Agenda item

Draft General Fund Budget 2023/24 (Decision: 110638)

Minutes:

Councillor Snell introduced the report and stated that the Quarter 2 2022/23 that had been submitted to Cabinet had shown a 2022/23 deficit of approximately £469mn, and a £180mn deficit in 2023/24, which had led to a Section 114 Notice being published on 19 December 2022, alongside a request to central government for exceptional financial support (EFS). He explained that the budget being presented to Cabinet assumed that central government would grant the request for EFS, but this was not guaranteed at this time. He explained that even if EFS was granted, the Council needed to work to mitigate the deficit through a 20-year financial strategy, which included raising council tax, disposing of assets, and revising the Minimum Revenue Position (MRP) policy, all of which was included in the report. He added that inflation was also having an impact on the Medium-Term Financial Strategy (MTFS) as gas and electricity prices had risen by approximately 10%; petrol prices had risen by 8.9%; and diesel prices had risen by 22%. He explained that the team monitored inflation rates carefully.

Councillor Snell moved on and explained that on 6 February 2023 the Department of Levelling Up, Housing, and Communities (DLUHC) had granted the Council dispensation to raise council tax rates above referendum levels, without holding a referendum. He stated that the finance team had carried out comparative work with other peer unitary authorities, and had found that Thurrock had a lower council tax base than its peers, which meant that the Council could not raise as much income to pay for services to residents. He confirmed that a hardship fund of approximately £116,000 would be introduced, alongside the Local Council Tax Scheme, to ensure vulnerable residents received support paying their council tax. He stated that the budget presented to Cabinet assumed a 9.99% rise in council tax. He added that non-domestic rates would also be levied to increase income for the Council by approximately £7mn in 2023/24. Councillor Snell commented that the team were also undertaking research into a business rate pool with other local authorities, but an application needed to be submitted before this proposal could be progressed. He summarised and stated that the budget remained challenging, as it could only be balanced for 2023/24 with EFS from central government, but needed to be sustainable in the long-term.

The Interim Director of Finance explained that the Council needed to demonstrate to central government that they understood the scale of the financial challenge and were taking action to resolve these financial issues. He stated that the budget was being presented to Cabinet as a point in time report, as the context behind the budget was continually moving, and presented underlying fragility. He stated that the team were now reversing one-off measures and working to deliver savings to work towards a sustainable budget. The Interim Director of Finance explained that core service pressures were now outweighing council income, which had led to a £180m budget gap, which had been compounded by investment income issues. He added that the council were carefully monitoring interest rates and working on the divestment of assets and investments, as well as MRP charges that remained high and presented additional risks. He stated that the Council had to demonstrate to government they were working to mitigate financial issues, and this had to include the proposal to raise council tax. He described how the Council’s finances were now exposed to risk and this could present a problem in achieving financial sustainability through the 20-year model. He stated that conversations between the Council, central government, and commissioners remained ongoing to resolve financial issues, and this included considering all areas of the Council including fees and charges, to find further solutions and new innovations.

The Interim Director of Finance moved on and explained that the proposal to raise council tax was important as the Council were starting from a low council tax base, but a hardship fund would be introduced to ensure vulnerable residents received support. He highlighted the S25 Statement at Appendix 8 and explained that it was unusual as the proposed budget assumed EFS from central government, and this had not yet been agreed. He stated that the Council needed to continue to engage positively with the commissioner and intervention process, as well as key partners, to take action and resolve the Council’s financial crisis.

The Leader thanked Councillor Snell and officers for the report and felt that the proposed rise in council tax was important to ensure the future of Thurrock Council. He stated that the Council had to take tough decisions and do the right thing for the future sustainability of Thurrock. He stated that the budget presented a restart for the Council to undertake a new way of working and improving the culture, as well as ensuring future proposed regeneration could take place. He added that as council tax had not been raised to referendum limits in the past, Thurrock Council had lost approximately £50mn in compound tax collections.

