Committee: Cabinet
Date: 23 January 2024
Title of Report: Reconciling Policy, Performance and Resources (RPPR): Draft Council Plan 2024/25, Revenue Budget and Capital Programme
By: Chief Executive
Purpose of Report: To ask Cabinet to approve the draft Council Plan, Council Tax levels, Revenue Budget and Capital Programme for recommendation to the County Council.
RECOMMENDATIONS:
Cabinet is recommended to:
1. recommend the County Council to:
i) approve in principle the draft Council Plan 2024/25 at Appendix 1 and authorise the Chief Executive to finalise the Plan in consultation with the relevant Lead Members;
ii) increase Council Tax by 2.99% in 2024/25;
iii) increase the Adult Social Care Precept by 2% in 2024/25;
iv) issue precepts to be paid by borough and district councils in accordance with the agreed schedule of instalments at Appendix 5 (Draft);
v) approve the net Revenue Budget estimate of £538.1m for 2024/25 set out in Appendix 2 (Medium Term Financial Plan) and Appendix 3 (Draft) (Budget Summary) and authorise the Chief Executive, in consultation with the Chief Finance Officer, Leader and Deputy Leader, to make adjustments to the presentation of the Budget Summary to reflect the final settlement and final budget decisions;
vi) agree the Reserves Policy set out in Appendix 6;
vii) approve the Capital Strategy and Programme at Appendix 8;
viii)note progress with the Council Plan and Budget 2023/24 since quarter 2 set out in section 4;
ix) note the Medium Term Financial Plan forecast for 2024/25 to 2026/27, set out in Appendix 2;
x) note the comments of the Chief Finance Officer on budget risks and robustness, as set out in Appendix 6;
xi) note the comments from engagement exercises set out in Appendix 7; and
xii) note the schedule of fees and charges that have increased above 4% at Appendix 9.
1 Introduction
1.1 The County Council continues to provide vital services that underpin the quality of life for our residents, communities and businesses. The past year has seen both significant achievements and growing challenge. We have been able to deliver additional investment in our roads and improvements to public transport, opened new Family Hubs and taken further steps in the integration of health and care, all of which benefit our residents and communities. Our Local Government Association Corporate Peer Challenge recognised the strong leadership and robust management of the Council, along with the dedication of its staff, and the huge value of the effective partnership working in the county. Our services have been externally assessed as providing good value for money. These successes, achieved despite many years of financial and service pressures, put us in the strongest possible position to respond to ongoing demands and new challenges as a well-run and effective organisation.
1.2 However, the financial outlook we now face represents a step change. Growth in need for the statutory, demand-led services for vulnerable children and adults which account for around three quarters of our budget, coupled with the escalation in costs being felt right across the Council, have significantly increased the expenditure required to maintain core services. Our increased costs have not been offset by additional income. Despite extensive lobbying by us and the local government sector, highlighting the national factors impacting on all councils, the Autumn Budget Statement contained no new funding for local authorities and contained updates which further increased our costs. The provisional Local Government Finance Settlement confirmed the lack of additional funding, indicating that authorities should instead draw on their reserves to make ends meet.
1.4 The escalation in need seen over the last 12 months, particularly for the vital services this Council provides for the most vulnerable, stems from the persistent legacy of Covid, the increased cost of living and other national and international factors. These have resulted in a combination of more people needing our support and needs becoming more complex to meet. On top of this, the cost of providing services has risen rapidly, particularly in Children’s Services, and it remains difficult to recruit and retain the skilled workforce we need to deliver our services. We also continue to respond to significant national reforms which place new demands on our services. These are all factors largely outside local control.
1.5 These pressures have already had a considerable effect in the current year and also mean the outlook for the future has become more difficult. We continue to take action wherever we can to mitigate financial and service delivery pressures – making best use of new technology, investing in our workforce, seeking efficiencies and checking that our services are effective and provide value for money. But, ultimately, there are few levers left to pull, particularly given a lack of funding for the preventative work which would reduce the need for more intensive support in the future. As this work has been scaled back over time, services have become increasingly focused on responding to the most critical needs, creating a negative cycle of growing demand and increased costs. The intense strain on resources also means we are not able to invest to the level we would want to in other important areas, such as the roads which support the county’s economy and communities.
1.6 The latest picture of both current and future pressures must be factored into our planning for the future and our detailed Council Plan which covers what we will do and the specific targets we will use to judge our performance. The Council Plan, revenue budget and capital programme are fully integrated through our robust business planning process, Reconciling Policy, Performance and Resources (RPPR). In the face of significant challenges it is crucial that we maintain a sharp focus on our four priority outcomes and their supporting delivery outcomes in our business planning. In June Cabinet agreed, for planning purposes, some changes to the delivery outcomes to ensure they remain up to date and these have been factored into the plans presented in this report.
1.7 The RPPR process matches available resources with our delivery plans for our priority outcomes so that we focus and protect our spending where it will deliver our priorities most effectively. RPPR also ensures we have the demographic trends and performance information to monitor our progress. The process of planning, through RPPR, for 2024/25 and beyond has translated our full analysis of key trends and pressures into updated service and financial plans. The RPPR process has been applied across all services in the development of the Council Plan (Appendix 1) supported by the Budget (Appendix 3), Medium Term Financial Plan (MTFP) (Appendix 2) and capital programme (Appendix 8) set out in this report.
1.8 In recent years the Council has been able to provide welcome stability in our service offer to residents during a very uncertain time, helped by short-term Government support for social care and Covid impacts. This relative stability was also made possible by over a decade of significant work to transform services and manage resources as effectively as possible through innovation, working as One Council and proactively in partnership. This involved taking difficult decisions to reduce or step back from services when we had to, in order to live within our means and protect services for the most vulnerable. Overall, this meant identifying savings of £139m between 2010 and 2023, focusing spending on core services to balance our books. Making savings on this scale was not easy and had significant impacts on front line services and residents. The Council had to reprioritise its investment and reduce the extent and breadth of its service offer. This means we have already implemented the service reductions some other authorities are now progressing to address funding shortfalls, leaving us few avenues left to explore for further savings or efficiencies. Making any further savings would mean a fundamental review of our Core Offer which previously set out a realistic, basic but decent level of value for money services for residents in a time of austerity.
