Agenda item

To consider and scrutinise the Council’s financial outlook, provisional finance settlement and draft General Fund budget position prior to consideration by Cabinet and Council (report of the Director of Finance (Section 151 Officer) to follow).

Consideration was given to the report of the Director of Finance (Section 151 Officer) to consider and scrutinise the Council’s financial outlook, provisional finance settlement and draft General Fund budget position prior to consideration by Cabinet and Council. 

The Director of Finance (Section 151 Officer) and the Head of Finance Delivery SHDC (PSPS) attended for this item.

The Director of Finance introduced the report to members and the following main points were highlighted by way of a presentation (appended to the minutes at Appendix 1):

• The role of Overview and Scrutiny as part of the budget process;
• A recap of the process to date;
• Key headlines from the Provisional Local Government Finance (LGF) Settlement 2026/27 including significant complex changes and the release of illustrative figures for subsequent years, which will be updated on an annual basis;
• A summary of budget pressures;
• A summary of efficiency proposals;
• The provisional draft budget; and
• Next steps.

In addition, it was highlighted that:

• £5 million of grant funding towards Internal Drainage Board had been secured for 2026/27;
• Due to the late notification of the finance settlement from central government and the fact that further information was still awaited, the report had been prepared and presented with the caveat that work on the budget remained ongoing. This included, in particular, the following elements:
  • The Capital Programme and its funding arrangements, which were yet to be finalised; and
  • Financial assumptions relating to food waste collection and Extended Producer Responsibility, which had not yet been confirmed and would be incorporated into the budget when available. It was noted that these outstanding elements would have a consequential impact on the Treasury Management position and, in turn, on projected investment income;
• Work undertaken to date had reduced the 2026/27 initial funding gap from £2.5m to £250,000. It was noted that pressure was anticipated to increase in subsequent years and that, while further management measures would be required, the overall position was considered reasonable moving forward.

Members considered the report and made the following comments:

• Members queried whether grants consolidated within the finance settlement were ring-fenced for their respective purposes.
  • The Director of Finance explained that, while the consolidation of grants represented a departure from previous settlement approaches, the settlement documentation clearly identified the individual grant values and confirmed that these remained ring?fenced for their intended purposes.

• Members queried the likely impact of forthcoming changes to business rates, including the revaluation of licensed premises.
  • The Director of Finance explained that the business rates revaluation would potentially affect all ratepayers across the district. It was noted that, while the intention of the revaluation was that increases and reductions should broadly balance out at a national level, the impact would vary between individual businesses depending on their circumstances and ability to absorb change. Members were advised that the local implications would not be fully understood until detailed data was available later in the process.

• Members queried why government calculations overestimated Council Tax income by £109,000.
  • The Director of Finance explained that the national funding methodology applied standardised assumptions in relation to collection rates, Council Tax base growth, and the application of premiums for second homes and empty properties. It was noted that these assumptions did not fully reflect South Holland’s local circumstances, which resulted in an overestimation within the government’s calculations.

• Members commented on the savings and efficiency proposals relating to the generation of income from CCTV and expressed concern that transferring these costs to Parish Councils, while not representing a saving to the local taxpayer overall, could potentially place the future provision of the service at risk.

• Members queried whether the projected £175,000 reduction in premises?related expenditure over a two?year period was realistic and raised concerns that previous maintenance issues, including those at the Lutyens Memorial, suggested there was a risk that savings could result in underinvestment in Council buildings.
  • The Director of Finance reassured members that the anticipated reduction related to specific service areas, principally relating to the leisure contract and the swimming pool, and not to council-wide asset maintenance. The property team remained responsible for ensuring buildings were kept in good repair.

• Members queried why some of the budget lines did not appear to reconcile.
  • The Director of Finance explained that the movements within the budget were derived from a combination of inflation assumptions, rounding, service?level adjustments and outcomes from the Star Chamber process. As a result, the figures did not reconcile on a like?for?like basis and additional budget adjustments beyond the headline pressures and savings contributed to the overall efficiency requirement.

