is beneficial in the short term, longer term financial certainty is still lacking and so contingencies must be maintained in case of referenda and other eventualities.

66.9     Cllr Atkins asked how a stated £700k saving is constituted and asked for a breakdown of the one-off costs attributed to the collaboration agreement. The Financial Services Manager clarified that this saving will be realised across 4 years, with £350k already delivered – largely due to the JMT restructure - given that 2023/24 marks the second year. It was noted that an Invest To Save reserve was created to cover the one-off costs of the collaboration thus far, in addition to a small revenue budget. It was noted that the £700k annual savings will be retained in the budget each year from 2025/26.

The Chair noted the proposed £300k annual savings due to be delivered to Guildford and Waverley Borough Councils through the Transformation & Collaboration programme, but agreed that it was difficult to understand the source of this from the papers.

Non-voting visiting member Cllr Austin stated that she felt that the papers gave the impression of a £700k saving each year, that other significant costs had not been accounted for, and asked for clear communication of these costs and savings to members.

The Portfolio Holder for Finance, Assets and Property noted the importance of one-off investment to secure recurring annual benefits. The Chair remarked that planned staffing increases were unclear as to whether they would be shared with Guildford Borough Council. The Portfolio Holder for Finance, Assets and Property clarified that any would be dedicated Waverley unless otherwise stated.

66.10   Cllr Barker-Lomax referred to ongoing work regarding staffing and salary increases.

66.11   The Chair brought attention to car parking income, reminded members of the importance of precise financial comparisons, and requested detail of the £2.1 million of car park expenditure. The Lead Accountant noted much of this is staffing and capital repairs but would provide a detailed response outside of the meeting. In response to the Chair’s suggestions for lowering expenditure, The Portfolio Holder for Finance, Assets and Property noted that local authorities are limited by legislation in how they may employ Automatic Number Plate Recognition.

66.12   Cllr MacLeod remarked that central government statements on finance often reference the Covid-19 pandemic, congratulated the officers for producing a balanced budget and voiced caution in projecting to receive government funding without absolute certainty, and in attempting to predict future rates of inflation. Cllr MacLeod asked what risk pertained to the measures that will be pursued to address the budget shortfall of £2.8 million, and what impact will likely be had on Waverley residents.

The Portfolio Holder for Finance, Assets and Property replied that this is a gross figure that is compensated by measures in the Ongoing Base Budget Reduction panel in annexe 1. The shortfall is due to uncontrollable variations such as inflation, and compounds over the MTFP period.

66.13   The Financial Services Manager remarked that the Key General Fund Variations are intended to exposit the budgetary changes within each service and that growth requests are a response to resident requests for greater service provision. The Portfolio Holder for Finance, Assets and Property noted that the effects of inflation on local communities mean that answering residents’ increased need for services is increasingly challenging.

66.14   Cllr Wicks asked if recovery of overpaid Housing Benefit will be limited by Universal Credit, what sum is outstanding and if this applies to rent arrears, noting that some Housing Benefit claimants are not Universal Credit recipients. The Financial Services Manager clarified that local authorities are no longer in control of the amount of housing benefit claimants receive or how it can be reclaimed since the implementation of Universal Credit, and that this does have an impact on the Housing Revenue Account. The Senior Accountant noted that rent arrears have not yet increased but may be beginning to and would provide a detailed response to members on this and the subject of how much the council is owed in not yet recovered overpayments.

The Committee RESOLVED to note the report and requested that the Executive considers the comments made by the members of the Committee.