Agenda item

To consider a report detailing Cabinet’s 2024-2028 Financial Planning and Budget Process: 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 2024-2028 Financial Planning and Budget. This report represented a key milestone in the development of the 2024/25 Budget and 2024-2028 Medium-Term Financial Plan (MTFP), as it sets out Cabinet’s initial Budget proposals for the next financial year and beyond.

 

The report also included the Authority’s approach to budget engagement and the Budget Engagement Strategy.  The Our North Tyneside Plan remained the delivery focus for the Elected Mayor and Cabinet, and the Budget was driven by the Authority’s key priorities that made up the Plan – a thriving, secure, family friendly, caring and green North Tyneside.  Despite the economic challenges facing the country and the local government sector, the Authority continued to be ambitious to ensure anyone who needed support can access it, to continue to help the most vulnerable members of the community and to continue investment in all parts of the Borough.

 

Understanding the context in which any budget was set is critical, but this was even more relevant now.  In many ways, 2024/25 represented the first post-covid budget, with the temporary funding to support local authorities through the pandemic now ended and activity levels stabilising towards the “new normal”.  However, at the same time, wider economic factors had come into play, manifesting themselves in the cost-of-living crisis for our residents, business and the wider public sector.

 

Local authorities across the country had experienced significant financial uncertainty for many years, but since 2018 there had been several local authorities who had issued notices under section 114 of the Local Government Finance Act 1988 (section 114 Notice), which was effectively a notice confirming that an authority was unable to meet its expected financial obligations.  The reasons for the section 114 notices issued to date varied between each affected authority, but the current funding levels in the sector mean financial resilience had been weakened and some authorities had struggled to meet increased levels of demand within their current financial and operational arrangements.

 

The national and international economic position must also be recognised.  As well as the increased levels of older people generally, there was a change to the proportion of over-50 year olds in work, reducing the levels of those who were economically active.  Despite innovation and changing business processes, productivity in the economy has been weak in the past 10-15 years, undoubtedly impacted by the events such as the global banking crisis and the pandemic.  More recently, rapidly rising inflation and the consequential increase in interest rates, following a prolonged period of historically low rates, were impacting on growth in the economy.  However, there remained areas of economic resilience, with continued level of capital investment in many sectors.

 

Locally, this presented the Authority with challenges, which also changed at pace.  Since the budget for 2023/24 was set on 16 February this year, increased demand and changing levels of risk had impacted on activity and budgets.  This was covered in detail in the latest Performance and Finance report (also on the agenda for this meeting), but included: Increased levels of vulnerable children, including those accessing high needs support; National pressures on the cost of external provision for both children’s and adult social care; Increasing food inflation and reducing numbers of schools buying services from the Authority, linked in part to academisation; Continued inflationary pressures, impacting on general costs but also contractual uplifts, for example waste and PFI schemes; and Recruitment and retention challenges, especially in certain shortage areas such as social care and lawyers.

 

In response to this, the Authority had continued to evolve and enhance its reporting mechanisms.  2023/24 had seen a new approach to the bi-monthly reporting to Cabinet and OSC&FC.  This has focused more on service activity levels that drive the finances, rather than just the financial impacts, giving a much more informed and balanced set of reports to Members.  It was also driving the revised approach to the MTFP set out in this report.

 

Despite these challenges, Cabinet was preparing its budget and MTFP proposals from a position of strength.  The bi-monthly Performance and Finance reports set out some of the key achievements in year, demonstrating the support the Authority gave to its residents, business and visitors.  The achievements set out in those reports, and summarised in this section, were not exhaustive but included:

·        58% reduction in carbon emissions across Authority service operations, ensuring that the Authority is on track against its commitment to become carbon net-zero by 2030;

·        The ambition to deliver 5,000 Affordable Homes is progressing well with 2,348 homes delivered at the end of quarter two;

·        The Ambition for North Tyneside Programme is progressing with regeneration projects in all four areas of the borough;

·        Almost £12m has been invested in delivering planned improvement works to maintain homes to the decent homes standard including kitchen and bathroom replacements, roof replacements, redecoration works, fencing replacements, heating replacement works;

·        Almost £9m of improvement works have been delivered including integrated transport improvements including the North Shields Transport Hub which was opened on the 2 September 2023. 

