Revenue Budget 2023-2024 to 2025-2026 and Council Tax 2023-2024
North Lanarkshire Council · 23 February 2023
Back to Council — 23 February 2023 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
North Lanarkshire Council Report Council Does this report require to be approved? ☒ Yes ☐ No Ref; EK/KS Date 23/02/23 Revenue Budget 2023/24 to 2025/26 and Council Tax 2023/24 From Elaine Kemp, Chief Officer (Finance) E-mail KempE@northlan.gov.uk Telephone 07939280601 Executive Summary The purpose of this report is to provide financial information that enables the Council to set its Revenue Budget and Council Tax for 2023/24 and provide a forecast Revenue Budget position for financial years 2024/25 and 2025/26. In line with the framework outlined in the Revenue Resources Budget Strategy, the Council’s Medium Term Financial Plan (MTFP), approved by Policy and Strategy Committee on 29 September 2022, identified an envisaged 3 year budget gap of £74.817 million, with an estimated shortfall of £37.897 million in 2023/24. This forecast has now been updated to reflect the 2023/24 financial settlement contained in the Local Government Finance Settlement Circular (11/2022), and some other changes to planning assumptions, which result in a net reduction in forecast costs of £9.643 million, reducing the 2023/24 budget gap to £28.254 million, as outlined at Appendix 1 and 2. To help manage the gap in 2023/24, action totalling £17.210 million is proposed through a combination of base budget adjustments and use of one-off resources, thus reducing the gap to £11.044 million. As a result of such action the gap for 2024/25 and 2025/26 is now estimated at £30.848 million and £16.090 million, respectively. See appendix 2 for details. Recommendations It is recommended that Council: (1) Acknowledges the key movements on financial planning assumptions in relation to expenditure and resources at section 2 and 3. (2) Recognises the subsequent impact on the financial outlook for 2023/24 to 2025/26, summarised in Appendix 2, which shows a budget gap for 2023/24 of £28.254 million. (3) Confirms the level of Council Tax for 2023/24. (4) Agrees the general fund contingency reserve as advised by the Chief Officer (Finance), outlined in section 5.2. (5) Agrees the continuation of the treatment of volume discount as set out at section 6. The Plan for North Lanarkshire Priority Improve North Lanarkshire's resource base
Page 2
1. Background 1.1. The statutory requirements in relation to budget setting are contained within Section 93 of the Local Government Finance Act 1992. This is reinforced by CIPFA’s guidance which requires that total estimated expenses for the year can be funded by the income estimated from grants, Council Tax and other income. Failure to meet these requirements would result in serious consequences for Council operations and individual members. Section 102 of the Local Government (Scotland) Act 1973 sets out specific processes for the Controller of Audit to report to the Accounts Commission on the failure to set a budget. The Commission can recommend that Scottish Ministers direct the Council to rectify this. 2. Report 2.1. Revenue Expenditure Budget 2023/24 to 2025/26 Appendix 1 highlights the updated revenue budget position for 2023/24, and Appendix 2 summarises the position across the three years. Adjusted 2022/23 Budget 2.2. The starting point for determining the revenue budget for 2023/24 is the 2022/23 revised base budget of £908.119 million. Expenditure Budget 2023/24 2.3. The 2022/23 revised base budget has been adjusted to reflect the planning assumptions detailed in the Medium Term Financial Plan 2023/24 to 2027/28 approved by Policy and Strategy Committee in September 2022. A number of these planning assumptions have also been updated to reflect known changes and additional requirements arising from the Local Government Finance Settlement 2023/24, which are outlined below and summarised in Appendix 1. 2.4. The total expenditure budget for 2023/24 reflects additional net expenditure requirements totalling £61.354 million with the most significant relating to employee and inflationary cost pressures. After accounting for Directed Expenditure and Ring-Fenced Grant movements of £13.330 million, the Council’s revised net forecast expenditure budget for 2023/24 is £982.803 million. This incorporates updates to planning assumptions since the Medium Term Financial Plan. The main updates are as follows; 2.4.1. The 2023/24 expenditure budget reflects the additional recurring cost of £21.394 million for the 2022/23 pay award agreed for single status employees, and the current offer to teachers, at the time of writing. It should be noted that an element of additional funding provided for pay award by the Scottish Government is in respect of all Local Authority employees, including Adult Social Care, which will be given full consideration in discussion with the IJB. In addition, employee cost pressures for 2023/24 are forecast to reduce by £3.500 million to £8.500 million to reflect the reversal of the 1.25% social care levy, by the UK Government. 