Agenda item

To consider a report detailing Cabinet’s initial budget proposals and associated matters.

 

 

Cabinet considered a report which sought approval for the Cabinet’s initial budget proposals for 2023/24 in the context of the 2023-2027 Financial Planning and Budget. This report represented a key milestone in the development of the 2023/24 Budget and 2023- 2027 Medium-Term Financial Plan (MTFP), as it sets out Cabinet’s initial Budget proposals for the next financial year and beyond.

 

The Authority’s 2022/23 Budget and 2022-2026 MTFP were agreed by full Council on 17 February 2022. At that time, it was impossible for the Authority to foresee the global economic impact of the Russian invasion of the Ukraine. Rising interest rates and inflation had caused a significant impact leading to a cost-of-living crisis, which would see a real term reduction in living standards for families throughout the Borough. At the time of writing this report inflation (as measured by the consumer price index (CPI)) has reached 10.1%, with forecasts that it could rise further towards the end of the financial year. This would have a significant impact on the cost of delivering essential services and the InvestmentPlan.

 

The Authority’s financial planning had previously assumed that COVID-19 pressures would abate in line with the withdrawal of Government support. However, as reported to Cabinet at this meeting in the Budget Monitoring Report for September, the Authority continued to feel the financial effects movingforwards.

 

Whilst the Authority carried forward COVID grants, which had been used to smooth the financial position in 2022/23, it was anticipated that these grants would be fully utilised in the current financial year with no residual funding available to meet any ongoing costs into future years. This posed a significant risk to the Authority’s financial position for 2023/24 and future years and the Senior Leadership Team, supported by Senior Officers, continued to mitigate this as far as possible in budget monitoring and planning.

 

It was highly likely that key income sources including Council Tax, through both the Collection Fund and tax base growth, and business rates would continue to be under significant pressure in 2022/23. The current MTFP position incorporates prudent assumptions about these income streams, which would need to be reviewed over the course of the Budget-setting period. This would include Government announcements around the inflationary uplifts to business rates, which are set nationally.

 

Despite all this, Cabinet would be aware that the Authority’s priorities, as set out in the ‘Our North Tyneside Plan’, continued to be met and that the Authority had a goodtrack record of delivering those priorities within the funding resources that were available. This was evidenced by the fact that Cabinet had delivered balanced outturns, without the need to use reserves, in each of the last three financialyears.

 

The cost-of-living crisis was accelerating inequalities in the Borough, pushing families further towards crisis and realigning many of the inequalities that already existed in the Borough. Cabinet was determined that this gap would not widen and would do everything it could to get support to families that needed it whilst making sure that nobody was left behind. However, it was acknowledged that the Authority cannot deliver this essential work alone, so officers and Members continued to engage with the brilliant voluntary and community sector who helped the Authority get the right support, at the right time, to the rightpeople.

 

Whilst the approach to Budget-setting this year continued to be challenging and there was a significant amount of risk and uncertainty, Cabinet continued to plan for the future, listening to and focusing on the priorities of residents and businesses. The proposals for a balanced Budget for 2023/24 and a MTFP over 4 years would bebased on a reasonable and prudent set of assumptions. Despite the unknowns, this would give the residents and businesses in the Borough as much certainty as possible that the Authority continued to deliver services that meet their needs and that their money was being spent well.

 

At the Council meeting in February 2022, the MTFP for 2023/24 to 2025/26 set out a gap of £21.534m over the 4-year period, with a gap of £10.655m for 2023/24. The gap in the February Council report for 2023/24 was calculated prior to the increase in council tax (1.99%) and adult social care precept (1%), which was agreed at that meeting. The additional resources agreed (£3.184m) reduced the revised gap for 2023/24 to £7.471m, which would be the base line position for the remainder of this report.