1.9 The immediate position for 2024/25 is the most challenging we have seen in recent years. We have taken every step we can to minimise the deficit, including reprioritising spend, maintaining preventative approaches which will reduce higher level demand where possible, and reviewing and reducing our capital programme to minimise the need for borrowing. Despite this, the balanced budget presented for the coming year is, for the first time, and in the absence of other realistically deliverable options within the timeframe, supported by a significant draw from reserves.Previous robust and prudent management means we have this final safety net to see us through the next 12 months, but this is not a sustainable way to balance the budget. Reserves can only be used once and do not reduce longer term pressure, in effect simply deferring the deficit whilst also depleting the contingency funding we have available for the future. We will need to use the temporary buffer provided by using our limited reserves to develop and implement further measures to reduce the longer term deficit where we can, and to continue to call for national recognition of the untenable position we and other councils face. Further detail on the revenue budget position is provided at section 5.
1.10 In addition, the budget reflects the continued national reliance on Council Tax to fund ongoing core pressures from rising demand, particularly for social care. As previously indicated, Government has extended for a further year the level of Council Tax flexibility and the approach of expecting local authorities to apply an Adult Social Care Precept on bills to provide essential funding for care services. Government funding calculations for 2024/25 assume councils with social care responsibilities will take both the higher level of Council Tax and the additional precept, with this factored into the allocation of funding to local authorities. Council Tax now represents around 70% of our net budget. Given the very significant deficit we face in the coming year and beyond, we do need to apply these increases to safeguard services as far as possible. We have long highlighted to Government that individual authorities’ ability to raise Council Tax is unrelated to need for services and is particularly problematic for areas such as East Sussex with high need for social care services, but where capacity for local people to pay more to support these services is limited. We will continue to make this case.
1.11 Our lobbying of Government, individually and through our networks and partnerships, will continue to set out robustly the challenges we face and the consequences of funding shortfalls for people, communities and businesses in the county. Throughout the autumn and winter we added our voice to those of the sector as a whole in articulating the issues to Government. The County Councils’ Network letter to the Secretary of State and Chancellor attached at appendix 10 illustrates the key points being made. There is much uncertainty about the medium term, particularly in light of the general election expected this year. The need for immediate support to meet statutory duties and local needs, sustainable reform to the way local government is funded and multi-year financial settlements to support effective planning will be key messages from ESCC and the wider local government sector to any new Government.
1.12 This report sets out:
2 National and Local Context
2.1 Since the last report to Cabinet in November the national policy environment has continued to evolve, with further announcements which will impact on us locally. Key developments are set out below along with detail of how we are responding:
2.2 King’s speech and Government reshuffle: The King’s speech on 7 November set out the Government’s planned legislative programme ahead of the next general election, expected to take place this year and by January 2025 at the latest. Government plans focused on strengthening society, growing the economy and keeping people safe, including specific legislation related to automated vehicles, smoking and vaping, and crime, anti-social behaviour and terrorism. Policy measures focused on progressing Government priorities around the economy, NHS and migration. The Prime Minister subsequently undertook a reshuffle of his frontbench team later in November. New ministerial appointments of most relevance to local government included new Secretaries of State for the Home Office, Health and Social Care and Environment and new Ministers for Local Government, Public Health, Schools and Roads.
2.3 National economic outlook and Government spending plans: The Chancellor announced the Autumn Budget Statement on 22 November, accompanied by new national economic forecasts from The Office for Budget Responsibility (OBR). The OBR judged that overall growth would be 0.7% in 2024, rising to 1.4% in 2025, and then an average of 1.9% between 2026 and 2028. Debt and borrowing forecasts were lower than at the March 2023 Budget, with debt expected to hit a peak of 93.2% of Gross Domestic Product (GDP) in 2026/27 before falling to 92.8% in 2028/29. The unemployment rate was predicted to peak at 4.6%, later than expected, in 2025 before falling to 4.1%. The OBR forecasted that headline inflation will remain higher for longer than previously predicted, falling to 2.8% by the end of 2024 and not reaching the 2% target rate until 2025 – this revised projection has impacts for our ongoing operating costs. The Bank of England held interest rates at 5.25% in December in support of its ongoing strategy to curb inflation, with some analysts predicting rates may begin to fall during 2024 as inflation reduces further.
2.4 In the Budget Statement the Chancellor indicated that the Government’s focus was on economic growth. The Budget announcements focused on deploying additional spending on measures designed to stimulate growth and on changes to taxation policy, notably a reduction in employee national insurance contributions from 12% to 10% from January 2024 and reductions in taxes for businesses and the self-employed. The Budget also confirmed that means-tested and disability benefits would rise by 6.7% in line with inflation (as at September 2023), and the state pension by 8.5% due to the triple lock. The National Living Wage will also be increased to £11.44 for workers 21 years old and over from April 2024, an increase of 9.8%. This will add significant financial costs to the social care provider market, increasing the financial pressure on Adult Social Care and Children’s Services in the coming years. There was no change in the overall planned increase in Government department spending limits of 1% in real terms. This could mean real terms cuts for unprotected services, including most of local government. The announcements were accompanied by a target of 0.5% annual productivity improvements in the public sector. The statement included no new funding for local government beyond what had already been announced. The date of the spring Budget has been set for 6 March 2024.
2.5 Local government funding: The provisional Local Government Finance Settlement, received on 18 December, provided the detailed funding picture for local government and was again for one year only. It indicated that Core Spending Power would increase by an average 6.5% for local authorities in England, based on the presumption that all councils will levy the maximum increase in Council Tax. The Council Tax referendum limit was maintained at 3% and the Adult Social Care precept at 2%. There was no additional funding, but the continuation of a range of short-term grants was confirmed, including grant funding for social care. In response to cost pressures on councils the Department for Levelling Up, Housing and Communities (DLUHC) instead advised the use of reserves to maintain services and for investment to be made in preventative approaches in children’s services where possible to improve the sustainability of children’s social care. The implications of the Budget and provisional finance settlement announcements for the Council’s MTFP are set out in section 5.