2.4.2. As indicated above, the Local Government Finance Settlement includes a net increase in ring fenced and directed resources of £13.330 million. This includes a net increase in ring fenced grant funding of £0.471 million, primarily for early years expansion. In addition, further directed resources of £12.859 million have been provided in relation to empty property relief funding (£3.974 million), family wellbeing support (£2.346 million), additional free school meals monies (£1.175 million), a net increase in respect of Adult Health & Social Care (£5.045 million), mainly for the Real Living Wage uplift, and a number of other minor expenditure requirements (£0.318 million). Ambition statement (25) Ensure intelligent use of data and information to support fully evidence based decision making and future planning
Page 3
2.4.3. Members should also be aware that following the revaluation of properties by the Scottish Assessors the cost to the Council for Non-Domestic Rates has increased. However, the non-domestic rates poundage has been frozen at the 2022/23 levels, as part of the Scottish Government budget. Therefore, the budgetary provision for the inflationary uplift in the poundage, will partially offset the increased costs. In addition, responsibility for empty property relief has been devolved to Local Authorities from 2023/24, which subject to review, may provide a future budget benefit, and could help manage the overall rates budgetary position. Any shortfall in 2023/24 will be managed on a one-off basis, with a full review undertaken to determine any recurring budgetary pressures, which will be incorporated into the next update of the Medium Term Financial Plan. 2.4.4. Members are reminded this budget is presented on the basis that the Council approves a 1% increase in Council Tax to ringfence those funds to meet the borrowing costs of the Community Investment programme expenditure. 3. Available Resources 3.1. Resources available to the Council in setting its 2023/24 budget total £954.549 million, as set out below and detailed in Appendix 1. 3.2. The draft 2023/24 Local Government Finance Settlement updated in January 2023, details the level of grant available to the Council for 2023/24. The Scottish Government has indicated that it will work in partnership with local government to implement the budget and the joint priorities in return for the full funding which includes: • Support for the 2022/23 local government pay deal and additional funding for payment of SSSC fees for the Local Government workforce, which will continue to be made on a recurring basis. • Additional funding to support social care and integration, which recognises the recurring commitments on adult social care pay in commissioned services and inflationary uplift on free personal nursing care rates. This is partially offset by the non-recurring interim care money ending. • Confirmation that councils have full flexibility to set the Council Tax rate that is appropriate for their local authority area. 3.3. It is anticipated the level of government grant (Aggregate External Finance) for 2023/24 will be £786.374 million, which includes assumptions on undistributed funding of £9.481 million in respect of Teacher Induction Scheme and Discretionary Housing Payments. 3.4. The Council Tax base budget of £158.049 million is anticipated to increase by 1% or £1.600 million to reflect the commitment to ring fence 1% of Council Tax increases for the Community Investment. In addition, a further £0.800 million is anticipated to be raised through growth in housing stock. 3.5. The Scottish Government has provided capital grant funding of £7.726 million, in lieu of general revenue grant, to support the agreed 2022/23 pay award. Scottish Government has advised this will be baselined in the general revenue grant from 2024/25 onwards. 4. Budget Gap 4.1. Total resources outlined above equate to £954.549 million compared with an estimated expenditure budget for 2023/24 of £982.803 million, which results in a shortfall of £28.254 million, as highlighted in Appendix 1.