 

Before looking at the new and emerging pressures since the Budget was set, Cabinet noted that the robust approach to financial planning in North Tyneside served its intended purpose. Had new pressures not arisen, a review of changes to Government funding assumptions and reductions to growth pressures from management action, would have reduced the residual MTFP gap for 2023/24 from £7.471m to £1.059m. This would have been a manageable gap to address in the current budget round.  However, since the development of the 2022/23 Budget and MTFP in February 2022, a number of further significant risks had emerged that were impacting on the 2022/23 budget outturn position, as well as increasing the £7.471m gap identified for 2023/24. These risks were anticipated to add £15.635m to the gap and were summarised in Table 1 (section 1.6.3). 

 

Social care fees – following the 2022/23 budget being set, the in-year home care negotiations resulted in a further uplift in fees, reflecting the current market pressures facing the sector. As such, an additional amount had been added into 2023/24 estimates to ensure the base budget reflected these contractvalues.

 

Pay award – the current year pay award was based on the pay offer made by Local Government Employers, being a flat rate of £1,925 per full time equivalentemployee. At the time of writing, 2 Trade Unions had accepted the offer, with one 1 rejectingit – it was expected to be formally agreed in November and paid to staff in December. For both in-year monitoring and future budgeting purposes, this rate, which equates to an average increase across the Authority of between 5-6%, had been used. The impact on the 2022/23 financial position was included in the Budget monitoring report elsewhere on this agenda, but for 2023/24 the base budget would need to increase by a further £4.000m to ensure the base budget was sufficient moving forwards.

 

Energy inflation – the original £7.471m gap in the MTFP included £0.800m for utility price inflation. Since the Budget was set, energy price inflation had increased exponentially. Despite the forward purchase of energy through the North East Procurement Organisation (NEPO) framework and the in-year Government support to councils, a further £4.772m was currently forecast to be required for the 2023/24 base budget. This area remained subject to significant volatility, so further updates would be given to Cabinet in future finance papers, both budget monitoring and budget setting.

 

Contractual inflation – this figure was made up of two elements; firstly £3.000m for indexation of contracts which were pre-determined in terms of timing and inflationary measure – generally CPI or Retail Price Index (RPI). Future reports would update for any further changes in the applicable rates, as current assumptions had been used as to what they would be at the specified contractual uplift dates. The residual amount of £2.663m related to care fee inflation, arising from a combination of price and volume assumptions. Some of this increase may be funded from Fair Cost of Care allocations, but the timing of these announcements by Government were not currently known. The revised gap for 2023/24 was therefore £23.106m as shown in Table 2 (section 1.6.7).

 

Finance officers were continuing to work with Cabinet, the Senior Leadership Team and other senior officers across the Authority to review Business as usual activity in a number of key areas. The key areas of challenge, which could lead to further cost pressures,included:

·         Children’s Services – demand, workforce and costassumptions;

·         High needs/Special Educational Needs and Disabilities (SEND)pressures;

·         Adults Social Care – demand, workforce and costassumptions;

·         Unachieved savingstargets;

·         Commissioning & Asset Management – impact of schools’ service level agreementreductions;

·         Law & Governance Structure – use of locums;and

·         Revenues & Benefits position – review of the level of benefits overpayments and subsequentrecovery.

 

The aim of this work was to ensure actions were in place to bring the outturn forecast for normal activities in on balance.

 

With regards to Government funding, the MTFP had assumptions in relation to the continuation of certain elements of the 2022/23 funding settlement, including in particular that there would be a repeat of part of the “one-off” 2022/23 Services Grant allocation of £3.330m. The current revised gap above assumed that 50% of the grant would be reversed by Government, i.e. a loss of £1.665m. Any further reduction in the grant would result in a worsening position, but the continuation of the grant at 2022/23 level would improve the incomeassumption.

 

There remained significant uncertainty about the Fair Funding Review or successor approach. A consultation on the Fair Funding Review had been expected earlier this year, following several years of being repeatedly delayed. Once again, no consultation had been brought forward and any future approach would be dependent on the new Government’s priorities and the current macro-economic picture. Given the restrictions of the parliamentary timetable, Spending Review timescales and the significant impacts that implementing Fair Funding could had across the local government sector, it was possible that reforms will not be brought forward until 2026/27.