·        Work continues to progress on the resurfacing programme, flood alleviation measures and on major highways improvement schemes such as the Seafront Sustainable Cycle Route, Stephenson Street junction upgrade and the next phase of the Routes to Metro Project; and

·        Council Tax and Business Rates collection remains strong and compares well with national performance, ensuring that the Authority has the resources required to deliver essential services.

 

However, the regular monitoring reports also highlighted the on-going financial challenge.  Without further intervention, there was a current forecast overspend of £9.648m this financial year which, without further improvement, would require some use of strategic reserves.  Whilst this was the intended reason for holding reserves, their usage cannot continue indefinitely.  In response to this, Cabinet continued to focus on a realistic programme of replenishment of reserves over the period of the MTFP.

 

In light of these challenges facing the sector, prioritising service levels and budgets was critical, which needed to focus on the vulnerable and those impacted most by the cost of living crisis.  However, this planning continued to be undertaken with deep levels of uncertainty facing the Authority.  Whilst the 2023/24 finance settlement gave an indication of the 2024/25 funding for some items through a policy statement, it was far from complete and the allocations between councils was not confirmed. 

 

The Autumn Statement would take place on 22 November 2023, which was after the publication of this report.  Whilst that would provide further information which would feed into the budget scrutiny process, the date of the provisional finance settlement (which would give further detail on the allocation of funding to individual councils) was not yet confirmed, but was unlikely to be before mid-December 2023 (it was not released until 19 December last year). As a response to this, the Authority had developed a high-level Financial Strategy which set the overarching principles and considerations for medium-term financial planning within North Tyneside.  The diagram in section 1.5.12 sets out the components of the Strategy and each of the themes was covered in more detail within the MTFP, which was appended to this report.

 

The General Fund Medium-Term Financial Plan was summarised in section 1.6.1 of report and full details were included in the Annex to the report of the approach taken for Budget-setting for 2024/25. 

 

The final 2023/24 settlement included funding allocations for 2023/24 and the policy direction for 2024/25. The MTFP, as set out to Council in February 2023, identified that the Authority, in common with other upper tier local authorities, needed to address a material budget shortfall in 2024/25 and beyond.  However, there remained some uncertainty about the level of funding for 2024/25 and the potential for additional pressures to emerge during the budget setting process.  At the Council meeting in February 2023, the MTFP for 2024/25 to 2026/27 set out a funding gap of £35.110m over the 4-year period, with a gap of £7.575m for 2024/25.  The gap in the February Council report for 2024/25 included the future years impact of the 2023/24 increase in Council Tax (2.99%) and Adult Social Care Precept (2%), which were agreed at that meeting. 

 

The Revenue Budget Outturn for 2022/23 was reported to the Cabinet in June 2023, and represented a net overspend on the cost of services of £6.081m.  The Strategic Reserve was utilised to fund that overspend, reducing the remaining balance to £6.345m.  The September 2023 Performance and Financial Management Report, which was also presented to Cabinet at this meeting, showed that without mitigation and management actions, the forecast pressure to the end of March 2023 was expected to be in the region of £9.648m.

 

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, many of which were outside the control of the Authority, budget monitoring analysis showed that by updating the assumptions included in February 2023, the residual MTFP gap for 2023/24 would have reduced from £7.575m to £2.265m.  This would have been a manageable gap to address in the current budget round. Table 1 summarised the impact of the revised assumptions which gave the starting gap for 2024/25’s budget calculations.

 

As part of the Authority’s revised approach to setting a balanced budget for 2024/25 and a 4-year MTFP for 2024-2028, thirteen project areas had been established to tackle the highest pressures facing the Authority and to explore areas of opportunity to be more efficient or maximise resources.  Since May, the Senior Leadership Team had been working to develop those projects with regular updates being received by members of Cabinet at Lead Member Briefings.  The development of those followed the approach that was initially established with Childrens Social Care, which had been used as a blueprint for project development which form part of Cabinet’s initial Budget proposals.  This approach was also being incorporated into the in-year Performance and Finance reports to Cabinet and OSC&FC, recognising that service activity was driving the financial position of the Authority.

