Strategic Planning Update and 2026/27 to 2028/29 General Fund Revenue Budget
Perth and Kinross Council · 26 February 2025
Back to Perth and Kinross Council — 26 February 2025 and its agenda
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Our vision is a Perth and Kinross where everyone can live life well, free from poverty and inequality ___________________________________________________________________ Committee or Board: Perth and Kinross Council Date of Meeting: 26 February 2025 Report Title: Strategic Planning Update and 2026/27 to 2028/29 General Fund Revenue Budget Report Number: 25/36 Report Author: Scott Walker, Chief Finance Officer Organisational Lead: Scott Walker, Chief Finance Officer ___________________________________________________________________ 1. Purpose 1.1 This report provides Council with an update on the delivery of its ongoing strategic transformation and change programme and alignment with the Medium Term Financial Plan approved by Council in December 2024. Thereafter the report presents the Council with Provisional Revenue Budgets for 2025/26, 2026/27 and 2027/28. These budgets include a three year Council Tax Strategy which seeks to allow the Council to continue its commitment to achieving its Vision and Corporate Priorities. Focusing on, tackling poverty and inequality by making decisions which see resources directed to those in greatest need and the protection of services which deliver for these individuals, families and communities. 2. Recommendations 2.1 It is recommended that Council: A. Approves the 2025/26, 2026/27 and 2027/28 Provisional Revenue Budgets as set out in Appendix B – see paragraph 6.39. B. Agrees a Council Tax collection rate of 98.25% in 2025/26, 2026/27 and 2027/28 – see paragraph 6.45. C. Approves the Council Tax bases set out in Table 8 - see paragraph 6.48.
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D. Approves Band D Council Tax levels (see paragraph 6.52) of: –. 2025/26 – £1,544.05 (final) 2026/27 – £1.698.45 (indicative) 2027/28 – £1.800.35 (indicative) E. Approves a contribution of £106.133 million to Perth and Kinross Integration Joint Board in the 2025/26 Provisional Revenue Budget – see paragraph 6.67. F. Maintains a prudent approach to the application of Reserves, in line with the Council’s Financial Principles, and earmarks the General Fund balances of £43.174 million identified in Appendix G – see paragraph 7.11. G. Approves that uncommitted Reserves are maintained at between 2% and 4% of the 2025/26 Revenue Budget which equates to £9.985 million to £19.970 million – see paragraph 7.18. 3. Structure of the Report 3.1 This report is structured over the following sections: 4. Background and Context 5. Scottish Government Budget 6. 2025/26, 2026/27 and 2027/28 Provisional Revenue Budgets 7. Reserves Strategy 8. Risk Assessment 9. Conclusions 10. Impact Value Assessment 11. Appendices 4. Background and Context 4.1 The Council first approved the 2025/26 Provisional Revenue Budget on 1 March 2023 as part of its three-year budget plan (Report No.23/72 refers). 4.2 On 28 February 2024, the Council approved an updated 2025/26 Provisional Revenue Budget and, for the first time, the 2026/27 Provisional Revenue Budget (Report No. 24/63 refers). These are the basis for the updated 2025/26 and 2026/27 Provisional Revenue Budgets, and for the 2027/28 Provisional Revenue Budget that is being considered by Council at this meeting.
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4.3 The starting point for this year’s strategic planning update and budget process is the significant service demand pressures which the Council continues to face in many areas, most notably in social care services. While there is an increase in Scottish Government funding, there are also several obligations aligned to this. In addition, uncertainties around the wider economy of the UK, including an overall lack of growth, continuing pressures from inflation levels and changes in Employer National Insurance contributions, mean there is limited ability to use this additional funding to focus on local needs. 4.4 Those needs include the continued high numbers of people requiring more and more complex support for older people’s social care, adults with a learning disability, and young people with additional support needs. Additionally, we continue to see over 27.000 people living in poverty across Perth and Kinross, almost 6,000 of them children, with particular challenges for rural communities and the services required to support them. These changes in the profile of our residents and the complexities of individual needs require us to think differently about how we deliver suitable services and as a result these are all areas in which programmes of service redesign and transformation are underway. This Council has set out a clear vision and priorities, which seek to focus on those in greatest need and to transform our own organisation to best meet the needs of these individuals, groups and communities. Transformation and change 4.5 Beyond the measures focused on protecting frontline services for those in greatest need, the updated 2025/26 Provisional Revenue Budget also seeks to build on the significant transformation programme which has been underway in the last two years. 4.6 We have seen our own organisation go through significant change, both culturally and structurally, while delivering over £11 million to date in savings (actual and projected) through programmes of consolidation, leadership reviews, process improvements and cost reductions (see Table 1). The transformation and change programme, initially approved by Council in June 2022 (Report No. 22/142 refers) continues to be developed and delivered alongside changes to how we operate and engage with our communities. The focus is on improving both our operating efficiency and, more importantly, aligning our available resources to where there is greatest need and working towards achieving the Council’s vision of a Perth and Kinross where everyone can live life well, free from poverty and inequality. 4.7 A summary of the savings identified to date is set out in Table 1 (both actual and projected) which will increase as the Council continues to transform services. The most recent progress report was provided to the Finance and Resources Committee on 18 September 2024 (Report No. 24/262 refers). A full update will follow in April 2025 to the Finance and Resources Committee.