 

As well as uncertainty around progress on Fair Funding over the medium term, it is unlikely that there will be any certainty about the 2023/24 Provisional Settlement until mid-December at the earliest, with some commentators suggesting that this could be delayed into the new calendar year. For the remainder of the report, the starting point for the approach to bring the 2023/24 General Fund budget into balance wouldbe £23.106m as set out in Table 2.

 

Using the starting point of a £23.106m revised gap for the General Fund, officers had reviewed the current assumptions included in the MTFP, including revising assumptions around the level of Government funding that would be provided. There were inherent uncertainties within this exercise for the reasons set out earlier, but this reflected the latest information gleaned from a variety of sources. It was summarised in Table 3 (section 1.6.12), with a commentary included on eachsection.

 

Pensions deficit – the MTFP included an estimated figure of £2.747m that would be required in the base budget to address the forecast deficit on the pension fund. In October 2022, the updated position of the Tyne and Wear Pension Fund was provided, which confirmed that the fund was in surplus so this amount would not be required.

 

New Homes Bonus (NHB) – the schedule of NHB payments was expected to reduce from next financial year due to the winding down of the scheme. However, industry commentators had highlighted that due to the delay in the Fair FundingReview, amongst other considerations, it was expected that there could be an extension of the scheme. A one-year extension, without any residual/legacy payments, would see an additional £0.500m next financial year.

 

Fall out of services grant – as noted earlier, £3.300m was received in 2022/23 for a one-off service grant. The assumed position in the MTFP was that this would be partially extended, with an assumption that 50% would be retained in 2023/24. Latest intelligence suggests that the full grant could be repeated in 2023/24, therefore an additional £1.665m would be available for the Budget nextyear.

 

Inflationary uplifts – the MTFP assumed a prudent assumption around inflation in the Revenue Support Grant, business rates and Improved Better Care Fund. Whilst it is not certain, these assumptions have been uplifted from 2% to 6.5%, although confirmation would be required from Government in the Provisional Settlement, which was expected in December. Although there had been indications from Ministers that there would be no increase in funding for inflation, the sector was currently lobbying for increases – so a partial uplift, compared to current CPI levels, is included at this stage.

 

Reversal of national insurance contribution increases – the full year effect of this could be up to £1.250m. However, Cabinet noted that there was a potential that the Government funding provided, in part, to cover the original increase could be reversed.

 

Unidentified growth – each year of the MTFP had an item in for unidentified growthof £1.000m. For 2023/24, this would be required to address various staffing restructures addressed in the current year, including the use of agency and locum staff in shortage areas. There was no change to the MTFP gap as a result, but this was included here for transparency. Future year proposed usage would be confirmed in MTFP considerations for next year’s Budget-setting.

 

The MTFP approved by full Council in February 2022 included a 1.99% general increase in Council Tax and a 1% adult social care precept for 2022/23. It remained a major concern that the Government continued to place significant reliance and expectations on locally raisedincome.

 

The Government had yet to announce the Council Tax referendum limit for 2023/24 but it was expected that a general Council Tax increase of 2% will remained in place. Since 2016/17 the Government had also allowed local authorities to raise additional income to support the rising costs of providing Adult Social Care by way of levying a precept, without having to hold a referendum. Following the failure of the Government to provide authorities with sustainable funding to support rising costsof supporting the Borough’s most vulnerable residents the Authority, in line with the Government’s expectations, had made full use of the precept raising ability. At the time of writing this report, no announcements had been made in relation to any precept levy which would be available to local government for the 2023/24 financial year, although this was widely expected to beannounced.

 

Whilst no proposal about Council Tax and/or Adult Social Care levies are being made in this report, it is useful to set out what this would mean for the Authority for illustrative purposes. Should Cabinet consider the increases in Council Tax, based on current tax base estimates, this would raise approximately £3.294m ofadditional funding for next year (made up of £2.192m general Council Tax (1.99%) and £1.102m from the Adult Social Care Precept (1%)). The precise final level of any change in Council Tax would be confirmed in February 2023 following a decision by full Council.