2.6 Cost of living: The increased cost of living has continued to impact on households, although inflation, as measured by the Consumer Prices Index (CPI), reduced to 3.9% in the 12 months to November (down from 4.6% in October), a larger than expected reduction. The falls in recent months have been driven by a significant drop in the cost of energy from the peak in autumn 2022 and slower growth in the cost of food and fuel. However, the ongoing high rate, on top of previous price increases, continues to create significant pressures on households, particularly those on low incomes. We continue to work with partners through the multi-agency East Sussex Financial Inclusion Steering Group on ways to maximise access for vulnerable residents to the advice and support available. The Household Support Fund (HSF), which is administered locally by ESCC, continues through the winter but is currently due to close at the end of March 2024. As with all short-term grant funded schemes, it will not be possible for ESCC to maintain the HSF measures without further national funding. Cabinet agreed in December to extend for a further and final financial year (2024/25), using residual Contain Outbreak Management Fund (COMF) grant, the Additional Measures scheme which has provided funding to voluntary, community and social enterprise (VCSE) money and debt advice organisations county-wide to support those facing cost of living pressures.
2.7 Levelling up and devolution: The Autumn Budget Statement also announced four new devolution deals across England. This included two Level 3 mayoral deals with Greater Lincolnshire, and Hull and East Yorkshire and two Level 2 non-mayoral deals with Lancashire and Cornwall. The Government also announced that opportunities would be made available for counties with no neighbouring or ‘island’ unitary authority to take up Level 2 devolution deals, where there is local consent to such arrangements and subject to meeting relevant criteria as set out in the Levelling Up White Paper. This includes Surrey County Council in the south east. DLUHC also published a new framework for extending deeper devolution to existing Level 3 Mayoral Combined Authorities, and a scrutiny protocol, setting out best practice for accountability in devolved areas.
2.9 Levelling Up Partnerships with Government in Hastings and Rother continue to progress work to develop bespoke, place-based regeneration plans to access associated capital funding. We will continue to work with our district and borough partners and DLUHC on these partnerships, and the Long Term Plan for Towns endowment funds for Hastings and Bexhill, to maximise the benefit of these opportunities for local communities and the local economy. Further guidance on the Long Term Plan for Towns was published by DLUHC in December including arrangements for Town Boards, which are to include representation from the county council in two tier areas.
2.10 The Office for Local Government (Oflog) has outlined next steps in establishing an early warning system for local authorities at risk of failure, intended to complement existing mechanisms for warning and support - including external auditors, peer challenges, the work of teams in DLUHC and other government departments, and regulators of particular services such as the Care Quality Commission and Ofsted. Oflog’s two-phase approach, starting with desk-based research which will be followed up with ‘Early Warning Conversations’ with local authorities identified as potentially at risk, will be piloted before the first conversations take place in mid-2024.
2.11 Local Economic Growth: The transfer of the three main functions of Local Enterprise Partnerships (LEPs) (business representation, strategic economic planning, and responsibility for the delivery of government economic growth programmes) to upper tier local authorities or bodies with devolved powers is ongoing. In December, Government published further guidance setting out expectations on the transfer and future delivery of business representation and local economic planning. In 2024/25, Government will provide eligible combined authorities and upper tier local authorities with up to £240,000 to deliver the functions previously delivered by LEPs, subject to final business case and integration plan approvals. This represents a reduction on 2023/24 funding levels, as Government expects the integration of functions into combined and local authorities to deliver efficiencies. Future funding is to be set out at the next Spending Review. Locally, a transition plan has been developed to manage the transfer of relevant South East Local Enterprise Partnership (SELEP) functions to constituent local authorities, including ESCC, from April 2024. The transition of LEP functions links to work on the new East Sussex Economic Strategy, which is being informed by consultation undertaken towards the end of 2023, with a draft planned to be in place for the new financial year.
2.12 Children’s Services: Children’s Services nationally, regionally and locally have continued to experience significant pressures from rising demand and increased complexity of need, coupled with workforce shortages and a lack of specialist placements, all of which has led to escalating costs and operational challenges over the past year. Locally, in response to rising demand in children’s social care, Children’s Services has worked with Impower consultants to implement the Valuing Care approach, enhancing our ability to secure the right care for the right child for the right length of time and working on placement sufficiency, including foster carer recruitment. This approach will be taken forward into business as usual in 2024/25. The department is also launching the nationally trialled Family Safeguarding model, which is in line with the recommendations of the Independent Review of Children’s Social Care, in early 2024. The final two of 11 new Family Hubs opened in November, in Lewes and Peacehaven. Family Hubs will offer ongoing access to support and advice from Midwives, Health Visitors, Early Communications Support Workers, Early Years Practitioners, Community Engagement Coordinators and Early Help Keyworkers.
2.13 In December, the Government published further detail on how it will take forward commitments set out in ‘Stable Homes, Built on Love', its plan to reform children’s social care. This included:
We are assessing the implications of this latest policy for our services.
2.14 In December OFSTED undertook an inspection of ESCC Children’s Services under the inspecting local authority children’s services (ILACS) framework which focuses on children’s social care. We await the report which will also inform the future development of these services.
2.15 Adult Social Care and Health: Locally the health and care system continues to be under pressure from high demand which is exacerbated by workforce challenges. In January the Department for Health and Social Care set out next steps in its plans to develop the care workforce. These included the first phase of a new Care Workforce Pathway, intended to provide a national career structure for the adult social care workforce, new qualifications, subsidised training and additional apprenticeship opportunities. Further detail is awaited on how these will work in practice and associated funding. In November, the Care Quality Commission (CQC) announced the outcomes of its pilot new assessments of how local authorities deliver their adult social care duties. The new assessments are intended to support sharing of best practice and improving Government’s data, intelligence and understanding of the system. CQC has also updated its assessment framework and guidance to local authorities in light of the pilots. ESCC can expect its assessment in the coming months and we will be undertaking a Local Government Association Adult Social Care peer challenge in February to support our preparations.