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Table 1: Transformation and change savings to date Transformation and change area Savings Office Estate £2.0m Tayside Contracts £1.1m Leadership Review £1.5m Consolidation £2.0m Procurement £1.6m Health and Social Care Partnership £3.0m Total £11.2m 4.8 A full breakdown of phase two programmes and projects with a short summary of recent progress is set out in Appendix A. This includes work carried forward from phase one, such as finance and property redesign, as well as new projects like digital transformation and zero waste. Officers will ensure strategic alignment and collaboration with partners as phase two projects progress. This will include NHS Tayside in future discussions about support for Health and Social Care transformation. Elected members will be kept informed through biannual reports to the Finance and Resources Committee as well as informally at briefing sessions, Leaders’ meetings and Conveners’ groups. 4.9 To support the delivery of digital transformation at a pace which capitalises on the development of new technologies, this draft budget includes a proposed investment of £750,000 by 2026/27 for digital innovation, and in particular artificial intelligence (AI). This investment will support the development and implementation of AI tools to streamline operations, enhance service delivery, and create efficiencies across various teams and service areas. 4.10 By investing in this technology, the Council is ensuring that its AI tools are safe and appropriate while also providing opportunities for its staff to upskill. This initiative places the Council’s people at the heart of the transformation, enabling them to focus on where they can add the most value in their roles. Additionally, the AI strategic programme will allow the redesign of services, making them more accessible, efficient, and capable of delivering better outcomes for citizens, businesses, and partners. 4.11 A failure to support investment in AI may compromise the Council’s ongoing transformation activities, challenge further organisational savings opportunities and ultimately impact on how we best deliver services for our local communities. 4.12 Core to this vision is recognising that the Council cannot continue to deliver in the same ways that we have in the past, and that our communities are often best placed to identify and deliver local solutions. This approach recognises that one size does not fit all and that the Council’s most effective role may be in facilitating change and empowering communities. Over recent years, we have increased the opportunities for communities to receive and direct local funding through Local Action Partnerships and Community Investment Fund money.
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We’ve worked with communities on asset transfer opportunities, as well as supporting and funding community transport and developing models of local service delivery and management. These continue to be at the heart of how we seek to work with communities to allow them to shape and where possible, deliver, manage and own local services and resources. 4.13 The Council’s Medium Term Financial Plan (MTFP) approved in December 2024 (Report No. 24/350 refers) aligns clearly with this approach. The MTFP set out a longer-term strategy for addressing the financial challenges the Council faces, while protecting key public services and the Council’s longer- term planning ambitions. This financial strategy was based on a new Council Tax Strategy which is reflected throughout the report. 4.14 By agreeing the Council Tax Strategy as a planning assumption, the Council has avoided the requirement for abortive work to consider and propose budget cuts that would not be consistent with the agreed Corporate Plan priorities. It also reduced the anxiety for key stakeholders including service users, customers, suppliers and staff that has arisen in previous years. The draft budget for 2025/26 and the indicative budgets for the following two years, do not include any additional cuts to public sector jobs, demonstrating commitment to our own workforce and a desire to maintain levels of support to communities. 5. Scottish Government Budget 5.1 The Scottish Government Budget 2025/26 was published on 4 December 2024 and followed by Local Government Finance Circular 10/2024 on 12 December. Local Government Finance Circular 10/2024 5.2 Local Government Finance Circular 10/2024 includes the provisional financial settlement for 2025/26 at an individual Council level. The information provided in December 2024 only related to 2025/26. 5.3 The Circular provides details of the provisional total Revenue and Capital funding allocations for 2025/26, as well as the latest information on funding redeterminations for 2024/25. The Circular also provides details on a range of business rates measures, including the 2025/26 Non-Domestic Rates poundage. 5.4 The provisional total funding allocations form the basis for the annual consultation between the Scottish Government and COSLA ahead of the Local Government Finance (Scotland) Order 2024 being presented to the Scottish Parliament. This is currently scheduled for 25 February 2025.