Councillor Spillman questioned the structural deficit of the Council if investment issues were removed. The Interim Director of Finance explained that the Council had a deficit of approximately £17.7mn of service pressure, which represented the difference between income, growth and savings; and service costs. He stated that further savings would need to be delivered within 2023/24 and the capital programme was being reviewed. The Interim Director of Finance explained that previous decisions not to raise council tax also meant that the Council’s budget base was smaller than other comparable unitary authorities. Councillor Spillman supported the budget as he felt it would help to ensure the viability of the Council and would help to close the structural deficits. The Deputy Leader agreed with the proposals to raise council tax, as it would help to ensure that frontline care such as staff, equipment, and residential care continued to be provided to vulnerable residents. She added that the £1.5mn raised through the Adult Social Care precept increase would help to provide these services, but would not fully close the £4mn service pressure. Councillor Spillman asked which services would be cut if Council only agreed to raise council tax by 4.99%. The Interim Director of Finance explained that if council tax was raised by 4.99%, compared to 7.99%, this would increase the Council’s deficit by approximately £2.3mn. He stated that if this was the case, the Council would need to undergo further service transformation.

The Leader highlighted that if council tax was not increased, this would have a compound affect for the next 20 or 30 years, and Members needed to ensure the Council was financially sustainable. Councillor Abbas supported the budget as he felt it would protect statutory services for residents, but highlighted 3.9 of the report and asked what further adjustments would be made in future. The Essex County Council (ECC) Commissioner stated that although the budget was detailed, further work needed to be undertaken, for example the Quarter 1 review of fees and charges; and a fuller review of the capital programme and further potential savings in this area. She stated that the budget represented a point in time and further service transformation would be required in 2023/24. She added that central government would place conditions on the EFS, if it was granted, for example regarding the disposal programme. She highlighted that the EFS request for £630mn over 2022/23 and 23/24 had been submitted to the minister, but was not yet approved as the Council were waiting for a ‘minded to’ letter. The Leader stated that all Members needed to work together on the budget. He thanked the commissioners and the finance team for their hard work on the budget. Councillor Spillman echoed the Leader’s comments and thanked the finance team for their hard work.

The recommendations were moved by the Leader, and seconded by Councillor Snell. All Cabinet Members agreed the recommendations as listed below.

RESOLVED: That Cabinet:

1. Commented on the proposed updates to the Medium-Term Financial Strategy including the deficit positions set out in each year.

2. Noted on 6 February 2023 Thurrock Council was granted permission by the levelling up minister to raise council tax by an extra 5% to 10% without the need for a local referendum.

3. Noted the paper assumed as council tax increase of 7.99%, as per paragraph 9.6.

4. Supported a 2% Adult Social Care precept increase as per paragraph 9.6, and noted that this will be used to fund increased demand and provider fees with older people care services.

5. Noted the council tax requirement of £82.355m as per section 8.

6. Noted the net cost of services requirement is £327.647m as per paragraph 8.1.

7. Noted the proposed savings as per section 12 and Appendix 4 and noted that these are insufficient to address the funding gap without the need to seek exceptional financial support from government.

8. Noted that exceptional financial support is required to balance the 2023/24 budget and discussions with central government are ongoing, as per Appendix 3.

9. Noted the budget had been set based on the assumption that the request for exceptional financial support in respect of the 2022/23 budget deficit is granted.

10. Noted the changes to the capital programme as set out in the report and associated appendices.

11. Noted the impact of the new Prudential Borrowing on the debt levels of the Council as set out in Appendix 5.

12. Noted the capital programme will be subject to a further review as set out in the report and following the issue of a Section 114 Notice.

13. Noted the projected revenue impact of the Minimum Revenue Position (MRP) costs as set out in Section 14.25.

14. Commented on the proposed delegation to Cabinet to approve additions to the programme based on the criteria set out in section 14.24.

15. Noted the Dedicated School’s Budget is set out at £51.258m as per paragraph 15.13.

16. Commented on the draft budget proposals within this report to inform the final budget proposals to be presented to Full Council on 1 March 2023.

17. Noted further reviews have been commissioned into the fees and charges policy and the pay policy as per paragraph 9.23 and 10.4 respectively.

18. Noted the Council’s position on Reserves, recognising the unique situation the Council faces and a need to revisit the adequacy of Reserves as savings and service transformation are affected during 2023/24.

19. Noted that work on the budget will continue during 2023/24, with more savings required to Council services.

Reason for decision: as outlined in the report
This decision is subject to call-in

Supporting documents: