Agenda item

To approve: The General Fund and HRA Budget for 2025/26, including the use of reserves, Medium Term Financial Strategy, Capital Programmes and Strategy, Treasury Management Policy/Strategy and the Annual Delivery Plan including the approval of Council Tax levels for recommendation to Full Council (report of the Deputy Chief Executive – Corporate Development (151)).

Consideration was given to the report of the Deputy Chief Executive – Corporate Development (S151) which sought approval of the General Fund and HRA Budgets for 2025/26, including the use of reserves, Medium Term Financial Strategy, Capital Programmes and Strategy, Treasury Management Policy/Strategy and the Annual Delivery Plan including the approval of Council Tax levels for recommendation to Full Council.

The Portfolio Holder – Finance presented the report  and started by apologising for the lateness in circulation to Cabinet of the report.  He had asked the S151 Officer to raise this matter with the Authority’s service provider, PSPS Ltd with a view to considering how joint working could  prevent such a position repeating itself in the future.

The creation of the 2025/26 Budget has been extremely challenging for South Holland with increasing costs such as pay, contract costs and the IDB levy, plus reductions in government support. This was at a time when the Authority was seeking to support those most vulnerable, to create a vibrant District for residents to live in and businesses to grow.

Despite these challenges, as part of this budget the Authority was providing more support to its residents as part of the new Council Tax Support Scheme, implementing a new Business Improvement District for the Town, deploying Long Term Towns Funding and delivering the hugely significant South Holland Health and Well-Being Hub funded mainly through grant.  The £38.6million Capital Programme was one of the most significant seen for many years.

Internal Drainage Boards continued to be an ever-increasing pressure with an additional requirement for 2025/26 of £158,000.  It was also noted that there had been a 36% increase since 2021/22, clearly not sustainable on a now £3.57million a year bill for the Council to absorb. Cabinet was aware that the Council has been in detailed discussion with government officials regarding this difficult position over the past 2-3 years as well as working through the Special Interest Group (SIG) to lobby heavily on this matter. Extra funding for councils increasing in 2025/26 to £5million had now been confirmed by Government as part of the final settlement which was welcome, but allocations were yet to be confirmed.

Due to these pressures an increase of Council Tax by the maximum 3% was proposed, equating to a £7.11 increase for a Band D property which equated to 14p a week. The vast majority of properties in South Holland were bands A, B and C and lower increases for these would therefore be seen.

Two efficiency targets were included in the budget, one in respect of the IDBs and the second relating to a need for general efficiencies of £255,000 -  this would be challenging but there were plans to address this.

This budget also included a new grant in respect of the Extended Producer Responsibility funding, which had been awarded for costs that the Authority already incurred in the waste system.  This would be available to support the budget in 2025/26 if needed or indeed future years as funding arrangements changed.

Member oversight of this efficiency savings work would be undertaken by the Portfolio Holder – Finance working with the s151 Officer, who would be seeking to make better use of technology and buying power to drive savings, efficiencies and service transformation.

Members considered the report and the following issues were raised:

·       It was believed that the figure of £139,000 grant to offset the increase in employers National Insurance was based on an incorrect base line figure – what action had been taken to update and correct this, and to acquire a greater amount of grant funding?

o   The Portfolio Holder – Finance confirmed that the amount of money allocated was insufficient, and that as part of the Draft  Settlement Process the S151 Officer had written to Central Government to advise of the shortfall in their calculations.

o   The S151 Officer advised that with regard to how this would be picked up in the long term it was likely that this would happen, however it was likely that it would be combined up with other grants and the overall amount would reduce.  It would continue but it was likely that the amount would be insufficient to offset the cost.

·       In relation to the Pension Fund deficit which had required an additional sum to be made, what had caused the deficit, and what had the additional sum been?  In addition , would the Employers’ Valuation Rate still remain the same at the next valuation.

o   The Portfolio Holder – Finance advised that the Pension Fund was due for its tri-ennial review this year.

o   The S151 Officer addressed the issue around how the calculations were made.  The last tri-ennial review had been carried out in 2022/23 and as part of that process, consideration had been given to what was required to support the fund in terms of individuals contributing to the scheme at that time and whether any backlog payment was required.  It would be interesting to see what the results of this year’s review would be as at the last review (post-Covid) there had been many other factors in the mix.  Many pension funds were now moving into a more positive position and this could impact upon the back-payment and also in terms of the contributions that Councils made for their workforce.  With regard to the amount of the additional payment, this was in the region of £250,000.

·       Members responded that for many years, this situation around the Pension Fund had always been present with no satisfactory response being received – was the way in which investments were managed satisfactory?

o   The S151 Officer responded that the valuation was undertaken by actuaries on behalf of the Authority.  Pension funds generally were moving to a more positive position and it was difficult to comment further until actuaries had completed their current review.  It was noted that pensions training was shortly due to be held for members of the Governance and Audit Committee and it would be useful for other members to attend in order that they were prepared for the results of the next review and valuation.

·       Members asked for clarification around the need for the extra contribution, as a result of the deficit, and whether the deficit had been created by those managing the investments?

o   The S151 Officer responded that she would check the definition of what was bound up in the deficit calculation so Cabinet was clear how this was composed.  The deficit had previously been a rolling deficit however requirements of regulations were now that the deficit was pulled back in completely so that within a certain period funds should be at 100%.

·       The Leader thanked the team for drawing together a good Budget, despite concerns earlier in the year and less monies being received from central Government.  There were concerns regarding funding and grants from central Government over the next few years and there would continue to be challenges going forward.

DECISION:

a)    That Cabinet note the results of the Public Consultation process (Appendix 7) and the minutes of the Joint Performance Monitoring Panel and Policy Development Panel held on 21st January 2025 (Appendix 8)

b)    That Cabinet approves the following recommendations for onward referral to Full Council on 27th February 2025:

1.    That the Revenue Estimates for the General Fund, HRA and Spalding Special for 2025/26 (Appendices 1, 1a, 1b and 1c) be approved.

2.    That the Council Tax for a Band D property in 2025/26 be set at £208.53 (£7.11 per annum increase on 2024/25 levels).

3.    That the Spalding Special Expenses for a Band D be set at £23.13 for 2025/26, (previously £25.83 in 2024/25).

4.    The additions to and use of reserves (as detailed at Appendix 1) be approved.

5.    The Medium-Term Financial Strategy (at Appendix 1) be approved.

6.    That the HRA related staffing changes as incorporated into the budget and specifically detailed at Appendix 1 section 8.2.4 are approved.

7.    The Capital Programmes and Capital Strategy (Appendices 1, 2 and 3) be approved.

8.    The Section 25 addendum (Appendix 1) be noted.

9.    That the Treasury Management Policy Statement and Treasury Management Strategy Statement including MRP Policy (at Appendix 4) be approved.

10. The Fees and Charges Schedule 2025/26 (Appendix 5) be approved.

11. The Annual Delivery Plan for 2025/26 (Appendix 6) be approved.

(Other options considered:

·       No other options were considered;

Reasons for decision:

·       To comply with the budgetary and policy framework and legislative requirement).