2.16 Climate, environment and planning: In December the Conference of Parties (COP) 28, the governing body of the United Nations (UN) Convention on Climate Change, took place. The summit’s outcome included a ‘global stocktake’ intended to be used by countries to develop stronger climate action plans by 2025, with the ongoing overarching aim to keep the target of limiting global warming to 1.5°C within reach. Locally, an updated Corporate Environment Policy and new Carbon Offset Framework were agreed in December to help guide our future work. As part of ongoing planning reform, DLUHC has revised the National Planning Policy Framework which sets out the government's planning policies for England and how these are expected to be applied. The framework was revised following consultation on measures linked to the Levelling-up and Regeneration Act.
2.17 Transport: In November we received confirmation from Government of initial allocations of funding redirected from the HS2 high speed rail plan towards other transport schemes, including road maintenance. ESCC was allocated £1.6m in each of 2024/25 and 2025/26 which has been factored into the grant funding available to support our planned highways capital programme. Allocations beyond 2025/26, together with future funding conditions, are yet to be confirmed. Additional one-off investment in highways, agreed by Cabinet in November 2021 and June 2023, continues to be delivered with the majority to be completed by the end of March. The challenging revenue budget position, referenced throughout this report, has required the capital programme to be reviewed to minimise the borrowing costs of the overall programme within Treasury Management and the revenue budget. The level of investment in highways, whilst maintained above Department of Transport grant funding levels, will not, in the medium term, be able to be delivered to the level originally envisaged.
2.18 Consultation on the draft updated Local Transport Plan (LTP) for East Sussex began in November. When finalised later this year, the Plan (covering the period to 2050) will set out how we will connect people to places around and through the county over the next three decades – by walking, cycling, public transport, car or by using new forms of travel.
2.20 A court judgement in relation to legal action brought by Kent County Council on use of the National Transfer Scheme (NTS) for unaccompanied asylum seeking children found that the NTS and the management of the scheme is inadequate and for periods of time was unlawful. The court directed that the Home Office must resolve the issues and ensure that it works fairly and sustainably in the future. ESCC supported the Kent action and continues to call on the Home Office to discharge its responsibility effectively; we also continue to play a full part in the NTS.
2.21 Looking ahead, the coming year will see the run up to the next general election and the subsequent formation of a new Government, with the potential for significant policy developments affecting ESCC services. Implications for the Council and new developments will continue to be factored into our ongoing planning through RPPR.
3 Council Plan
3.1 The draft Council Plan is attached at Appendix 1. The Council Plan continues to be built on the Council’s four overarching priority outcomes: driving sustainable economic growth; keeping vulnerable people safe; helping people help themselves; and making best use of resources now and for the future. Making best use of resources now and for the future is the priority test through which any activity must pass. The remaining three priority outcomes guide our activities, direct our resources and are reflected in our Council Plan activities and targets. The delivery outcomes have been updated to reflect the changes agreed by Cabinet in June.
3.3 The Council Plan is still a work in progress until final budget allocations are made and firm targets can be set. It will be published in March 2024 and refreshed in July when final performance outturn figures for 2023/24 are available. Authorisation is sought for the Chief Executive to make final changes pre and post publication in consultation with Lead Members as appropriate.
4 Progress with Council Plan and Budget 2023/24 since quarter 2
4.2 Looked After Children and Child Protection Plans – On 28 November 2023 there were 707 children with a Child Protection Plan. This is a 5.4% increase since the end of quarter 2, when the figure was 671. Demand for services remains high, however the number of Looked After Children has not increased since the end of quarter 2 and remains at 686. This demonstrates that the focused work across locality teams to enable children to live safely at home and the work done by Looked After Children teams to support reunifications is having a positive impact. Despite this work, the cost of placements for children remains both of local and national concern.
4.3 NHS Health Checks performance measure – The quarter 2 outturn for the NHS Health Checks measure (reported a quarter in arrears) is now available and shows that 1,119 eligible people have received a health check, against a yearly target of 2,300. This measure was reported as amber in quarter 1 but as a result of the improved performance in quarter 2 we now expect to achieve the annual target.
4.4 Support with Confidence – A public consultation on the future of the Support with Confidence scheme ran from 27 September to 5 December 2023. In October 2023 the licence holders informed us that they are withdrawing the brand, so the scheme closed on 31 December 2023. Our future offer to personal assistants, businesses and residents will be agreed by Lead Member on 6 March 2024. This measure will be proposed for deletion as part of quarter 3 monitoring.
4.5 Direct Payments performance measure – The percentage of people receiving community based long term support who are in receipt of Direct Payments has fallen slightly. The number of people in receipt of Direct Payments has increased from 1,520 as at 31 March 2023 to 1,562 as at 30 November 2023. However, the denominator (number of people receiving community based long term support) has increased at a much greater rate, from 4,792 as at 31 March 2023 to 5,099 as at 30 November 2023, leading to a continued drop in performance. Despite this drop, we are still performing well compared to national benchmarks (based on current national data, this performance would fall within the upper-middle quartile). It is important to note that this measure is a snapshot at the end of each reporting period so performance can fluctuate.
4.6 Carers supported through short-term crisis intervention – Between 1 April and 13 December 2023, 229 carers have been supported (78% of the target for 2023/24 of 390). This is a significant improvement on the performance reported for quarter 2. The provider will continue to promote the service to other carer organisations to raise their profile, and further discussions in January are exploring additional ways to promote the service.
4.7 There is currently no significant change to the projected quarter 2 revenue budget forecast.
5.1 The Medium Term Financial Plan (MTFP) is set out in Appendix 2, and detailed in the table in paragraph 5.3 below. It reflects the latest assessment across service departments and corporate budgets, including modelled demand, inflation, the impact of the overspending 2023/24 financial position and local and national policy objectives.