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5.5 The Circular sets out a national funding package and includes: a further £524.9 million of funding has now been baselined as General Revenue Grant. additional General Revenue Grant of £289 million to support local priorities an additional £15 million to support the expansion of Free School Meals £125 million for adult social care workers to deliver the Living Wage in commissioned services £10 million to support provision of Free Personal and Nursing care an additional £25.7 million to improve pay for early learning and childcare workers an additional £41 million investment to maintain or restore teacher numbers to 2023 levels an additional £28 million for additional support for learning £33 million to support the development of people working in children’s social work £40 million to tackle the climate emergency an additional £10 million to improve play parks for children 5.6 As has been the case in previous years, Finance Circular 10/2024 also contained information on revenue funding which has still to be distributed. 5.7 Based on Finance Circular 10/2024, the total Revenue funding being made available by the Scottish Government to Perth and Kinross Council in 2024/25 is £337.738 million (see Table 2 below). Table 2: Scottish Government Grant Funding – Perth and Kinross Council 2025/26 2024/25 Movement £m £m £m General Revenue Funding (includes uplift re teacher numbers) 304.896 269.418 Non-Domestic Rates 63.537 64.514 Ring-Fenced Grants 3.801* 3.806 TOTAL REVENUE FUNDING 372.234 337.738 34.496 Source: Finance Circular 10/2024 – 12 December 2024 *includes £1.834m not yet distributed for Criminal Justice Finance Circular 8/2023 – 21 December 2023 5.8 The 2025/26 Scottish Government provisional funding allocation of £372.234 million represents a £34.496 million increase in absolute cash terms from the allocation for 2024/25 (or 10.2%). 5.9 However, the 2025/26 provisional funding allocation includes £27.036 million where there is an expectation or requirement for the Council to apply funding for a stated purpose (most notably 2024/25 pay awards and social care (living wage)).
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5.10 Therefore, on a like for like basis, the provisional Scottish Government funding allocation for 2025/26, represents a £7.460 million cash increase (or 2.2%) over the equivalent position for 2024/25. 5.11 Table 3 summarises the movements in the total funding package from the Scottish Government to facilitate a comparison of the 2025/26 provisional allocation with 2024/25 on a comparable basis. Table 3: Cash movements from 2024/25 and 2025/26 (on a comparable basis) £m 2024/25 – Finance Circular 8/2023 337.738 2025/26 – Finance Circular 10/2024 372.234 Year on year cash increase in funding 34.496 Year on year % increase in cash funding +10.2% Less funding directed to service delivery/commitments (27.036) £ cash increase (on a comparable basis) 7.460 % cash increase 2.2% 5.12 The Scottish Government has still to allocate some funding to Councils including the teachers’ induction scheme, discretionary housing payments and criminal justice social work. Once these allocations are known, the Finance and Resources Committee will be asked to approve updates to the 2025/26 Revenue Budget. Implications for the 2024/25 Capital Budget 5.13 Finance Circular 10/2024 also includes provisional Capital Grant allocations for 2025/26. The impact of these allocations is included within the Strategic Investment and Capital Budget 2025/26 – 2030/31(Report No. 25/37 refers) which is on the agenda for this Council meeting. Non-Domestic Rates 5.14 Finance Circular 10/2024 also includes the Non-Domestic Basic Rate poundage for 2025/26 of 49.8 pence, no change from 2024/25. Two additional rates are levied on properties with rateable values over £51,000 (55.4 pence) and £100,000 (56.8 pence) respectively.