 

Strategic Reserve – the MTFP assumed that a contribution would be made to the strategic reserve each year to take account of usage in previous years. Given the current financial position, it was proposed to defer the 2023/24 contribution, butfuture years’ contributions were left in the MTFP for planningpurposes.

 

Minimum Revenue Provision (MRP) – a change was made to the way in which MRP was calculated towards the end of 2021/22. This had now been subject to external audit and no concerns were raised. As well as the savings made to date, it was estimated that this would lead to an underspend on the debt charges budget in 2023/24 in the region of £4.000m. Given the residual gap, as well as the inherent uncertainty, it was considered prudent at this stage to put this forward as a saving for illustrativepurposes. The impact of these options was summarised in Table 4 (section 1.6.24).

 

For completeness, the Elected Mayor and Cabinet had already made decisions in previous years which resulted in savings during the MTFP period, which were already included in the MTFP gap calculations used in this report. These were summarised in Table 5 (section 1.6.25) for ease ofreference.

 

In addition to these planned savings, the Elected Mayor and Cabinet were developing further options for consideration to balance the General Fund over the next four years of the MTFP, with updates to be brought to the January 2023 Cabinet meeting. The aim was to do this via a range of strategic activity whichincluded:

 

a)     Workforce Planning: changing the workforce over the next four years where the need to change aligns to people’s plans and recruitment and skillsneeds;

b)     Commissioning, Procurement and Commercial Planning: looking specifically at procurement, demand management testing joint provision with the NHS, direct service delivery and meeting needdifferently;

c)     Digital, Data and Customer Strategy: cash and efficiency benefits from investing in the Authority’s priority projects and delivering the Digital Strategy;and

d)     Asset Management Planning: investing capital to reduce revenue costs and improve the Minimum Revenue Provisionposition.

Work would also continue before January 2023 to update the revised gap to take account of the Provisional Settlement (expected in December) along with any wider Government announcements, including the impact of policy initiatives. In particular, the residual gap around adult social care was hoped to narrow based on theallocation of Fair Cost of Care funds. However, in the absence of any detailed information, no attempt had been made to quantify this and the full extent of the social care growth already in the MTFP assumptions had been leftunchanged.

 

From the information in this report so far, the level of uncertainty in this year’s planning process was higher than previously experienced. As such, it was not yet possible to confirm the 2023/24 position with any certainty at this stage. This had a consequential impact on the 4-year planning horizon for theMTFP.

 

Normally this report would include a detailed forecasting of the MTFP, taking into account the full roll forward of year 1 (in this case 2023/24) into future years. However, given the increased uncertainty, a simplified approach had been taken at this stage to set out the 4-year MTFP period, which assumed that the 2023/24 yearis balanced.  Table 6 (section 1.6.30) set out the key areas of movement each year, plus adds in a “new” year into the MTFP i.e. 2026/26.

 

The estimated growth required assumptions were largely in line with previous year estimates for 2024/25 and 2025/26. 2026/27 had been added, to take the MTFP to a 4-year planning period, by rolling forward the majority of the assumptions from 2025/26. The notable exception was with regards to the pension fund deficit, as the next triennial valuation will had taken place. An indicative growth item of £5.000m had been added to address the potential deficit balance which could arise in the actuarial valuation. This figure would be revised each year based on the latest indications from the pensionfund.

 

The change in the Council Tax base/Business Rates was the net impact of forecast changes to the Collection Fund. The spike in income in 2025/26 (£2.012mcompared to circa £0.500m in the other years) reflected the end of the COVID-19 accounting arrangements, which saw the deficit arising during the pandemic being spread over 3 years. After this one-off reset, the position on the Collection Fund was expected to return to normal levels.