5.2 The council continues to make necessary investments in services to meet the needs of our residents, £51.1m in 2024/25, as set out in the table below. However, the funding made available to meet the required investment is not sufficient and reserves of £14.3m are required to be used in 2024/25 to set a balanced budget:
|
Summary of Budget Growth and Funding 2024/25 |
(£m) |
|
Inflation: contractual |
28.2 |
|
Pay Awards |
7.9 |
|
Service Investment: |
|
|
Adult Social Care |
3.9 |
|
Children’s Services |
19.1 |
|
Management of service pressures through other revenue budgets |
(8.0) |
|
Total Budget Growth |
51.1 |
|
Council Tax |
(21.7) |
|
Business Rates |
(7.5) |
|
Government Grants |
(7.6) |
|
Total Additional Funding |
(36.8) |
|
Budget Deficit |
14.3 |
5.3 The MTFP has been updated for regularly calculated adjustments and pressures since last reported at Cabinet in November 2023, including the impact of the Local Government Settlement announced on 18 December 2023. The full MTFP is provided at Appendix 2.
|
Ref |
Estimate (£m) |
||||
|
|
|
2024/25 |
2025/26 |
2026/27 |
Total |
|
Cabinet 7 November 2023 DEFICIT/(SURPLUS) |
|
27.700 |
23.114 |
13.884 |
64.698 |
|
Normal Updates: |
|
||||
|
Council Tax Flexibility: Add a further 2.00% to our current 2.99% assumption (1.99% plus 1% ASC Precept) to get to 4.99% (2.99% plus 2.00% ASC Precept) in 2024/25 |
A |
(7.059) |
(0.248) |
(0.257) |
(7.564) |
|
Council Tax (inflation, base growth and collection) |
(2.924) |
3.529 |
0.021 |
0.626 |
|
|
Council Tax (Rother Local Council Tax Reduction Scheme) |
0.988 |
0.035 |
0.037 |
1.060 |
|
|
Business Rates Retention (inflation and growth) |
B |
(0.960) |
(1.039) |
(1.530) |
(3.529) |
|
Business Rates Reset (remove from MTFP) |
C |
0.000 |
(2.255) |
3.931 |
1.676 |
|
Revenue Support Grant inflation update |
D |
(0.049) |
0.049 |
0.000 |
0.000 |
|
Impact of Local Government Settlement: |
|
|
|
|
|
|
Adult Social Care Market Sustainability and Improvement Funding |
E |
(2.240) |
0.000 |
0.000 |
(2.240) |
|
Social Care Grant Funding |
F |
(1.327) |
0.000 |
0.000 |
(1.327) |
|
Continuation of Services Grant (but at a lower rate) |
G |
(0.478) |
0.000 |
0.000 |
(0.478) |
|
Continuation of New Homes Bonus |
H |
(0.554) |
0.554 |
0.000 |
0.000 |
|
Confirmation of Business Rates Pool in 2024/25 |
I |
(2.194) |
2.194 |
0.000 |
0.000 |
|
Inflation for contracts (normal and contract specific) |
J |
(0.138) |
1.950 |
0.888 |
2.700 |
|
Further Actions: |
|
|
|
|
|
|
Waste PFI Model – Additional Income |
K |
(3.000) |
3.000 |
0.000 |
0.000 |
|
Impact of National Living Wage to £11.44 per hour |
L |
6.850 |
0.000 |
0.000 |
6.850 |
|
Further Looked After Children Investment |
M |
4.414 |
1.293 |
2.570 |
8.277 |
|
Reprofile of Public Health Investment |
N |
(2.420) |
0.459 |
(0.586) |
(2.547) |
|
CET: Waste Housing Growth |
O |
(0.002) |
0.050 |
0.057 |
0.105 |
|
Treasury Management - extension of IFRS9 override |
P |
(0.500) |
0.500 |
0.000 |
0.000 |
|
Treasury Management - review of capital programme |
(1.200) |
(1.300) |
(1.500) |
(4.000) |
|
|
Pay Award |
Q |
(1.200) |
(0.970) |
(1.000) |
(3.170) |
|
Levies Increase |
R |
0.016 |
0.001 |
0.001 |
0.018 |
|
General Contingency |
S |
(0.044) |
0.062 |
(0.013) |
0.005 |
|
Pressures added to / (removed from) the MTFP |
|
|
|
|
|
|
Pressures Protocol – bids approved by CMT |
T |
0.665 |
0.000 |
0.000 |
0.665 |
|
DEFICIT/(SURPLUS) AFTER UPDATES |
|
14.344 |
30.978 |
16.503 |
61.825 |
|
One-off use of Financial Management Reserve |
U |
(14.344) |
14.344 |
0.000 |
0.000 |
|
DEFICIT/(SURPLUS) AFTER DRAW FROM RESERVES |
|
0.000 |
45.322 |
16.503 |
61.825 |
5.4 The Chancellor, Jeremy Hunt MP, delivered the Autumn Statement on 22 November. No funding was announced for upper tier local authorities beyond what had been previously announced. There was further reaffirmation about the grant increases for social care in 2024/25 announced in the 2022 Autumn Statement, which had already been factored into financial planning.
5.5 The provisional Local Government Finance Settlement was published on 18 December. As widely expected, there was nothing in the settlement that significantly improved the Council’s financial position for 2024/25. Allocations of grants were confirmed and have been factored into the MTFP, leaving a deficit position of £14.3m in 2024/25.
5.6 In presenting a balanced position for 2024/25, the Council will instead be required to make a £14.3m draw from the Financial Management Reserve. As reserves can only be used once, the underlying deficit will be deferred into 2025/26, leaving a deficit of £45.3m. Even if it is assumed that Council Tax flexibility will continue into 2025/26, and that the maximum 4.99% is taken in 2025/26, the deficit would be £34.2m. Given the level of strategic reserves is projected to be £25.0m at 31 March 2028, this is a challenging position, and not sustainable.
5.7 In addition to strategic reserves, there is also a General Fund (unallocated reserve) balance of £10.0m, aligned to CIPFA best practice, plus a general contingency within the base revenue budget equal of £5.3m for 2024/25, to cushion the impact of unexpected events and emergencies in year. This general contingency is set at 1% of net revenue expenditure (NRE) less Treasury Management. For 2024/25, the General Fund and contingency total £15.3m, which represents 2.76% of NRE.
5.8 Having increased Council Tax by the maximum allowable amount, and the MTFP remaining in deficit, it would take an additional 4.10% in council tax to balance the budget for 2024/25. A total increase of 9.09% would require a referendum.
Normal Updates:
A Council Tax Inflation and Base
The Government has provided local authorities in England additional flexibility in setting Council Tax by increasing the referendum limit for increases in Council Tax to 3% in 2024/25 and the ability to increase the Adult Social Care Precept by up to 2%. The MTFP has been updated to make use of this flexibility in 2024/25, increasing council tax rates to 4.99% (2.99% plus 2% ASC Precept). Previously, the MTFP had assumed a 2.99% increase (1.99% plus 1% ASC Precept).