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6. 2025/26, 2026/27 and 2027/28 Provisional Revenue Budgets Council Tax Strategy - Background 6.1 In approving the latest Medium Term Financial Plan, the Council endorsed a three year Council Tax strategy based on annual Council Tax increases of 10% in 2025/26 which has been built into the 2025/26 planning assumptions, and thereafter, indicative increases of 10% in 2026/27 and 6% in 2027/28. 6.2 The Council also agreed to earmark a further 0.25% of Council Tax income each and every year to support the Capital Budget. This, along with the 1% agreed in February 2024, applies 1.25% of Council Tax income, each and every year to supporting the delivery of the Capital Budget. 6.3 The Council has previously approved the application of the Service Concession Scheme which included the application of £20 million of Reserves. This meant the application of Reserves over five years, between 2023/24 and 2027/28, with a gap of £4 million emerging in 2028/29. 6.4 Should the Council Tax Strategy be endorsed, this will allow a managed reduction in the reliance on Reserves, improving the financial sustainability of the Council. The 2025/26, 2026/27 and 2027/28 Provisional Revenue Budget includes a proposal to apply £1 million per year, on a recurring basis, to offset the contribution from Reserves. This proposal releases £6 million of non-recurring Reserves which will be applied as follows: Anti-Poverty Earmarked Reserve - £2 million Transformation (including workforce management) - £2 million Insurance Fund - £2 million 6.5 It is for elected members to confirm the final 2025/26 Council Tax level and indicative 2026/27 and 2027/28 Council Tax levels at today’s budget meeting. However, in approving the Council Tax strategy in December, the Council provided a direction of travel in terms of its commitment to and the amount of funding that could be available to protect vital public services for those in greatest need and delivery of the Council priorities. Council Tax Strategy - Protecting services for those in the greatest need 6.6 The Council Tax Strategy agreed in the MTFP has also influenced how the Council’s Executive and Strategic Leadership Team has approached this year’s budget process. Following on from the direction of travel approved by Council in December 2024, officers have aligned spending plans to the Council’s Corporate priorities. Having considered the unrestricted elements of the additional funding received from the Scottish Government settlement, and the potential income from the Council Tax Strategy, budget proposals are focussed on realigning resources to frontline services where there is evidence of greatest need.
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As a result, officers have reviewed savings which were previously agreed in the 2025/26 and 2026/27 Provisional Revenue Budgets which are contrary to those goals. In particular reductions in Education and Learning and Children, Families and Justice budgets. 6.7 Social Care is an area of service delivery that is under significant pressure. There is increasing demand from an ageing population with more complex needs and an extensive evidence base of an increased need for care and support across all adult care groups. The updated 2025/26 Provisional Revenue Budget includes additional funding of £6.7 million designed to meet increased need and sustain vital care and support services for vulnerable adults. This is a net pressure. The Integration Joint Board (IJB) will be asked to consider savings of £4.8 million over 3 years as part of its financial strategy and budget setting for 2025/26 when they meet in March. 6.8 In agreeing the 2025/26 Provisional Revenue Budget in February 2024, the Council agreed £4.359 million of reductions in Education and Learning and £464,000 in Children, Families and Justice. 6.9 Since then, the requirement to maintain teacher numbers at 2023 levels has been confirmed. This means £2.18 million of the reduction identified for Education and Learning is no longer deliverable. 6.10 Whilst a saving of £50,000 has already been achieved against the £464,000 in Children, Families and Young People, officers have assessed that any further reduction would have a direct and negative impact on the most vulnerable children, young people and families. Cuts to early intervention provision would be required to meet the full savings target, leading to statutory crisis intervention, which may result in costing the Council more in the short, medium and long term. It is therefore recommended that the remaining £414,000 should be reinstated. 6.11 Almost 6,000 children in Perth and Kinross are living in relative poverty. For those households’ poverty creates an additional challenge which impacts on education and social care need. The Council’s continued focus on working across our teams and with partners in the Anti-Poverty Taskforce to tackle the impact and causes of poverty in Perth and Kinross is delivered through the Tackling Poverty Strategy endorsed by Council in October 2024 (Report No. 24/299 refers). As a result of the approved Council Tax strategy (see section 6.1), it is proposed that £2 million is added to the Anti-Poverty Earmarked Reserve to allow the Council to invest in initiatives to tackle this important issue. 6.12 Together these four areas represent a commitment to protecting services for the members of our communities in the greatest need. However, we recognise that there are related issues which can, if prioritised for investment, help reduce future need. That is why, going forward, if possible, the Council should consider committing additional resources to supporting resilient communities and growing a greener economy to attract investment and create job opportunities for residents.