• Members queried why income from investment interest was forecast to remain flat, despite expectations that interest rates would change over the medium term and questioned whether this represented a financial risk.

o   The Director of Finance explained that this budget line remained subject to further work and that a flat assumption had been applied at this stage to avoid overstating income without full information. It was noted that the final position would depend on movements within the capital programme, treasury management activity and reserve balances, and that the figure was therefore likely to change as these elements were finalised. In acknowledging the sensitivity of the investment income line to market volatility, the Director of Finance advised that the Council had some flexibility to manage exposure through internal borrowing arrangements, including between the General Fund and the Housing Revenue Account, which could reduce reliance on external borrowing and help mitigate risk.

• Members asked for details regarding the £500,000 ‘Direct Revenue Financing of Capital Expenditure’ budget line within the Medium-Term Financial Strategy (MTFS).
  • The Director of Finance explained that this sum represented an in?and?out budget movement, with a corresponding entry within relevant service areas, and therefore had a net nil impact on the Council’s overall revenue position. It was further noted that, while the Capital Programme was still being finalised, it was not anticipated to differ significantly from the 2025/26 position, and any amendments would be fully funded and would not adversely affect the revenue budget.

• Members sought clarification on the anticipated level of Internal Drainage Board (IDB) levies and the associated risk.
  • The Director of Finance advised that positive and ongoing discussions were taking place with the Internal Drainage Boards through the Special Interest Group. It was noted that, in line with Government advice, grant assumptions within the budget had been based on 2025/26 figures. Whilst indicative information had been shared, formal confirmation of IDB levy requirements was not expected until spring or summer 2026, and this uncertainty presented a degree of ongoing risk within the projections.

• Members raised concerns about the Council’s use of expensive temporary accommodation for homelessness and queried whether the financial examination of a Council-owned provision, such as a hostel, had been considered.
  • The Director of Finance advised that the current approach to homelessness provision was considered effective, and while alternative options were not currently being progressed, Members were welcome to explore and propose other solutions for consideration.
  • The Portfolio Holder for Housing further explained that a Council?owned provision had previously been explored; however, an identified property had been assessed as unsuitable and was not taken forward. It was noted that the Council’s reliance on bed and breakfast accommodation had significantly reduced as a result of a strategic shift towards prevention activity. Members were also advised that the approved departmental restructure had strengthened this preventative approach, including expanding engagement with private sector landlords to secure additional accommodation. In addition, funding secured through round three of the Local Authority Housing Fund had enabled improvements to temporary accommodation, and the introduction of small ‘top?up’ charges from April 2026 was intended to support tenant readiness and assist the transition to longer?term housing solutions.

• Members requested further detail regarding the £455,000 annual saving attributed to staff vacancies and sought clarification on the potential impact of forthcoming Local Government Reorganisation (LGR) on staffing levels and resources.
  • The Director of Finance explained that:
    • The vacancy saving was generated through natural staff turnover, recruitment lead?in times and new starters commencing on lower salary points within established grades. It was noted that this approach reflected common practice across the local government sector and was informed by historic experience, which demonstrated that approximately 4% in?year savings could be achieved in this way; and

§  In relation to Local Government Reorganisation, he advised that while some statutory roles were likely to consolidate under any future arrangements, operational service staff would continue to be required. It was further noted that a degree of natural workforce reduction could occur; however, experience elsewhere had shown that reorganisation typically created increased short?term demand for staff capacity due to transformation, transition and service integration activity.

• Members queried changes to the Council’s pension contribution levels following the triennial review.

• The Chairman acknowledged that a substantial amount of work had been undertaken by officers to develop the draft Budget and Medium?Term Financial Strategy. However, it was noted that the late receipt of the Government finance settlement, combined with uncertainty within some of the data presented, had made the Panel cautious about suggesting specific variations at this stage. It was further observed that the timing of the report had limited members’ ability to scrutinise the budget as fully and effectively as it would have wished.

• In conclusion, the Panel recommended that Cabinet be urged to continue detailed exploration and refinement of the budget during the remaining period, with a view to improving the overall position prior to the Council Tax rate being set.

AGREED:

That following scrutiny of the Draft Budget and Medium-Term Financial Strategy for the period 2026/27 to 2030/31, the comments of the Joint Performance Monitoring Panel and Policy Development Panel be noted and considered by Cabinet on 17 February 2026.