Page 4
4.2. However, as indicated in the updated Financial Outlook provided in Appendix 2, base budget adjustments totalling £7.192 million have been identified over the three-year period, with a saving of £6.510 million forecast for 2023/24 and £0.682 million for years 2024/25 and 2025/26. Further details in respect of the base budget adjustments are provided at Appendix 3. There is also an assumed £10.700 million use of one-off resources in 2023/24 to manage the forecast energy burden, due to the real uncertainty in respect of the recurring cost to the Council. Taken together this reduces the budget shortfall in 2023/24 to £11.044 million. 4.3. Appendix 2 contains an update on the Financial Outlook for 2024/25 and 2025/26, highlighting anticipated budgets shortfalls of £30.848 million and £16.090 million respectively, after adjusting for base budget adjustments. Work is ongoing to develop strategies to manage this position and ensure the Council remains financially sustainable. 5. General Fund Reserves 5.1. The Policy and Strategy Committee in January 2020 approved a Reserves Policy which sets out the types of reserves held by the Council, establishes procedures for their governance and outlines the approach to be taken in determining the appropriate reserve levels held by the Council. The policy provides guidelines which ensure reserves are established and managed in a way that safeguards long term financial sustainability and supports good financial management, allowing the Council to balance current obligations, whilst preparing for future commitments and financial risks. 5.2. Within the General Fund Reserve, a Contingency Fund is maintained. This is held for unexpected events or emergencies. Based on previous assessments of risk facing the Council, the level of contingency has been set at £8.000 million over recent years. Given the Council’s track record of effective financial management it is recommended that the sum of £8.000 million remains appropriate for 2023/24. 5.3. The Council also maintains a Change Management Fund to support future budget pressures, one-off costs of approved savings, and transformation initiatives, whilst ensuring the Council has a strategic plan that is prudent, affordable and sustainable in the medium to longer term. 5.4. Based on the latest financial projections it is anticipated that the Change Management Fund balance as at 1 April 2023 will be £27.800 million, as detailed in the forecast at Appendix 4. The forecast also reflects estimated fund requirements for approved savings and one-off costs to support future budgets savings to 2027/28. 5.5. Given the Council is looking over the medium-term timeframe both in relation to anticipated challenging future budget positions and future organisational ambitions, it is essential that the Council takes a prudent approach to retaining the remaining balances for the period ahead. The overall reserves position will continue to be updated as part of the regular budget monitoring report and will be subject to a full review as part of the year end closedown process. 6. Housing Revenue Account 6.1. As with previous years Members are asked to confirm the continued treatment of including the volume discount in the General Fund budget in relation to the Council’s partnership with Mears Scotland LLP.
Page 5
7. Treasury Management Strategy and Prudential Indicators 7.1. The Treasury Management Strategy outlines the Prudential and Treasury Indicators that allow the Council to demonstrate that investment plans are managed within a sound financial environment. These indicators are endorsed by Finance and Resources Committee and remitted to Full Council for approval to meet the full requirement of the Prudential Code. 8. Areas of Risk and Uncertainty 8.1. As always, in preparing the Revenue Budget, estimates have been made that contain an element of risk and uncertainty. It should be noted that forecasts of pay and non-pay inflation adds significant additional risks and uncertainties to this budget. However, it is currently not possible to forecast the financial impact of such risks with any degree of certainty. Therefore, the financial impact of inflation remains under continuous review. It is envisaged that any unbudgeted pressures arising will be managed on a one-off basis from unallocated reserves, with any recurring impact addressed in future Medium Term Financial Plan, when there is greater certainty of impact. 8.2. The grant settlement received by the Council may be subject to change as the Finance Budget Bill progresses through Parliament. In the event that further undirected funds are received as a result of this process, they will be held in reserves to mitigate against these risks and to support future budget pressures. 9. Measures of success 9.1. Ensuring that the Council sets a balanced budget for 2023/24 10. Supporting documents Appendix 1 North Lanarkshire Council Revenue Budget 2023/24 Appendix 2 Updated Financial Outlook Appendix 3 Base Budget Adjustments Appendix 4 Change Management Fund Forecast Elaine Kemp, Chief Officer (Finance)
Page 6
11. Impacts ( http://connect/report-template-guidance ) 11.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality-and-fairer- scotland-duty-impact-assessments Yes ☐ No ☐ 11.2 Financial impact Does the report contain any financial impacts? Yes ☒ No ☐ If Yes, have all relevant financial impacts have been discussed and agreed with Financial Solutions? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? The financial impacts are detailed in the report. 11.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People and Organisational Development? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 11.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic Solutions? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 11.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐ If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 11.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒
Page 7
If Yes, please provide a brief summary of the impact? Where the impact identifies a requirement for technology, has an assessment been carried out (or scheduled) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 11.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 11.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 11.9 Risk impact Is there a risk impact? Yes ☐ No ☒ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed? 11.10 Armed Forces Covenant Duty Does the report require to take due regard of the Armed Forces Covenant Duty (i.e. does it relate to healthcare, housing, or education services for in-Service or ex- Service personnel, or their families, or widow(er)s)? Yes ☐ No ☒ If Yes, please provide a brief summary of the provision which has been made to ensure there has been appropriate consideration of the particular needs of the Armed Forces community to make sure that they do not face disadvantage compared to other citizens in the provision of public services.