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Council Tax Strategy Impact 6.13 In summary, confirmation of the Council Tax increases included within Council Tax Strategy will allow: Funding of £6.7 million to protect social care services Maintaining almost £2.2 million of teaching capacity Protecting over £400,000 of services for children and families at risk An injection of £2 million into the anti-poverty earmarked reserve Investment of £750,000 in technology/ artificial intelligence to transform and redesign services Capacity to reduce the reliance on non-recurring Reserves, and therefore improving financial sustainability Reallocation of £4 million of Reserves to Transformation and Insurance Process for Updating the 2025/26, 2026/27 and 2027/28 Provisional Revenue Budgets 6.14 The Council initially approved the 2025/26 Provisional Revenue Budgets on 1 March 2023, and updated this on 28 February 2024 while also agreeing the 2026/27 Provisional Revenue Budget (Report Nos 23/72 and 24/63 refer). In doing so, the Council approved expenditure pressures and budget reductions which are set out in Table 4 below. Table 4: Council Decisions 1 March 2023 and 28 February 2024 2025/26 2026/27 Total Expenditure Pressures £4.568m £2.299m £6.867m Budget Reductions £(7.700)m £8.328m £(16.028)m 6.15 Following the decisions taken on 1 March 2023 and 28 February 2024, the Council had balanced revenue budgets. This is the starting point for updating the 2025/26 and 2026/27 Provisional Revenue Budgets and setting the 2027/28 Provisional Revenue Budget for the first time. 6.16 Adjustments to the 2025/26, 2026/27 and 2027/28 Provisional Revenue Budgets are included in the Executive Summaries set out in detail in Appendix C. 6.17 The Executive Summaries include an assessment of the potential impact of budget reductions against the following criteria: Fairness – including the potential socio-economic impact on vulnerable individuals and groups. Workforce – including information on numbers of employees affected, vacancies, staff turnover and fixed term contracts.
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Customers – including information on the effect on all customers /stakeholders (both external and internal). Equalities/Diversity – ensuring that any statutory equalities issues are considered. Outcome and Performance – identifying any significant impact on the Local Outcomes Improvement Plan and/or Service Business Management and Improvement Plans. Climate Change – including positive and negative impact 6.18 The potential workforce implications identified within the Executive Summaries include vacant posts and will be influenced by turnover. The Council’s positive and proactive approach to workforce management is designed to mitigate the impact on its people, including investment in skills for the future, retraining, support to take on new job roles, career coaching and building resilience. 6.19 Equality and Fairness Impact Assessments for individual expenditure pressures and reductions were prepared which facilitated the preparation of a cumulative impact assessment. 6.20 Within Appendix C, there are several adjustments, beyond those that are contractual or inflationary that merit further commentary. 6.21 The Council has also recently been notified that it should expect to receive £4.975 million in 2025/26 from the Packaging Extended Producer Responsibility Scheme (pEPR). This is a fee that some organisations and businesses will have to pay in respect of the packaging they supply to or import into the UK market. The income will go directly to local authorities and is meant to cover the net cost of collecting, managing, recycling and disposing of household packaging waste. 6.22 The 2025/26 Provisional Revenue Budget has been constructed on the basis that the funding will be applied as set out in Table 5. Table 5: Application of Packaging Extended Producer Responsibility Scheme Funding £m Comments Estimated Level of Funding 4.975 Utilisation of Funding Existing pressures Earmarked Reserve 1.167 1.008 Contribution to known pressure for loan charges Earmarked in Reserves to fund investment in waste/ recycling initiatives