 

Following initial assessments of each project area, the anticipated net impact was an additional pressure of £12.209m increasing the gap for 2024/25.  Full details of all the projects were included within section 6 of the MTFP appended to this report, however table 2 (section 1.6.7) provided an overview of the position by project where there was a financial impact.

 

Taking into account the position after the review of assumptions, summarised in table 1 (section 1.6.5), and the impact of the initial assessments of the projects above, the estimated revised gap for 2024/25 prior to any assumptions regarding additional government grants, collection fund adjustments or increases to Council Tax was £14.474m, as shown in table 3a (section 1.6.8).

 

As the budget plans had developed recently, further consideration had been given to potential changes to government grant funding, in particular funding elements that were influenced by the Consumer Prices Index (CPI).  Initial estimates were that further funding of £4.942m could be received, which would also support the revised gap as described above.  Table 3b (section 1.6.9) showed the impact of the estimated additional funding for 2024/25. 

 

For 2023/24 and 2024/25 the Government announced that the referendum limit for increases to Council Tax would be up to 5%, which would form the basis of the

Government’s assumption for calculating individual councils’ Core Spending

Power.  The MTFP approved by full Council in February 2023 included a 2.99%

general increase in Council Tax and a 2% Adult Social Care Precept for 2023/24 but

did not make any assumptions for future years.  The general move towards raising

income locally places additional burden on those residents not in receipt of Local

Council Tax Support, either as part of the statutory scheme or the additional

support put in place locally.  The National Audit Office had calculated that

between 2010/11 and 2020/21, Council Tax in North Tyneside rose by 15.8% in real

terms (using 2019/20 prices).  Whilst this remained a major concern, the Authority

must reflect the Government's assumptions in its financial planning.

 

Whilst no proposal about Council Tax and/or the Adult Social Care Precept were being made in this report, it was 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 £5.865m of additional funding for next year (made up of £3.513m general Council Tax (2.99%) and £2.352m from the Adult Social Care Precept (2%)). The precise final level of any change in Council Tax would be confirmed in February 2024 following a decision by full Council.

 

The statutory and additional local support that was in place in North Tyneside to assist residents with their Council Tax bills.  In summary, it was proposed to retain the current level of support through both the statutory Local Council Tax Support Scheme, which gives up to 85% discount for eligible working age claimants (eligible pensionable age claimants can claim up to 100% of their bill).  In addition, there was a local scheme where up to £150 per eligible working age claimant was available, at a cost of £1.5m annually.  For a working age couple in a Band A property, this would see their annual bill reduced to £61 per annum (£8 for a single person).  Further detail was included in section 5.6 of the Annex.  Table 4 (section 1.6.13) summarised the revised gap for illustrative purposes taking these factors into consideration, especially recognising that any Council Tax increase proposals would follow in January and February reports to Cabinet and Council.  The revised gap reflected the on-going uncertainty noted earlier in this report, especially around central government funding levels. 

 

The Mayor and Cabinet had already made decisions in previous years which result 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 1.6.14).

 

Work would continue before January 2024 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 (ASC) was hoped to narrow based on the realignment of the Market Sustainability and Fair Cost of Care funding into the ASC Market Sustainability and Improvement Fund.  This would also take into account the latest returns to Government on the business rates position, which would not be known until January 2024.  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 left unchanged.  In the event of the residual gap remaining after the Provisional Settlement updates were incorporated, the Authority would need to consider further usage of reserves or the application of capital receipt flexibilities, as set out elsewhere in this report.

 

In relation to the 2024-2028 General Fund Medium Term Plan estimates, the Authority was prudently planning on the basis that it would receive additional inflationary uplifts in Revenue Support Grants (RSG), Business Rates Top Up grants and additional social care grant in 2024/25.  From 2025/26 it was likely that the Authority would only receive CPI uplifts in RSG, Business Rates and Top Up grants i.e., no increase in core grant funding were included.  This prudent estimate for future years was in line with announcements by the Chancellor of the Exchequer in the March 2023 Budget that across the three years 2025/26 to 2027/28 the public sector would only receive a 1% real terms funding increase with Health, Education and Defence expected to receive additional protection.  This position would be closely monitored as Budget-setting progresses and during the lead in time for publication of the Autumn Statement which was expected on 22 November 2023.