Page 8
Appendix 1 North Lanarkshire Council Revenue Budget 2023/24 £m £m 2022/23 Adjusted Base Budget 908.119 Additional Net Expenditure Requirements Employee Costs - 22/23 Pay Award 21.394 Net Employee Costs - 23/24 8.500 Contract Inflation 11.600 Energy 11.180 Strategic Priorities 2.290 Other Net Expenditure 6.390 61.354 Additional Net Directed Expenditure and Ring Fenced Grants Early Years & Childcare Expansion & Other Ring Fenced 0.471 Empty Property Relief 3.974 Free School Meals 1.175 Adult Health & Social Care 5.045 Family Wellbeing Support 2.346 Other Net Directed Spend 0.318 13.330 Expenditure Budget 2023/24 982.803 Available Resources: Anticipated Aggregate External Finance 786.374 Council Tax Base Budget 158.049 Council Tax Increase for CIF (1%) 1.600 Council Tax Base Growth 0.800 946.823 Capital Grant Flexibilty in Lieu of Pay Award Funding 7.726 2023/24 Available Resources 954.549 Recurring Budget Shortfall/ (Excess) 28.254 Identified Action Base Budget Adjustments (6.510) Use of One Off Resources (10.700) (17.210) Revised Budget Shortfall/ (Excess) 11.044 Revised Estimated Recurring Budget Shortfall 2024/25 30.848 2025/26 16.090
Page 9
Appendix 2 2023/24 £m 2024/25 £m 2025/26 £m Total £m Budget Shortfall MTFP 37.897 20.620 16.300 74.817 Reversal of 1.25% Social Care Levy (3.500) (3.500) Increase in General Revenue Grant (6.143) (6.143) Revised Budget Gap 28.254 20.620 16.300 65.174 Action Identified Base Budget Adjustments 6.510 0.472 0.210 7.192 Use of Balances - energy costs 10.700 (10.700) 0.000 Revised Shortfall / (Excess Resource) 11.044 30.848 16.090 57.982 Updated Financial Outlook
Page 10
Appendix 3 Base Budget Adjustments 2023/24 2024/25 2025/26 Total £m £m £m £m Removal of residual transitional rates relief budget 0.127 0.127 Reduction in non staffing education HQ budgets 0.181 0.181 Reduction in children's services HQ employee cost budgets 0.069 0.117 0.186 Deletion of vacant posts following the change to the delivery model for inspections & maintenance of playgrounds 0.061 0.061 Reduction in supplies & services / employee cost budgets in water management/ bridge & transportation engineering 0.075 0.039 0.114 Income generation in Countryside Ranger service 0.022 0.022 Increased charging for services and reduction in Greenspace for Communities budget 0.031 0.031 Increase capital recharges for property service provided in generating capital receipts 0.050 0.050 Asset rationalisation savings 0.117 0.082 0.173 0.372 Review of procurement and management support structure 0.059 0.059 Review of staffing resource on completion of the Enterprise Project 0.037 0.037 Reduction in Facility Support Services budgets within management and administration 0.044 0.044 Increase recharges to capital for forward planning costs 0.052 0.052 Review of City Deal budgets including increased recharging to capital 0.077 0.077 Review of Planning staffing resources & increased income generation. 0.104 0.104 Maximise charging other non Council funds for services provided 0.050 0.050 Remove budget to promote tourism & inward investment in North Lanarkshire 0.060 0.060 Reduce costs of lighting within stairs and closes 0.032 0.032 Review resource requirement within Enterprise and Communities strategic resourcing / business intelligence/ business development 0.068 0.068 Household waste collection (exc. special uplifts) re-routing efficiency saving 0.392 0.392 Household waste collection (exc. special uplifts) - income generation for glass, metal, plastic 0.580 0.580 Reduction in Environmental Health resources 0.041 0.041 Inflationary uplift in Private Sector landlord registration fees 0.050 0.050 Increased income generation in Building Standards fees 0.150 0.150 Fiscal Flexibilities; Accounting for Service Concessions 4.000 0.000 4.000 Corporate management structure changes 0.127 0.125 0.252 6.510 0.472 0.210 7.192
Page 11
Appendix 4 2023/24 2024/25 2025/26 2026/27 2027/28 £m £m £m £m £m Opening Balance Projected Balance at P9 27.800 22.400 12.400 8.400 4.400 Less: Known Commitments Revised One off Costs of Approved Savings (0.900) 0.000 0.000 0.000 0.000 Less: Estimated Future Commitments Indicative One off Costs of Future Savings (4.500) (10.000) (4.000) (4.000) (4.400) Forecast Closing Balance 22.400 12.400 8.400 4.400 (0.000) Change Management Fund Forecast