Agenda item

Report by the Chief Executive.

22.1     The Deputy Chief Executive introduced the report and the Chief Finance Officer provided an update on the Council’s financial position. In summary, throughout the year the Council has forecast a significant deficit in the Medium Term Financial Plan (MTFP). In September Cabinet received a report that the Committee then considered on the Council’s financial and policy outlook and a proposed response to some of the challenges the Council was facing. At the end of October, the Budget was announced which contained a number of changes in the policy and financial outlook for the Council. The Government is expected to publish a more detailed Local Government Finance Policy Statement shortly, and the Provisional Local Government Settlement is expected to be announced on 19 December 2024.

22.2     In November Cabinet received a further update report on the Council’s financial position and details of a range of potential savings, which is contained within the meeting papers. The RPPR report provides the Committee with the opportunity to consider the savings proposals, the changes in the planning and policy context, the updates to the MTFP and capital programme set out in the Cabinet report, and to identify any further information or work for consideration at the Committee’s RPPR Board later in December.

22.3     The Chief Finance Officer gave an update on the Council’s financial position. The MTFP for 2025/26 contains a budget deficit of £57 million which with a number of planned scenarios takes the deficit down to £29 million. The potential savings put forward by all departments comes to a total of £16 million, which leaves a budget gap of around £13 million.

22.4     The Budget announced on 30 October contained a number of increases in revenue and capital funding, with around £1.3 billion for local government. Included in this figure is £600 million for social care, of which the Council would expect to get around £6 million. A further £700 million was announced of un-ringfenced expenditure which will be allocated to meet need aligned to deprivation. This has been the focus of some lobbying work with MPs and central Government as East Sussex is not a typical southeast council in this respect. One concern is that if the methodology of the allocation of grants changes this could be to the detriment of the Council. There is also an impact from the increase in the National Living Wage and the National Insurance increases on the care sector to consider, both in terms of the level and threshold at which employers start to pay National Insurance.

22.5     The level of inflation modelled within the MTFP is based on the Office for Budget Responsibility (OBR) predicted rates. The current MTFP uses March 2024 rates, and the October Budget contained higher than predicted rates of inflation, as the expected fall in inflation has slowed down. This will need to be factored into the MTFP.

22.6     Overall, there appears to be a greater number of negative changes than positive ones in the Budget announcement and therefore the Council will need to reflect this in its planning assumptions. This means there will be a continued need to identify savings to meet the forecast budget deficit. A Local Government Finance Policy statement is expected from the Ministry of Housing, Communities and Local Government (MHCLG) which will hopefully provide more information.

22.7     A review of the capital programme has been undertaken on the basis of minimising the impact of borrowing on the revenue budget. As a consequence, the capital programme has been reduced in future years to the level of grant funding, capital receipts, and Section 106 funding. If capital works schemes are already committed to, the level of borrowing will be continued to permit them to be completed, but in future borrowing will seek to be minimised. The review has resulted in a £4 million saving which has been factored into the MTFP. The Council’s unallocated reserves were £10.2 million as of 1^st April 2024, against a forecast deficit of around £13 million.

22.8     The Committee discussed the report and update on the Council’s financial position. A summary of the discussion and comments made is given below.

Capital programme

22.9     In regard to the review of the capital programme the Committee asked what the reduction in infrastructure and highways maintenance investment above the level of grant funding would mean. The Chief Finance Officer clarified that the level of capital investment will reduce to the level of grant funding the Council receives and will not be topped up with borrowing. In terms of roads maintenance, additional investment above the grant funded level will not occur.

Climate change

22.10   The Committee asked what the impact was of the reduced investment in climate change work and whether all investment in climate change work will cease. The Director of Communities, Economy and Transport (CET) outlined that the reduction would mean that the direct activity on climate change funded by the capital programme would cease. Work involving indirect activity on climate change will continue and applications for external grant funding for climate change work will continue to be made.

Budget deficit

22.11   The Committee sought clarification on the reason why the forecast budget deficit is shown as declining over the three year term of the MTFP and whether the Council is expecting better funding as a result of the Budget announcement. The Chief Finance Officer responded that the Council does not know if its funding will increase as the Government has only announced high level budget allocations. There appears to be more capital investment in schools and highways, but detailed budget allocations are not known at present. In terms of the forecast budget deficit, most of the pressures are in the current financial year and in 2025/26. The budget forecasts include an assessment of inflation and growth in demand for services in future years, which aggregated together to give the total deficit over the term of the MTFP. Also, reserves are being used in the current financial year to mitigate the forecast overspend.

22.12   The Committee also asked whether the forecast reduction in the budget deficit in the MTFP was optimistic. The Chief Finance Officer responded that the forecasts were based on OBR modelling and the modelling of future need for Children’s Services and Adult Social Care which is showing a reduction. Inflation and pay awards are expected to show a reduction and overall costs are expected to come down. Consequently, the forecasts are realistic based on the information available and assumptions made at the time.

Bus Service Improvement Plan (BSIP) funding

22.13   The Committee asked if the £4.55 million BSIP funding allocation announced earlier in November is included in the budget figures or whether this was additional funding to that already received. The Chief Finance Officer agreed to contact Councillor Hollidge after the meeting to confirm if this was new funding or included in the existing budget. (Post meeting note: The Chief Finance Officer has confirmed that the £4.55 million announced is new BSIP funding, and this will be included in the budget figures).

22.14   The Committee RESOLVED to:

(1) note the information in the attached RPPR Cabinet report of 13 November 2024 (appendix 1), including the updated Medium Term Financial Plan (MTFP), savings proposals and capital programme update; and

(2) identify any further work or information needed to aid the Scrutiny Committee’s contribution to the RPPR process for consideration at the RPPR Board, or as part of the committee’s ongoing work programme.