 

As in previous years, the MTFP had been reviewed and assumptions for the next

4-years had been updated to consider the impact of inflation and demand led pressures across all of the Authority’s services.  Full details of the impact of the revised assumptions were included within the Annex to this report.  The summary position was included in table 6 (section 1.6.18).  The revised assumptions had increased the overall funding gap or level of savings required to £46.3m by the end of the current MTFP in 2027/28 (assuming a balanced budget in 2024/25).  However, there continued to be a high level of uncertainty on the 4-year planning horizon.  Due to this as in 2023/24 a simplified approach had been taken at this stage to set out the 4-year MTFP period.  The ongoing uncertainty was continuing to make financial planning extremely challenging and requires the Authority to be flexible and adaptable to the changing financial landscape.  As Budget-setting progresses officers would continue to monitor economic and market updates, and where necessary would apply these to any assumptions currently estimated within the Authority’s MTFP.

 

With regard to the review of General Fund Reserves, the Authority maintained a level of reserves to plan for and manage financial risk.  It was important to remember that reserves can only be used once, and that they were maintained to provide a degree of financial resilience and flexibility for the Borough.

 

Reserves balances had fallen from 2022/23 primarily due to the overspend of £6.081m and the use of the Strategic Reserve to balance the General Fund in that financial year.  The Authority continued to have planned use of earmarked reserves, and this will continue in the current financial year and across the MTPF.  Cabinet will be aware that this unplanned use of reserves meant that the Strategic Reserve balance was now below the £10m minimum as set out in the Reserves and Balances policy.  The MTFP set by full Council last year included plans to replenish the Strategic Reserve to a level above that in the Policy.  However, due to additional pressures identified earlier in this report the initial review undertaken by management set out to defer the replenishment of the Strategic Reserve into 2025/26 and the remainder of the MTFP.  General Fund reserves balances were forecast to fall to £37.349m by the end of 2027/28.  This assumed no utilisation of the Strategic Reserves to underwrite revenue budget pressures over the MTFP. 

 

The Authority bought forward General Fund reserves balances of £59.596m into 2023/24, based on the latest forecast of planned usage, it is anticipated £18.271m would be drawn down in 2023/24 to support service delivery. This would result in a 2024/25 balance bought forward for reserves of £41.325m.  The planned usage did  not incorporate the potential requirement of the strategic reserves to support the revenue budget pressure being forecast of £9.648m for 2023/24 as reported in the Financial Management report elsewhere on this agenda.

 

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 Association of North East Councils (ANEC) areas.  The prudent use of reserves formed a vital part of this financial planning.

 

Financial Planning for the Housing Revenue Account (HRA), as with the General Fund, was driven by the Our North Tyneside Plan vision and priorities.  The HRA would set a budget and updated four-year, MTFP supported by the updated 30-year HRA Business Plan, which would be agreed at the Cabinet meeting on 29 January 2024.

 

The Authority, in line with most Local Authority Registered Providers, followed the Government’s social housing rent policy.  In recent years, the increase had been calculated at the CPI rate, as at September, plus 1%.  This led to a 4.1% rent increase for 2022/23.  However, for 2023/24, due to the cost of living crisis and the high rates of inflation in September 2022, which stood at 10.1%, this would have led to an 11.1% increase.  Following consultation, the Government capped the maximum rent increase for 2023/24 at 7%.  As part of the proposals, the Government also reserved the right to apply the cap for 2024/25.  In response to the level of rent being set, Cabinet would recall that a £3m fund was created to support a range of tenancy sustainment measures over the 3-year period from 2023/24.

 

At September 2023, the CPI rate of inflation was 6.7%, so applying the standard policy would lead to a rent increase of 7.7%.  As with last year, a range of scenarios had initially been modelled within the 30-year HRA Business Plan and outlined in table 7 (section 1.7.6) pending any definitive announcements from Government.  The default position for 2024/25 is based on a 7.7% increase, with scenarios setting out the implications of reduced “caps” from that point in terms of the savings that would be required to balance the plan in each circumstance.