 

The Authority maintained a level of reserves to plan for and manage financial risk. It was important to remember that reserves could only be used once, and that they were maintained to provide a degree of financial resilience and flexibility for theBorough.

 

Reserves balances had fallen from 2021/22 primarily due to the planned use of balances relating to COVID grants, which were partially received in advance ofthe intended spend. By the end of 2022/23, grants relating to COVID would either be utilised or repaid in line with the grant condition which were attached, withthe Authority maximising the benefit to the Borough’s business and residents.

 

The Authority bought forward reserves’ balances of £80.298m into 2022/23, based on the latest forecast of planned usage, it was anticipated £17.050m would be drawn down in 2022/23 to support service delivery. This would result in a 2023/24 balance bought forward for reserves of £63.249m. The planned usage did not incorporate the potential requirement of the strategic reserves to support the 2023/24 revenue budget pressure being forecast of £5.996m for 2023/24. Neither does it take into account any use of the strategic reserves to support the 2022/23 in-year pressures, as reported in the Financial Management report elsewhere on thisagenda.

 

Reserves balances were forecast to fall to £54.369m by the end of the financial year 2026/27. This assumed no utilisation of the strategic reserves to underwrite revenue budget pressures over the MTFP. Should the Authority utilise the strategic reserve to underwrite the revenue budget pressures, this could lead to the Authority being in breach of the internal requirement to maintain a level of strategic reserves no less than £10m as per the Reserves and Balances Policy.

 

Whilst there was still a significant level of uncertainty, the Authority would continue to deliver best practice as would be expected. That meant there was a refreshed 4-year MTFP for both the General Fund and HRA, alongside a 5-year Capital Investment Programme. Those financial plans had been based on a benchmarked set of assumptions which had included information from HM Treasury, the Office of National Statistics, and the Office for Budget Responsibility, CIPFA, dialogue with the Society of Municipal Treasurers, as well as the local Treasurers across the LA7 and ANEC areas.  The prudent use of reserves forms a vital part of this financial planning.

 

Financial Planning for the Housing Revenue Account (HRA), like the General Fund, was driven by the Council Plan vision and priorities. The HRA would set a Budget and updated four-year MTFP, supported by the updated 30-year BusinessPlan.

 

The Authority, in line with most Local Authority Registered Providers, followedthe Government’s social housing rent policy, which for the last two years had seen rent increases based on the Consumer Prices Index (CPI) rate, as of September, plus 1%. The CPI rate for September 2021 was 3.1% which led to a rent increase for 2022/23 of 4.1%. However, because of the cost-of-living crisis and the current high rates of inflation being experienced, the Government was concerned about the impact this would have on rent increases for tenants in 2023/24. On 31 August 2022 the Department for Levelling Up, Housing and Communities issued a consultation document on social housing rents, which concluded on the 12 October 2022. They were seeking views on a new Direction to be issued to the Social Housing Regulator in relation to social housing rent policy. The Government was proposing the introduction of a rent ceiling for 2023/24 to limit the maximum amount by which rents could be increased. The September 2022 rate of CPI was 10.1% and following the existing policy would see a rent increase of 11.1% for 2023/24. The Government’s proposal was for a ceiling of 5% or CPI + 1%, whichever was the lower. In addition, however the Government were also seeking views on limits of 3% and 7% or any other proposals.

 

This had led to the need to model a range of scenarios within the 30-year HRA Business Plan. However, until the Government confirmed its final position following the consultation, it had been assumed that rents would rise in line with the Government’s proposed new Direction i.e. 5%. The Authority was facing a range of pressures due to several factors including post-pandemic legacy costs, war in Ukraine, rates of inflation, and general economic uncertainty. This was no different for the HRA which was having to contend with some key issues,namely:

 

·       2022/23 pay award being above 2% budgetedfor;

·       Uncertainty over future payawards;

·       Craft Workers PayReview;

·       Additional responsibilities required of Landlords under Government Safety White Paper following Grenfell disaster e.g. Carbon Monoxide Detectors in every home and increased periodic electricalinspections;

·       Increased costs for Materials across the Supply Chain;and

·       Increased Sub-Contractor costs linked to inflationaryissues.

 

All these issues had been factored into refreshing the HRA Business Plan, along with the current proposed rent increase with the aim of ensuring that the 30-year HRA Business Plan could be balanced, whilst meeting all the Elected Mayor and Cabinet’s key objectives. These included maintaining the existing stock, meeting increased Affordable Homes ambitions and taking steps to respond to the Authority’s Climate Change Emergency, by funding increased sustainability measures and starting to address the decarbonisation agenda as part of the Authority’s Carbon Net-Zero 2030 ActionPlan.

 

However, with the proposed change to the Government’s rent policy, regardless of whether the increase ends up at 5%, or 3% or 7%, all these scenarios would result in a significant funding gap for the HRA. Table 7 (section 1.7.5) of the report gave an indication of the potential impact of differing rent increase rates. As stated above the current proposal had sought to balance the model using a 5% rent increase, with the “gap” being closed by a combination of slowing down the rate at which debt was repaid over the life of the plan and ultimately reducing the funding the Authority had available to undertake new build affordable housing, based on the premise that the Authority’s primary responsibility as a landlord is to manage and maintain its existing homes and tenancies.

 

As was consistent with the General Fund, the HRA continued to face financial pressures, some of which had been significantly increased by the current economic climate. The continued roll out of Universal Credit and other welfare reforms brings greater pressure on tenants in terms of managing their finances in a time of rising inflation. The Authority continued to focus on supporting residents to sustain tenancies, and help tenants manage their money so that they did not end up in financial hardship or significantarrears.

 

During the current financial year there was clear evidence of continued shortages of certain key materials such as steel and wood, accompanied by increasing prices as a result along with the current upwards pressure on inflation, effecting both the capital programme and the day-to-dayrepairs.

 

The 2023/24 budget and 4-year Financial Plan for the HRA were based on the above assumptions, balanced with small, planned contributions from reserves over the next two years and then smaller adjustments to balances in the remaining two years of the MTFP as set out in Table 8 (section 1.7.8).

 

There were a number of areas where options had been developed for consideration to help balance the Housing Revenue Account and provide resources to move towards meeting Cabinet and tenants’ ambitions. These had centredaround:

 

a)     An ongoing review of bad debt provisions and the associatedassumptions;

b)     A review of levels of in-year contingency provided within both the Management and Repairsbudgets;

c)     Review of the approach to debt management within the Treasury Management Strategy for theHRA;

d)     Analysing Government consultation on rent policy to assess potentialimpact;

e)     Balancing the needs of the existing stock whilst ensuring that the HRA continues to provide funding for a new build programme to assist towards helping to meet Cabinet’s Affordable Housingambitions;

f)       Ensure that the Authority has the resources available to continue supporting a programme of training and development through apprenticeships and the Working Roots scheme;and

g)     Identifying resources specifically to respond to the Authority’s declaration of a Climate Change Emergency, by undertaking sustainability measures within the housing stock that will reduce the Authority’s carbon footprint and help move towards net carbon zero status the Authority’s Carbon Net-Zero 2030 ActionPlan.

 

The 2022-2027 Investment Plan totalling £264.974m was approved by full Council on 17 February 2022. Delivery of projects within the plan and progress to date had been reported to Cabinet as part of the bi-monthly Financial Management reports. Reprogramming of £27.416m had been identified as part of the process and this spend was now included in the 2023-2028 planned spend shown in Table 9 (section 1.8.1).

 

A schedule of the individual projects included in the draft Plan was attachedas Appendix B(i). All projects were subject to the Authority’s Gatewayprocess.

 

In addition to the agreed 2022-2027 Investment Plan, proposals for the 2023-2028 Investment Plan for consideration as part of Budget-setting were set outbelow:

 

·       Projected investment of £1.000m pa to reflect the initial work underway in relation to Carbon reduction targets and enable progress to be made on this key priority; and

·       A new year 5 (2026/27) has been added to reflect rolling programme projectssuch as Asset Planned Maintenance, ICT infrastructure refresh and sustained investment of £2m/annum on additional HighwaysMaintenance.