Council Tax base growth is being estimated at 1.31% in 2024/25 (previously assumed at 1.5%) based on latest forecast data from district and borough councils, and 1.5% in the years thereafter. In addition, early indications from district and borough councils suggest that forecasts for increased collection would result in a £4.0m surplus expected within the collection fund in 2024/25. The assumptions for collection fund deficit/surpluses will be reviewed once final estimates are made by district and borough councils and managed through the collection fund reserve.
Rother District Council (RDC) is currently consulting on changes to its Local Council Tax Reduction Scheme (LCTRS) for 2024/25 which will see a reduction on Council Tax income received by the County Council, estimated to be £988,000. The impact of this reduction is reflected in the MTFP for 2024/25. The Lead Member for Resources and Climate Change agreed the ESCC response to the RDC consultation on 12 December 2023 and RDC will make a final decision in due course.
B Business Rates Retention
Business rates have been updated following the Local Government Settlement. Growth is currently estimated at 0.4% in 2024/25 and recovering to 0.7% in 2025/26 and 2026/27 (noting that the average in a normal year is 0.7%). Business rates will continue to be monitored along with the collection fund and reviewed alongside with the district and borough councils’ latest collection forecasts to understand any further impacts.
C Business Rates Reset / Reform
Although Government has previously given a commitment to reform the current local government funding regime, it is becoming increasingly likely that a post-election Government would struggle to implement any significant funding reforms within the current MTFP period. Given the uncertainty of timing and mechanism for a reform, the potential impact of funding reform has been removed from the MTFP.
D Revenue Support Grant (RSG)
The revenue support grant was confirmed in the provisional Local Government Finance Settlement. The government has compensated for the mechanism which creates negative RSG in some authorities.
Impact of Local Government Settlement:
E Adult Social Care Market Sustainability and Improvement Funding
New social care grants were announced on 28 July 2023 (nationally £365m in 2023-24 and £205m in 2024-25). These are the latest tranche of Market Sustainability and Improvement Fund (MSIF) grants, with these latest grants focussed on workforce support. They are additional to the grants announced in the 2023-24 settlement intended to “support more workforce and capacity within the adult social care sector”. The ASC Workforce Fund will be rolled into the larger ASC MSIF grant for 2024/25. It is assumed for planning purposes that this grant will be used to fund fee increases to the sector.
F Social Care Grant
The total available grant has increased by £692m to £4,544m. ESCC’s share is £45.4m, which represents an increase of £1.3m on previous updates to the 2024/25 budget, due to technical adjustments to the allocation.
G Services Grant
As part of the £1.6bn new Government Grant funding announced at Spending Review (SR) 21, the Council was allocated a one-year Services Grant of £5.175m. The 2023/24 allocation was reduced nationally to £464m, with ESCC share being reduced to £2.916m. The Local Government Settlement confirmed that a further allocation would be made in 2024/25, albeit at the much lower rate of £77m nationally, with £478,000 to ESCC.
H New Homes Bonus
The New Homes Bonus was confirmed in the Local Government Settlement and is £554,000 for ESCC in 2024/25.
I Confirmation of Business Rates Pool in 2024/25
It was confirmed at the provisional settlement that the business rates pooling arrangements will be allowable in 2024/25. Proceeds of pooling have been updated using published information from district and borough councils.
J Office for Budget Responsibility (OBR) Inflation for Contracts (normal and contract specific)
The OBR published its updated forecast inflation rates as part of its latest outlook for the economy and public finances on 22 November to coincide with the Autumn Statement. As is normal practice these figures have been used to inform the proposed budgets. The table below shows the changes in OBR inflation estimates from its previous publication in March 2023.
|
|
2024/25 |
2025/26 |
2026/27 |
|||
|
Mar 23 |
Nov 23 |
Mar 23 |
Nov 23 |
Mar 23 |
Nov 23 |
|
|
CPI |
0.57% |
3.33% |
0.02% |
1.60% |
0.67% |
1.43% |
|
RPI |
1.19% |
4.76% |
0.97% |
2.40% |
1.88% |
2.55% |
|
RPIX |
0.59% |
3.65% |
0.81% |
2.10% |
1.75% |
2.30% |
Inflation estimates are as of September of each calendar year to provide the best mid-point within each financial year.
The normal update includes inflation increases from 2024/25 onwards. Normal practice is that, in year, services would be expected to manage movement in actual inflation through contract/budget management and the pressures protocol.
K Waste PFI Model: Additional Income
Updates to the Waste Private Finance Initiative (PFI) model have been reviewed and it is considered reasonable to release additional income from electricity generation and recycling to the MTFP for one year, rather than setting aside the Waste PFI reserve to mitigate service risks.
L Impact of National Living Wage
It was announced in the Autumn Statement that the National Living Wage will increase to £11.44 for workers 21 years and over (an increase of 9.8%). This will add significant financial costs to the wider social care provider market, increasing the financial pressure on Children’s Services and Adult Social Care via increased fees.
M Further investment in Looked After Children (LAC)
Further modelling has been undertaken to project the demand for LAC placements in 2024/25 and beyond following the latest position as set out in the Q2 monitoring.
N Reprofile of Public Health Investments
A review of Public Health investment has enabled the Public Health Grant to be reprofiled to supported Early Years Services, in line with the Public Health Outcomes Framework.
O CET: Waste Housing Growth
The Waste Model has been updated for the latest housing growth estimates.
P Treasury Management
The Treasury Management (TM) position has been reviewed taking a holistic approach to consider the impact of interest rates increasing returns on investments, and the impact of proposed capital programme updates to a more affordable level, allowing reduction in external borrowing over the MTFP period. More details are provided in the capital programme update at Appendix 8. The update also includes the delay of the IFRS9 override – the point at which the Council will be required to realise losses on a specific class of investment.
Q Pay Award
This update includes the ongoing impact of the 2023/24 pay award, which was assumed at 5% in the MTFP, releasing an estimated at £1.2m. In addition, the pay award assumed has been maintained at 3% in 2024/25 but reduced to 2.5% thereafter (previously assumed at 3% in all years).