 

The HRA continued to face a range of cost and supply pressures.  Some of the main pressures were: Uncertainty over pay awards, for 2023/24 and future years; The outcome of the Craft Workers pay review; The implications of Grenfell Disaster which culminated in the passing of the Building Safety Act in 2022, placing additional responsibilities on Landlords e.g. ensuring carbon monoxide detectors in all properties, and increased level of electrical inspection; Supply chain difficulties sourcing certain materials and services, which adds to cost pressures and uncertainty; and Increased sub-contractor costs as they face many of the same issues in their supply chains and resourcing plans.

 

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

 

As stated above table 7, this provided some indicative figures of the potential impact of a cap being imposed.  This showed the amount of savings that would be required at each level starting with the balanced plan at 7.7%, and working backwards towards the long-term Government target assumption that annual rent increases would average out at 3%.

 

As can be seen from the above table the implementation of a cap would potentially lead to significant gaps in funding.  If a cap was to be imposed, the Authority would need to find savings within the HRA Business Plan to close the gap.  At that point there a range of options that would had to be explored to help balance the HRA and provide resources to move towards meeting Cabinet and tenants’ ambitions.  These would Involve the following areas:

 

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

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

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

d)   Analysing any Government announcement on rent policy to assess potential impact;

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 meeting Cabinet’s Affordable Housing ambitions;

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;

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 in line with the Authority’s Carbon Net-Zero 2030 Action Plan.

‘h)  The Business Plan also assumes that the results of the service charge review as described in Section 8 of the Annex are fully implemented from 1 April 2024, following an appropriate period of consultation with affected tenants, and that an agreed budget for transitional protection for those tenants is also put in place. 

 

As part of the 2023/24 budget setting process, Cabinet agreed that a review of service charges would be undertaken to inform the 2024/25 budget and ensure that the proposed charges reflected the cost of delivering the relevant services.  For the majority of services, the result of the review was that increasing service charges for 2024/25 in line with the proposed rent increase (7.7%) was considered to be appropriate.  However, there were some specific exceptions to this where additional increases were required in order to meet the costs of service delivery, specifically relating to the North Tyneside Living schemes.  Details of these were set out in section 8.4 of the Annex, including details of the elements that were eligible for benefit support.  For those elements that were to be paid by existing tenants, transitional relief was being put in place to limit increases in 2024/25 to the level of overall rent increase (i.e. 7.7% under current assumptions).

 

The Authority’s capital expenditure plans were captured within the Investment Plan which was developed in accordance with the Capital Investment Strategy. Effective capital investment played an important role in the delivery of the Authority’s strategic objectives.  The Investment Plan captured a range of planned improvements within the Borough, helping to shape the delivery of the Authority’s services as well as undertaking regeneration and placemaking activity and encouraging economic and housing growth.  The existing 2023-2028 Investment Plan totalling £312.34m was approved by full Council on 16 February 2023. The delivery of projects within the plan and progress to date was subject to ongoing review and challenge by Investment Programme Board (IPB) and had been reported to Cabinet as part of the bi-monthly Performance and Financial Management reports.

 

As part of the MTFP process, the existing plan had been reviewed to ensure this remained affordable and sustainable, challenging existing commitments as well as exploring opportunities for additional investment.  At this stage, a schedule of the individual projects included within the draft Investment Plan was attached as Appendix B(ii), with all schemes subject to the Authority’s Gateway process. The overall proposed investment was summarised at table 8 (section 1.8.4).

 

2029 Investment Plan for consideration as part of the Budget-setting process were set out below:

• The implementation and upgrade of the Authority’s Enterprise Resource Planning (ERP) system to replace the current BMS (£4m);
• Investment at the Killingworth depot, providing additional accommodation to facilitate the relocation of the Adult Loan Equipment Service (£2.8m);
• Improvements in the Authority's non-operational portfolio, improving accommodation standards, energy efficiency measures and enhancing its performance (£2.75m);
• Structural improvements works to Royal Quays Marina barrage (£1.65m);
• Investment in additional ICT infrastructure, including the delivery of upgrades to the Wide Area Network (WAN) to enhance security and connectivity (£0.95m);
• A new year 5 (2028/29) has also been added to reflect rolling programme projects such as Asset Planned Maintenance, ICT infrastructure refresh, investment in the Authority’s schools and highways infrastructure.