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6.23 Work is also ongoing to further demonstrate the level of investment in waste/ recycling services by the Council in previous years that may count towards this funding. 6.24 The balance of £2.8 million will be retained as a contingency, pending confirmation of the funding likely to be received towards increased employers’ national insurance contributions. 6.25 Furthermore, as described in section 6, a direct benefit of the Council Tax Strategy is that £6 million of non-recurring resources becomes available from 2025/26. The Reserves Strategy set out in Section 7, assumes that these non-recurring resources are applied to support Anti-Poverty Measures, Transformation and the Insurance Fund (£2 million each). 6.26 The Executive Summaries set out in Appendix C have been subject to scrutiny by Elected Member Budget Review Groups, which commenced in December 2024. 6.27 The detailed analysis of these expenditure pressures and reduction proposals are set out in Appendix C. Total updated expenditure pressures of £22.831 million and total budget reductions of £5.881 million, are summarised in Table 6. Table 6: Updated Expenditure Pressures and Budget Reductions 2025/26 £m 2026/27 £m 2027/28 £m Total £m Expenditure Pressures 15.707 4.535 2.589 22.831 Budget Reductions (5.397) (0.133) (0.351) (5.881) 6.28 In setting the 2026/27 Provisional Revenue Budget in February 2024, a Contingency Budget of £2.384 million remained unallocated. The updated 2026/27 Provisional Revenue Budget assumes that this is applied in full to support the delivery of Council services and is reflected in Table 7 below. 6.29 The Council Tax Strategy agreed on 4 December 2024 included indicative Council Tax increases of 10%, 10% and 6% in 2025/26, 2026/27 and 2027/28 respectively. This generates significant income of £5.220 million in 2025/26 and a further £5.873 million and £6.686 million in 2026/27 and 2027/28 respectively which is set out in Section 6, to support the delivery of Council objectives. The additional income from this decision is set out in Table 7 below. 6.30 This strategy brings us back to levels which would have been realised had we had the opportunity to increase annual Council Tax at a modest 3% rate over recent years.
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6.31 We understand that any increase in Council Tax will have an impact on residents. However, this strategy is based on a principle that increases are crucial to ensure that we can continue to provide vital services targeted to those in greatest need. Our Welfare Rights and Local Taxes Teams will continue to support residents who are in financial difficulties, and this support will be promoted as part of public messaging on the final budget decisions made today. 6.32 On 8 February 2023, the Council approved a change in accounting policy in relation to Service Concession arrangements (Report No. 23/43 refers). This included a proposal to apply £20 million over five years (£4 million per year on a non-recurring basis) from 2023/24 through to 2027/28 to support Council services. All things being equal this would result in a £4 million gap in the 2028/29 Revenue Budget. 6.33 The Council Tax Strategy provides capacity to reduce reliance on the Service Concession scheme with a reduction of £1 million each year through to 2027/28. This means that, all things being equal, the recurring funding gap that requires to be addressed in 2028/29 is £1 million which improves the financial sustainability of the Council and reduces the size of the opening deficit in 2028/29. 6.34 Finally, this is the first time the Council has been asked to set the 2027/28 Provisional Revenue Budget. Therefore, in line with the Medium Term Financial Plan assumptions, an expenditure pressure of £8 million or 3% has been included in the 2027/28 Provisional Revenue Budget for the cost of that years pay award. This is factored into the summary of financial capacity/ gap set out in Table 7. Table 7: Summary of Financial Capacity/ (Gap) 2025/26 £m 2026/27 £m 2027/28 £m Additional Funding – see Table 3 (7.460) - - Executive Summaries – Appendix C 10.310 4.402 2.238 Contingency Budget – paragraph 6.28 - (2.384) - Council Tax Strategy – paragraph 6.29 (5.220) (5.873) (6.686) Service Concession – paragraph 6.32 1.000 1.000 1.000 2027/28 Pay Award – paragraph 6.34 - - 8.000 Financial Capacity/ (Gap) (1.370) (2.855) 4.552 6.35 Across all three financial years, Table 7 sets out a financial gap of £327,000 which will require to be addressed over the medium term.