R Levies Increase
The figures are reflective of the latest estimates of the Flood and Coastal Protection Levy, Sussex Inshore Fisheries Levy and New Responsibilities Funding.
S General Contingency
This is calculated at an agreed formula of 1% of net budget less treasury management and reflects the impact of the updates above.
Pressures added to / (removed from) the MTFP:
T Pressures Protocol – approved by CMT
A number of pressures bids have been approved by Corporate Management Team (CMT) for inclusion in the MTFP as per the table below.
|
Ref |
Description |
2024/25 |
2025/26 |
2026/27 |
Total |
|
BSD1 |
Digital Assistant licence |
0.062 |
|
|
0.062 |
|
BSD2 |
Robotic Process Automation licence |
0.077 |
|
|
0.077 |
|
BSD3 |
Tableau licences |
0.063 |
|
|
0.063 |
|
GS1 |
Governance Services |
0.117 |
|
|
0.117 |
|
GS2 |
Coroner’s pathology fees |
0.106 |
|
|
0.106 |
|
GS3 |
Coroner’s Service pressure |
0.240 |
|
|
0.240 |
|
Total Pressures Bids |
0.665 |
0.000 |
0.000 |
0.665 |
|
U One-off use of Financial Management Reserve
The deficit position on the MTFP requires the use of £14.3m from the Financial Management Reserve for a balanced budget to be set.
6.1 In the Autumn Statement, no funding was announced for upper tier local authorities beyond the increases that were already expected. Rather than increasing funding to address national pressures in social care and the impact of the National Living Wage, the Government has given a steer to councils to draw upon reserves to set a balanced budget in 2024/25 and beyond. It is becoming increasingly likely that a post-election Government would struggle to implement any significant funding reforms within the current MTFP period.
6.2 The MTFP deficit by 2026/27 is estimated at £61.8m. This is not a sustainable position. In order to address the position, the Council will need to instigate work to identify a range of actions that it will need to take to set a balanced budget for 2025/26, without the need to draw on reserves.
7.1 The provisional Local Government Finance Settlement 2024/25 provided the ability for an additional 1% Council Tax increase and an additional 1% Adult Social Care Precept in 2024/25 over and above the 1.99% Council Tax increase and 1% ASC Precept previously assumed in the MTFP. This makes a total maximum of 2.99% Council Tax and 2% ASC precept available in 2024/25 without a referendum. Considering the pressures in social care, and lack of government funding to address these, it is proposed that this additional flexibility be included.
7.2 It is therefore proposed that the County Council be asked to consider increasing Council Tax in 2024/25 by 4.99% (2.99% Council Tax plus 2.0% Adult Social Care Precept). If agreed, the proposed band D charge for 2024/25 would therefore be:
|
Changes in Council Tax |
£ per house at Band D |
|
|
|
Council Tax Annual |
Council Tax Weekly |
|
Band D 2023/24 |
£1,693.80 |
£32.57 |
|
Council Tax increase* |
£50.67 |
£0.97 |
|
Adult Social Care Precept* 2.0% |
£33.84 |
£0.65 |
|
Indicative Band D 2024/25* |
£1,778.31 |
£34.20 |
* Council Tax is rounded to allow all bands to be calculated in whole pounds and pence.
7.3 The formal precept notices for issue to the borough and district councils will follow the formal recommendation by County Council. The current position is subject to change following final figures on Collection Fund and Business Rates provided by borough and district councils at the end of January 2024. The draft precept calculation is therefore set out at Appendix 5.
8 Capital Programme
8.2 The current approved programme has now been updated to include normal updates in accordance with Capital Strategy principles and additional investment proposals considered by CMT. The planning horizon has also been extended to 2033/34 to maintain the 10 year programme.
8.3 The challenging revenue budget position, referenced throughout this report, has required the capital programme to be reviewed to minimise the borrowing costs of the overall capital programme within Treasury Management and the revenue budget. The review has reduced and re-profiled programmes and schemes over the 10 year programme.
8.4 As a result, the level of investment in assets that support the objectives of the Council Plan, whilst maintained above grant funding levels, will not be able to be delivered to the level originally envisaged between 2023/24 and 2026/27.
8.5 It is proposed that a capital programme of £301.0m be set over the MTFP period from 2023/24 to 2026/27 (current year plus three), requiring £70.2m of borrowing, with the remaining years to 2033/34 being indicative to represent longer term planning. The update to the capital programme can be found at Appendix 8a.
8.6 The Council’s 20 year Capital Strategy recommended for approval can be found at Appendix 8c. The Capital Strategy covers the period 2024/25 to 2044/45 and has been updated to reflect emerging risks, principles and corporate priorities. The strategy has been revised to acknowledge that capital investment decisions have a direct impact on the Council’s revenue budget, particularly relating to borrowing costs, and are therefore to be considered in the context of their impact on revenue budget and wider Council financial position.