 

In addition to the above, the Authority had also identified a range of opportunities to utilise the additional flexibility to apply capital receipts to help fund the costs associated with service transformation that would ordinarily be met from revenue resources.  The Authority was considering options to invest in 2024/25 in projects to help deliver ongoing revenue savings and address any residual budget gap for 2024/25 once the Finance Settlement is confirmed.  Further details could be found in the Authority’s proposed Flexible Use of Capital Receipts Strategy in Appendix B(vi).

 

As part of the proposals for the North East Mayoral Combined Authority (NEMCA), a regional submission had been made for parts of the region to become an Investment Zone.  In North Tyneside, this would include parts of the riverside area, including land at the Port of Tyne.  These sites, along with other river locations in South Tyneside and Newcastle, would be known as a Growth Site, which could receive additional Investment Zone funding.  Whilst there were no specific projects included within the draft Investment Plan at present, if the Investment Zone bid was successful, it could result in additional funding being allocated to the borough.

 

School funding was a matter for the Department for Education (DfE), either by direct funding agreements with academy trusts or delegated by local authorities to maintained schools where budget management is 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 2024/25.  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 2024.  The local formula must comply with statutory guidance, but within these confines the final decision on the formula rests with the Authority after consultation with schools and the Schools Forum. Table 9 provided Indicative Dedicated Schools Grant funding allocation 2024/25

 

The Authority’s Dedicated Schools Grant funding (DSG) Management Plan, agreed in advance with parents and carers, children and young people, and partners from across education, health, and care, was submitted in February 2023.  Without further action, the High Needs block cumulative deficit was forecast to be in the region of £19.500m by 2027/28.  The Authority’s submission was successful and the DfE agreed financial support to the Authority of £19.500m over a 5-year period, with the first payment of £7.800m paid at the end of the financial year 2022/23.  In subsequent financial years, subject to compliance with the conditions set in the agreement, the DfE will release the remainder of the £19.500m.

 

North Tyneside Council was on track to reach a positive in year balance on its DSG High Needs Block by the year-end 2027/28.  The Authority’s DSG management plan forecast a 2023/24 year-end pressure of £10.474m.  The outturn position for 2022/23 was healthier than forecast, however, the Authority was in active discussion at that time with its maintained special schools regarding pupil numbers and funding. These discussions were now concluded and reflected in the revised position.

 

The Authority’s current forecast showed that the Authority remained on target to achieve the 2023/24 year-end position detailed within our DSG management plan, with a forecast pressure of £10.473m, ie a small improvement against the plan.  The DfE announced that in June 2023, the Authority would receive in capital funding £4.681m and officers were working on detailed plans for this investment.

 

The Authority remained confident that governance arrangements in place provided the necessary political rigour and oversight of its Lead Members, and support and scrutiny by its Chief Executive and Senior Leadership Team.  The wider SEND partnership remained locked into the deliverables set out in the DSG management plan, incorporated into the partnership’s SEND improvement plan.  The Authority’s Safety Valve communication and engagement plan, and its wider strategic SEND Engagement Strategy, continued to provide a clear basis upon which leaders across the Authority shared information, consulted and co-produced with children and young people, parents and carers, and the wider workforce.

 

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 after the accounts for the financial year 2025/26.  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 meets the ESFA’s requirements to ensure the historic deficit could be supported by funding that was available.

 

The Authority had specific responsibilities under the Equality Act 2010 and Public Sector Equality Duty.  Full Equality Impact Assessments would be undertaken for each of the projects included within the initial Budget proposals in order for Cabinet to consider, before reaching its final decision.  These would also be available for other aspects of budget engagement throughout the engagement process.  An Equality Impact Assessment had also been carried out on the Budget Engagement Strategy. 

 

The Authority was committed to being an organisation that worked better for residents and to ensure that it listened and cared.  This commitment included giving residents and other key stakeholders an opportunity to be involved in the Financial Planning and Budget process.  The Budget Engagement Strategy also ensured targeted activity with specific external and internal stakeholder groups. Full details of the Budget Engagement Strategy were set out at Appendix F to this report.

