Agenda item

To approve and refer to Council on 26 February 2026 for consideration and approval: The General Fund Budget for 2026/27, including the use of reserves, Medium Term Financial Strategy, Capital Programme and Strategy, Treasury Management Policy/Strategy and the Annual Delivery Plan including the approval of Council Tax levels (report of the Director of Finance (S151 Officer) enclosed).

Consideration was given to the report of the Director of Finance (S151) which requested approval and referral to Council on 26 February 2026 for consideration and approval: The General Fund Budget for 2026/27, including the use of reserves, Medium Term Financial Strategy, Capital Programme and Strategy, Treasury Management Policy/Strategy and the Annual Delivery Plan including the approval of Council Tax levels.

 

The Portfolio Holder for Finance presented the report.

 

The creation of the budget had been challenging for South Holland.

This was because of the uncertainty over the outcome of the Government’s Fair Funding Review not becoming clear until mid-December.

 

To add to this, errors were flagged on the methodology used by the government to calculate the figures announced in December. This meant that further adjustments had to be made by the Government in the Final Local Government Settlement which was only released late last Wednesday.

 

The budget position continued to be refined from the information provided post Final Settlement. Whilst the position for 2026/27 remained unchanged, it was future years that were affected, with the gap being more than what  had been budgeted for from the original figures provided in the Provisional Settlement.

 

General Fund budget:

 

While the move to multiyear settlements significantly improved medium term visibility, the immediate impact for South Holland District Council had been a rebalancing of funding sources exercise, rather than it being a net increase in resources.

 

In particular, the reset of Business Rates and the revaluation exercise being progressed had materially reduced locally retained income, thus placing greater reliance on Revenue Support Grant and transitional protections provided directly by the government.

 

This was at a time when the following was sought:

 

·             Supporting those who were most vulnerable in our society

·             Creating a vibrant District for our residents to live in, and also

·             Creating an environment for businesses to grow.

 

The budget also included expenditure for the creation of the Food Waste collection service for which SHDC received no additional resource from the government and which the Authority had managed to budget for within existing resources.

 

Furthermore, the Internal Drainage Boards continued to be an ever-increasing pressure, with an increase in their levy for 2026/27 of 4.6%. This took the increase since 2021/22 to 49% with the total cost for 2006/27 being £3.723 million which now accounted for 55% of the Council Tax retained.

 

Against this backdrop, the proposed budget:

 

·             Delivered a balanced and sustainable position for 2026/27

·             Supported statutory service delivery

·             Protected financial resilience, and

·             Maintained capacity for transformation and investment

 

Additional efficiency measures, further partnership working across the South & East Lincolnshire Councils Partnership, and maximising income opportunities had been key to mitigating the financial challenges. Despite a complex and volatile environment, the proposed budget enabled the Council to maintain service delivery in line with its priorities.

 

Included in the budget pack was a suite of Treasury Management documents. These were very important for the Council as they outlined its Treasury Management strategy for the year which included the management of the Council’s borrowing, investments and cash flows. Alongside ensuring robust arrangements were in place, these activities had delivered significantly increased returns in year and supported delivery of the balanced budget.

Also being proposed was a significantly large Capital Programme of £25.4m in 2026/27 which included major investments in Waste Transformation, the Health and Wellbeing Hub, and essential asset renewals.

 

Proposals included increasing Council Tax in line with government guidance equating to an increase of just over 12 pence a week for a Band D property. 

Members were asked to note that 74% of properties in South Holland were in a Council Tax band bracket of A to C, A (26%), B (21%) and C (27%), so would see increases lower than this.

 

Housing Revenue Account budget:

 

Significant investment and growth had been built into the HRA budget relating to service demand increases, inflation, service improvements and regulatory changes.

 

The HRA Capital programme would also continue to invest in Decent Homes & Major Adaptions and at the same time increase its focus on Green Homes Energy Efficiency

 

The HRA 30-year business plan was balanced and showed healthy balances to deal with unforeseen circumstances.

 

The HRA was ringfenced and could only operate from the rents it collected and therefore rent increases had been set within government guidelines.

 

Parks and Play areas within Spalding:

 

It was planned to utilise funding from Spalding Special Reserves to support Parks and Play area Maintenance including any Replacement works within Spalding. 

 

A clear delivery plan and prioritisation of sites was being developed.

 

A detailed report would be brought forward in year once the scope of works and funding requirements had been fully assessed, enabling an informed decision on the appropriate use of the Reserve.

 

In Conclusion:

 

This budget responded to one of the most complex settlements that Local Government had faced.

 

It also reflected South Holland District Council’s ability for strong planning, having strategic foresight, and commitment to local services.

 

Investment was being undertaken where it mattered most, holding firm on financial discipline, and positioning the Council for a stable future.