9.2 The projected balance of the Financial Management reserve also includes the planned draw of £14.3m to cover the budget deficit in 2024/25. The current reserves position is summarised in the table below. Total service and strategic reserves are projected to be £41.7m by 2028. This compares with a cumulative deficit of £61.8m by 2026/27, which underlines the need for actions to be taken if Government funding is not forthcoming:
|
|
|
01.04.23 Actuals per Q2 Cabinet Report |
Estimated Balance at 31.03.27 per Full Council Feb 23 |
|
Full Council February 2024 (£m) |
|
|
|
|
|
01.04.24 Estimate |
31.03.28 Estimate |
||
|
Earmarked Reserves: |
|
|
|
|
|
|
|
Held on behalf of others or statutorily ringfenced |
|
34.9 |
33.9 |
|
32.3 |
32.1 |
|
Named Service Reserves |
|
|
|
|
|
|
|
Waste Reserve |
|
19.9 |
7.5 |
|
19.4 |
8.9 |
|
Capital Programme Reserve |
13.4 |
0.3 |
|
9.4 |
0.5 |
|
|
Insurance Reserve |
|
7.4 |
7.1 |
|
7.5 |
7.3 |
|
Adult Social Care Reform Reserve |
|
3.1 |
0.0 |
|
3.1 |
0.0 |
|
Subtotal named service reserves |
|
43.8 |
14.9 |
|
39.4 |
16.7 |
|
Strategic Reserves |
|
|
|
|
|
|
|
Priority Outcomes and Transformation |
|
17.4 |
2.1 |
|
5.9 |
5.6 |
|
Financial Management |
|
41.9 |
22.5 |
|
31.8 |
19.4 |
|
Subtotal strategic reserves |
|
59.3 |
24.6 |
|
37.7 |
25.0 |
|
Total Earmarked Reserves |
|
138.0 |
73.4 |
|
109.4 |
73.8 |
|
|
|
|
|
|
|
|
|
General Fund Balance |
|
10.0 |
10.0 |
|
10.0 |
10.0 |
|
|
|
|
|
|
|
|
|
TOTAL RESERVES |
|
148.0 |
83.4 |
|
119.4 |
83.8 |
9.3 A lack of Government funding to address pressures in social care, instead asking councils to use reserves to mitigate pressures, means that we are using significant reserves to balance the budget for 2024/25, which will constrain the Council’s ability to use reserves to manage future financial risk. Furthermore, the Council has had to abandon its usual approach of maintaining reserves to help future proof Council services from unforeseen risks.
9.4 Details of the reserves held, and the Chief Finance Officer Statement on Reserves and Budget Robustness, are set out in Appendix 6.
10 Engagement Feedback and Future Consultation
10.1 The views of the Scrutiny Committees are set out in Appendix 7. The views of partners are also included in the appendix. The outcomes of engagement events with young people, Trades Unions and business ratepayers will be made available to Members once the meetings have been held and comments recorded.
10.2 Cabinet agreed in September to undertake a public engagement exercise to seek additional feedback directly from local people on the Council’s priorities and financial choices as part of planning for 2024/25 and beyond. This survey was open to everyone living, working or visiting in East Sussex to respond to for six weeks from 30 October to 10 December and received 2153 responses. A summary of the public survey feedback is also included in Appendix 7, to be considered alongside our RPPR engagement with key partners and groups representing local communities.
11.1 An initial Equalities Impact Assessment (EqIA) of each of the revenue savings proposals has been undertaken and is set out in Appendix 4. Further EqIAs will be undertaken where appropriate when individual proposals are being considered.
11.2 All proposed capital spending has been subject to an initial equalities assessment to identify potential impacts on people sharing legally protected characteristics and to identify whether a detailed EqIA is required (including if one has already been completed or is planned). Where the need for further equality assessment has been identified, this will be undertaken when individual proposals are being planned in more detail, to enable accurate analysis. A summary of the equality consideration of proposed capital spending is set out in Appendix 8b and where a detailed EqIA has been completed it is available to Members.
11.3 In considering the proposals in this report, Cabinet Members are required to have ‘due regard’ to the duties set out in Section 149 of the Equality Act 2010 (the Public Sector Equality Duty) as summarised in Appendix 8b. EqIAs are carried out to identify any adverse impacts that may arise as a result of proposals for people sharing legally protected characteristics and to identify appropriate mitigations. The full version of relevant completed EqIAs for capital projects are available on the Cabinet pages of the County Council’s website. They can be inspected upon request at County Hall. Members must read the full version of the EqIAs and take their findings into consideration when determining these proposals.
11.4 Whilst the Cabinet is being asked to recommend, and subsequently the County Council asked to agree, the revenue budget and capital programme, the budget decision does not constitute final approval of what policies would be or what sums of money will be saved or spent under the service proposals. The recommendations in the report do not commit the Council to implement any specific saving or spending proposal. When the Executive come to make specific decisions on budget reductions or expenditure, where necessary, focussed consultations and the full equalities implications of doing one thing rather than another will be considered in appropriate detail. If it is considered necessary, in light of equalities or other considerations, it will be open to those taking the decisions to spend more on one activity and less on another within the overall resources available to the Council.
13 Conclusion
13.1 This Council has a firm foundation of sound and prudent financial management over many years, endorsed by external assessments. We have taken difficult decisions when we needed to in order to balance the books and make best use of stretched resources. Our robust RPPR process has enabled us to direct spending towards priorities and core services, in particular protecting services for the most vulnerable in our county.
13.2 The past year has seen a rapid escalation in costs and demand for services, due to factors beyond local control, which has not been matched with increased funding. Despite the action we have taken locally to address pressures wherever we can, the scale of these challenges leaves us facing a very significant deficit and substantial risk in the coming years. There also remains considerable uncertainty about the future funding regime for local government, particularly when overdue reform which will provide sustainable long-term financing for the sector will be delivered.
13.3 There is continued national reliance on raising funding for core pressures, particularly growing demand in social care, through local Council Tax which is unrelated to need and unsustainable. In this context we must again ask local people to contribute more to protect services for the most vulnerable for the future. This recommendation is not made lightly, given the ongoing pressures on household budgets, but it is essential if we are to protect services as far as possible. Support will continue to be available through local Council Tax Support Schemes for those residents eligible and we will continue to work with partners to signpost residents to sources of support with the cost of living, including access to benefits they may be entitled to.
13.4 Even after this contribution, the budget presented for the year ahead relies on using our reserves to balance the books, significantly depleting this safety net for the future. This is an unsustainable position. The reality is that there are not sufficient reserves available to meet the deferred deficit and we will need to consider what action it is possible to take in the coming year to address the significant financial gap between the funding we currently expect to have and the cost of providing our services in 2025/26 and beyond. Our ability to do so without a detrimental impact on the quality of life of our residents, communities and business is very limited.
13.5 In this context, and with future national policy being shaped ahead of a general election, our lobbying will also be vitally important and we will consider how this can be further intensified and broadened. We will need to ensure the hard choices we now face and the impacts these will have on local residents, business and communities are heard loud and clear. We will continue to work with our local, regional and national partners to highlight the specific needs of East Sussex. We will press for immediate short-term support and longer-term fair, sustainable and needs-based funding that enables us to continue to meet the needs of our residents. Until this is delivered our medium term financial position will remain extremely difficult and present significant risk to our ability to meet local needs in the future.
BECKY SHAW
Chief Executive