 

Key aspects of the 2023/24 Financial Planning and Budget process timetable were  set out at Appendix G to this report, highlighting key decision milestones in the process.  The Elected Mayor and Cabinet were responsible for formulating the Authority’s Budget.  The Cabinet Member for Finance and Resources, in close consultation with the Elected Mayor, had been nominated as the lead Cabinet Member for the overarching 2024-2028 Financial Planning and Budget process.  The Director of Resources would be the project sponsor.

 

Cabinet’s initial Budget proposals and next steps were based upon available information and judgements at the time of the writing of this report.  As noted throughout the report, there were several assumptions and judgements built into the figures presented that were outside the control of the Authority and needed to be finalised.  These initial Budget proposals were subject to further review and consultation before they could be confirmed. The information to be assessed and finalised included:

 

·        The overall impact of the Autumn Statement due to be announced on 22 November 2023;

·        The Provisional and Final Local Government Finance Settlement announcements for 2024/25, including capital announcements and specific grants, including the DSG;

·        Police and Crime Commissioner for Northumbria and the Tyne and Wear Fire and Rescue Authority Precepts (due February 2024);

·        Levies, including the North of Tyne element of the Newcastle upon Tyne, North Tyneside, and Northumberland Combined Authority Transport Levy (due February 2024);

·        Tyne and Wear Joint Service Budgets (due January/February 2024); and

·        Consideration of the impact of the economic climate on the residents of the 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 review of these proposals.

 

Cabinet considered the following decision options:  to either approve the recommendations as set out in section 1.2 of the report, or alternatively, to not agree the recommendations and suggest that further / different options are considered by the Senior Leadership Team and be reported back to Cabinet for its further consideration.

 

Resolved that (1) the key principles being adopted in preparing the

Medium-Term Financial Plan, which is the Annex to this report, for the

Authority, subject to an annual review, be agreed;

(2) the performance of the Authority against the Our North Tyneside Plan

outcomes, be noted;

(3) the initial Budget proposals in relation to the 2024/25 General Fund

Revenue Budget (Section 1.6 of the report) and Dedicated Schools Grant

(Section 1.9 of the report), including the assessment in relation to the

current year’s Budget monitoring information, be agreed;

(4) the proposed 2024-2029 Draft Investment Plan (Section 1.8 of the

report), which had been developed in accordance with the Capital

Strategy (Appendix B(v) of the report), including initial prudential indicators

for 2024-2029 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(ii) & B (iii) of the report), be agreed;

(5) all schemes within the 2024-2029 Investment Plan to be kept under

corporate review by the Investment Programme Board, be noted;

(6) the initial proposals in relation to the Treasury Management Statement,

Annual Investment Strategy for 2024/25 and Treasury Management

Practices (Appendix C & D of the report), be agreed;

(7) the formal Reserves and Balances Policy for the Authority, subject to

review at least annually (Appendix H of the report), be noted;

(8) the Provisional Statement by the Chief Finance Officer (Section 11 of the

Annex  to the report), be noted;

(9) the 2024/25 rent policy for housing; the initial Budget proposals in

relation to the 2024-2028 Housing Revenue Account budget, and

associated Business Plan, including an assessment in relation to the

current year’s budget monitoring information (2023/24) (Section 1.7 of the

report), be agreed;

(10) the proposed 7.7% rent increase from April 2024 (subject to any

potential rent “cap” being implemented following further Government

announcements) (Section 1.7 of the report), be noted;

(11) as part of the budget-setting process for 2024/25 as agreed, a review

of services charges had been undertaken which would require consultation

with tenants prior to implementation, full details of which can be found in

(Section 1.7 of the report), be noted;

(12) the initial proposals in relation to garage rents for 2024/25 as per

(Section 1.7 of the report), be noted;

(13) the Governments proposed changes to all housing stock-owning local

authorities in relation to retaining additional capital receipts for new build

schemes, full details of which can be found in Section 8.4.14 of the Annex to

the report, be noted;

(14) 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

2024/25 in line with the school funding arrangements set out in the report

(Section 1.9 of the report); and

(15) 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 its proposed Council Tax level for 2024/25 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 1.10 of the report.)