 

School funding was a matter for the Department forEducation (DfE); either by direct funding agreements with academy trusts or delegated by local authorities to schools where budget management was the delegated responsibility of each governing body. As in previous years, Cabinet would need to determine the local formula to distribute funding to mainstream schools and academies for the financial year 2023/24. The formula would apply directly to maintained schools for the financial year, and for academies it would form the basis for their funding, distributed by the Education, Skills and Funding Agency (ESFA), for the year starting 1 September 2023. The local formula must comply with statutory guidance, but within these confines the final decision on the formularestswiththeAuthorityafterconsultationwithschoolsandtheSchoolsForum, was shown in Table 6 (section 1.9.1).

 

North Tyneside, like many local authorities both regionally and nationally, was experiencing an increase in the numbers of children with SEND. The number of children with an Education Health and Care Plan (EHCP) continued to increase and the complexity of the needs of those children and young people continued to grow. Responding to this increase in needs is creating pressure on the High Needs block of the Dedicated Schools Grant (DSG). The indicative funding allocation for High Needs showed that the Authority would receive an additional £2.203m in 2023/24, however, it was not sufficient to address the underlying increase inneed.

 

The ringfenced DSG was received from the Government and administered by the Authority and was the main source of income for the schools’ budget. The DSG first fell into deficit during 2017/18 and it was an important element of the financial management of the Authority that the DSG was not in a deficit position. As a result, there had been action to address the deficit working collaboratively with Schools Forum, however increasing numbers of children with special needs entering the education system had offset some of theprogress.

 

DSG deficits had come under increasing scrutiny from DfE and, during 2021, the Authority was required to submit a draft DSG Management Plan to the ESFA as its DSG deficit was more than 1% of the total value of the DSG as at March 2021. Asa consequence, since then, the Authority’s DSG deficit had remained underreview.

 

Liaising with the DfE during 2021/22, the Authority had been working to reduce the DSG deficit and this work was now being overseen by the Strategic Education and Inclusion Board.  The Authority submitted a draft DSG Management plan to the ESFA in August 2021 which outlined the main areas of priority that focus on reducing the deficit on the High Needs block of the DSG. As of 2022/23, the Authority has been invited to be part of phase 2 of the ESFA’s Safety Valve Intervention programme from September 2022. The Authority had had early discussions with representatives from the ESFA and as plans were firmed up over the coming months, the ESFA would continue to challenge and support the Authority through to the Safety Valve process.

 

For 2022/23 £150m of revenue funding was available to support the cumulativedeficit position of those authorities who were part of the Safety Valve programme, however, the ESFA had been clear that access to this funding will only be agreed once a robust and balanced DSG Management Plan is in place. The current cumulative deficit position on the High Needs block of the DSG at the end of the 2022/23 financial year was projected to be £18.622m. This was an increase of £5.111m since March2022.

 

A key risk for the Authority was that the statutory override to ring-fence DSG deficits from councils’ wider financial position in statutory accounts was due to end afterthe accounts for the financial year 2022/23. After this point, unless the statutory override was extended, authorities would need to demonstrate their ability to cover DSG deficits from their available reserves. Due to the level of the deficit on the High Needs block of the DSG it was imperative that the Authority’s DSG Management Plan met the ESFA’s requirements to ensure the historic deficit could be supported by funding that was available.

 

Cabinet’s initial Budget proposals were based upon available information and judgements at the time of the writing of this report. As noted throughout this report, there were several assumptions and judgements built into the figures presented that were outside the control of the Authority and needed to befinalised.