 

Consideration was given to the report, and the following issues were raised:

 

·         The Chairman of the Governance and Audit Committee commented on the governance assurance process underpinning the budget preparation, noting that external partners had provided minimal comment. The governance and assurance work had been fully undertaken, with assessments by PSPS and KPMG indicating that the process had run smoothly.

 

·         Members sought clarification regarding a typographical error in the budget table at section 5.1 of the covering report relating to the heading in the fifth column – it stated ‘increase over 2026/27’ – should this be 2025/26?

o   The Portfolio Holder confirmed that this was an error and that the correction would be made.

 

·         Members questioned the sustainability of significant one-off financial movements such as changes to pension contributions, noting that these could not be assumed to continue into future years.

o   The Director of Finance (S151) acknowledged the volatility and explained that forward projections would reflect realistic assumptions informed by past experience and actuarial advice.

 

·         Members asked why land charges income continued to reduce.

o   The Director of Finance (S151) advised that this reflected competitive pressures within the sector and ongoing challenges in maintaining income levels. 

 

·         Members queried whether the Local Plan review scheduled for 2026/27 would take place given resource pressures.

o   The Leader confirmed that the Local Plan review was required and that preparatory work would commence.

 

·         Members raised concerns regarding the potential loss of the Council’s VAT partial exemption status.

o   The Director of Finance (S151) confirmed that the position was monitored closely and that no breach was expected, though this remained a significant financial risk requiring ongoing oversight.

·         In response, Members sought information on the implications should VAT partial exemption be lost.

o   The Director of Finance (S151) advised that detailed financial consequences would be provided separately.

 

·         Members welcomed updates on progress with the leisure centre redevelopment and noted the successful attraction of funding towards the project and the Council’s contribution to the project. It was confirmed that the project remained on schedule and was due to open the following year.

 

·         Members noted a missing VAT-inclusive fee within Appendix 5 relating to market trader charges (Spalding Market (Tuesday and Saturday) Regular traders) for 2026/27.

o   The Portfolio Holder acknowledged the omission and confirmed it would be corrected.

 

·         The Leader commented on the challenges arising from reductions in government funding, including the disparity between funding for urban and rural councils.

 

·         The Leader confirmed that a significant error in the government’s original financial settlement had resulted in a one?year transitional correction for 2026/27, with reductions expected again from 2027/28. Further clarification from central government was awaited.

 

·         The Portfolio Holder raised concerns relating to Internal Drainage Board (IDB) levy increases and the wider financial impact, and that lobbying continued at a regional and national level. Members also noted that recent pumping hours indicated likely further increases.

 

·         Members acknowledged the partnership’s achievement in delivering savings ahead of target while maintaining services. Officers noted that the partnership’s transformation and efficiency work had exceeded its original financial objectives.

 

DECISION:

 

It is recommended that Cabinet approve the Draft Budget 2026/27 including all appendices and it be forwarded to Council on 26th February 2026 for consideration and approval with the following specific recommendations:

 

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

 

2)    That it be noted that the Council Tax Base for South Holland District Council of 31,567 and 9,746 for Spalding Special Expenses (Band D equivalent) has been set for 2026/27 and on the 23 December 2025 by the Director of Finance & Section 151 Officer under officer delegation in line with the Constitution.

 

3)    That the Revenue Estimates for the General Fund, HRA and Spalding Special Expense for 2026/27 (Appendices 1, 1a, 1b and 1c) be approved.

 

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

 

5)    The Capital Programmes and Capital Strategy (Appendices 2a, 2b and 3) be approved.

 

6)    That the Treasury Management Policy Statement Treasury Management Strategy Statement MRP Policy and Annual Investment Strategy and Treasury Management Practices (Appendix 4a, 4b and 4c) be approved.

 

7)    The Fees and Charges Schedule 2026/27 (Appendix 5) be approved.

 

8)    That it be noted that on 28th January 2026 Council approved the housing rent increase for 2026/27.

 

9)    That the report of the Section 151 Officer, under Section 25 of the Local Government Act 2003 on the robustness of the estimates made for the purposes of the budget calculations and adequacy of proposed financial reserves be noted (Paragraph 11).

 

10)That the Council Tax for a Band D property in 2026/27 be set at £214.92 (£6.39 per annum increase on 2025/26 levels) for South Holland District Council and £23.40 (£0.27 per annum increase on 2025/26 levels) for Spalding Special Expenses.

 

11)The Annual Delivery Plan for 2026/27 (Appendix 6) be approved.

 

12)Delegate the further amendment of this document (where needed to ensure financial integrity and reconciliation) in preparation for Council on 26 February to the Director of Finance & Section 151 Officer in consultation with the Portfolio Holder for Finance.

 

(Other options considered:

·         No other options were considered;

Reasons for decision:

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