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6.36 Elected Members are reminded that the position summarised in Table 7, is based upon the assumption that all expenditure pressures and all reductions within the Executive Summaries attached as Appendix C, and those in previous years are approved. In addition, it is based on the Council Tax Strategy approved by Council on 4 December 2024. Furthermore, this position is subject to the current known funding available from Government. 6.37 The 2025/26, 2026/27 and 2027/28 Provisional Revenue Budgets have been prepared based upon the information currently available, both in terms of financial resources and anticipated service delivery pressures. The analysis reflects the judgement of Council officers, a focus on Council priorities and financial principles, however, there is a significant risk that these assumptions may require to be revised as part of the ongoing monitoring of Council expenditure and income. 6.38 Finally, the Council is recognised by external auditors for its prudent approach to financial management. Given the level of uncertainty over the short to medium term in relation to additional expenditure, reduced income, the previously approved use of Reserves, and the unknown impact of the cost of living on local communities and the local economy, Council is advised to adopt a cautious and prudent approach towards the application of Reserves. Council has already agreed the principle of not funding recurring activity from general fund Reserves. 6.39 ACTION: The Council is asked to approve the 2025/26, 2026/27 and 2027/28 Provisional Revenue Budgets as set out in Appendix B – RECOMMENDATION A. 6.40 The Council is also advised that there may be delays implementing some additional expenditure proposals, to allow lead in arrangements to be established. This may result in some activity slipping into future financial years. Any additional projects introduced through the Revenue Budget Motion/ Amendments, must reflect the Council’s priorities and approved financial principles, including a focus on need rather than responding to demand and be based on evidence and data. Delivery of new proposals may also require a commensurate increase in staffing capacity which may delay implementation as appropriately skilled officers are recruited. Council Tax Collection Rate 6.41 In February 2024, the Council agreed a Council Tax collection rate of 98.25%. This target, whilst challenging, was supported by the Council’s collection performance over recent years and represents a realistic budgeted collection over time. 6.42 Elected members receive regular updates on Council Tax collection through reporting to the Finance and Resources Committee.
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6.43 Despite the challenges facing households, Council Tax collection is holding up. It is therefore proposed that the collection rate of 98.25% is maintained for 2025/26, 2026/27 and 2027/28. It should, however, also be noted that there remains a risk to collection levels due to the economic environment, changes in legislation in relation to debt recovery and welfare reform. The cost-of-living challenges and its impact on household incomes may also continue to have a significant impact. 6.44 It usually takes on average around six years to reach or exceed a collection level of 98.25%. The Council remains committed to sustaining and improving performance in respect of all its income recovery activities. 6.45 ACTION: The Council is asked to agree a Council Tax collection rate of 98.25% in 2025/26, 2026/27 and 2027/28 – RECOMMENDATION B. Council Tax Base 6.46 The number of chargeable band D equivalent dwellings for Council Tax purposes, the Council Tax base (after adjusting for assumed non-collection of 1.75%), is estimated to be as follows: TABLE 8: COUNCIL TAX – NUMBER OF BAND D EQUIVALENT PROPERTIES 2025/26 75,057 2026/27 75,710 2027/28 76,300 6.47 The Council’s tax base is regularly reviewed, based upon an analysis of recent trends, and adjusted for anticipated growth in the number of dwellings as well as increases in the number of discounts and exempt dwellings. 6.48 ACTION: The Council is asked to approve the Council Tax bases set out in Table 8 – RECOMMENDATION C. Council Tax Rates 6.49 Consistent with the decision of Council on 4 December 2024, the 2025/26, 2026/27 and 2027/28 Provisional Revenue Budgets have been constructed on the basis of Council Tax increases of 10%, 10% and 6% respectively. 6.50 For illustrative purposes, Table 9 sets out the impact of the proposed increases on a monthly, weekly and annual basis for a Band D Council Tax payer.
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TABLE 9: IMPACT OF COUNCIL TAX RISES Weekly Increase Monthly Increase Annual Increase 2025/26 £2.70 £11.70 £140.36 2026/27 £2.97 £12.87 £154.40 2027/28 £1.96 £8.49 £101.90 6.51 Any proposal to deviate from this position will have either positive or negative implications on the Council’s financial position depending on the final decision. 6.52 ACTION: The Council is asked to approve Council Tax levels as follows – RECOMMENDATION D. 2025/26 – £1,544.05 (final) 2026/27 – £1,698.45 (indicative) 2027/28 – £1,800.35 (indicative) 6.53 The 2026/27 and 2027/28 indicative Council Tax levels will be confirmed when setting the 2026/27 and 2027/28 final Revenue Budgets in February 2026 and February 2027 respectively. 6.54 Again, consistent with the Council decision on 4 December 2024, 1.25% of future Council Tax income per year will be ringfenced and applied to supporting the Capital Budget to ensure delivery of key infrastructure projects and supporting programmes such as roads, bridges and IT investment. 6.55 In the event that future Council Tax increases are restricted or prohibited, a corresponding amount from the Revenue Budget would be applied to Loan Charges in order to ensure the sustainability of the Capital Budget in the medium and longer term. Fees and Charges 6.56 The proposals set out in Appendix C include the financial implications of increases to existing levels of charges in 2025/26. Full details of recommended charges for 2025/26 are set out in Appendix D. 6.57 The annual review of charges considers several factors including an assessment of previous year’s income levels, trends in user demand, inflationary pressures, savings targets, alternative charging structures and the potential impact on vulnerable groups.