 

These initial Budget proposals were subject to further review and consultation before they can be confirmed. The information to be assessed and finalisedincluded:

 

·       The overall impact of the Autumn Statement due to be announced on 17 November2022;

·       The Provisional and Final Local Government Finance Settlementannouncements for 2023/24, including capital announcements and specific grants, including the Dedicated Schools Grant(DSG);

·       Police and Crime Commissioner for Northumbria and the Tyne and Wear Fire and Rescue Authority Precepts (due February2023);

·       Levies, including the North of Tyne element of the Newcastle upon Tyne, North Tyneside, and Northumberland Combined Authority Transport Levy (due February 2023);

·       Tyne and Wear Joint Service Budgets (due January/February 2023);and

·       Consideration of the impact of the economic climate on the residents ofthe Borough and Council Taxpayers.

 

Therefore, as some external announcements were still to be received, it

was recommended that Cabinet authorises the Elected Mayor, in

conjunction with the Cabinet Member for Finance and Resources,

Deputy Mayor and other Cabinet Members, to work with the Senior

Leadership Team to continue their joint reviewof these proposals.

 

Cabinet considered the following decision options: to approve the recommendations set out in paragraph 1.2.1 of the report; or alternatively, suggest that further / different options are considered by the Senior Leadership Team and be reported back to Cabinet for furtherconsideration.

 

Resolved that (1) the key principles being adopted in preparing the Medium-Term Financial Strategy for the Authority, subject to an annual review, be agreed;

(2) performance against the Our North Tyneside Plan outcomes (Annex 1 andbe noted;

(3) the initial Budget proposals in relation to the 2023/24 General Fund Revenue Budget and Dedicated Schools Grant, including the assessment in relation to the current year’s Budget monitoring information (Section1.6), be agreed;

(4) the proposed 2023-2028 Investment Plan, including initial prudential indicators for 2023-2028 in accordance with the Chartered Institute of Public Finance and Accountancy’s (CIPFA’s) Prudential Framework and a proposed Minimum Revenue Provision (MRP) policy in line with capital finance regulations (Appendix B(i) & B(iii)), be agreed;

(5) the draft Capital Investment Strategy be noted, and that this Strategy will now be subject to consultation as part of the Budget EngagementStrategy (Appendix B (iv)), be noted;

(6) all approved schemes within the 2023-2028 Investment Plan will be kept under corporate review by the Investment ProgrammeBoard, be noted;

(7) the initial proposals in relation to the Treasury Management Statement, Annual Investment Strategy for 2023/24 and Treasury Management Practices (TMPs) (Appendix C &H), be agreed;

(8) the formal Reserves and Balances Policy for the Authority, subject to review at least annually (AppendixI), be noted;

(9) the Provisional Statement by the Chief Finance Officer (Annex Section8), be noted;

(10) the 2023/24 rent policy for housing be agreed; and the initial Budget proposals in relation to the 2023-2027 Housing Revenue Account budget, and associated Business Plan, including an assessment in relation to the current year’s budget monitoring information (2022/23) (Annex Section4), be agreed;

(11) the proposed 5.0% rent increase from April 2023 (subject to results of Government consultation and imminent issuing of new Direction on Social Housing Rent Policy to the Social Housing Regulator), and the initial proposals in relation to housing service charges and garage rents for 2023/24, be noted;

(12) the Director of Resources, in consultation with the Director of Commissioning and Asset Management, the Cabinet Member for Children, Young People and Learning and the Cabinet Member for Finance and Resources, be authorised to undertake resource allocations to schools for 2023/24 in line with the school funding arrangements set out in the report;and

(13) the Elected Mayor, in conjunction with the Cabinet Member for Finance and Resources, Deputy Mayor and other Cabinet Members, be authorised to work with the Senior Leadership Team to continue their joint review of these initial Budget proposals.

 

(Reason for decision: Due to external information still to be received, Cabinet is not able to finalise setting its proposed Council Tax level for 2023/24 in relation to the General Fund. This report will form the basis of Budget engagement and scrutiny over the next two months, but further work will inevitably be required before final decisions are made on the Budgets for next year, hence the authorisation recommendation referred to in section 1.10of the report.)