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6.58 All fees and charges should be set in line with the approved individual charging policy and fall into one of the following categories set out in Table 10 below. Table 10: Charging categories Charging Strategy Objective Commercial Charges The Council aims to cover the cost of providing the service and make a surplus. Full Cost Recovery The Council aims to cover the cost of providing the service from those who use it. Subsidised The Council wishes users of the service to contribute to the costs of providing it. This might meet a service objective or allow competition with other providers. Free The Council chooses to make the service available at no charge to meet a service objective. Statutory Charges are determined in line with legal requirements. Perth and Kinross Integration Joint Board 6.59 The Public Bodies (Joint Working) (Scotland) Act 2014 introduced joint working with NHS (Tayside) in the form of an Integrated Joint Board (IJB) for the strategic planning of community health and social care across Perth and Kinross. 6.60 The Perth and Kinross IJB has an approved Strategic Plan for 2024-2027 and a series of Strategic Delivery Plans to deliver on its objectives for vulnerable adults who rely upon community health and social care for daily living. The IJB has issued directions to the Council to deliver social work and social care services for adults which are in line with integration principles for community health and social care, and, to support transformation in key priority areas such as older people services including care at home; expansion of support and independent living for people with a learning disability service and securing better outcomes in community mental health and wellbeing. 6.61 The IJB approved a financial strategy for 2024-2027 which includes a drive for greater efficiency and transformation to build best practice in health and social care provision and ensuring an integrated, whole system approach to meeting needs and improving outcomes. 6.62 The Council’s Executive Leadership Team continues to support transformational approaches aimed at building on best practice in health and social care provision.
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6.63 The Local Government Finance Circular, 10/2024 issued on 12 December 2024, confirmed that funding would be provided to increase the Living Wage for adult social care workers in commissioned services, and to increase the rate of Free Personal and Nursing Care. 6.64 The 2025/26 Provisional Revenue Budget assumes the Council will pass on its full share of the funding of £4.273 million as provided for in the local government funding settlement from the Scottish Government. 6.65 The IJB Budget will be based on receiving an uplift of £6.7 million to address pressures arising from the increasing needs of the population, which is included in the Council 2025/26 Provisional Revenue Budget. This will support the mid-level scenario planning assumed by the IJB. There is a risk that these assumptions are underestimated. The realisation of the high-level scenario would require a further £4.3 million in 2025/26. In addition, the Adult Social Care sector in Perth and Kinross faces significant risk due to unfunded increases to employer National Insurance contributions. This could result in financial instability, service closures, and workforce challenges and officers continue to engage in national discussions to highlight the scale and impact on commissioned care providers. At this stage work remains underway on the IJB Budget for 2026/27 and 2027/28. 6.66 The IJB is scheduled to meet on 19 March 2025 to consider its budget for 2025/26. This budget will consider the funding received from each Partner Body alongside the pressures which have been identified for 2025/26. The IJB will require to make decisions in relation to savings to deliver a balanced budget for 2025/26. Until both partners have confirmed their 2025/26 Revenue Budget, there is a risk to the delivery of the IJB Strategic Plan. 6.67 ACTION: The Council is requested to approve the contribution of £106.133 million to Perth and Kinross Health and Social Care Partnership in the 2025/26 Provisional Revenue Budget – RECOMMENDATION E. Scottish Water Charges 6.68 The Council has received notification from Scottish Water that domestic water supply and waste water collection charges for 2025/26 will increase by 9.9%. This results in a band D equivalent charge for water and waste from Scottish Water of £600.39, an increase of £54 (£546.39 in 2024/25). 6.69 Scottish Water charges for water and wastewater continue to be charged using the Council Tax multiplier that was in place prior to 1 April 2017. 7. Reserves Strategy 7.1 In accordance with the existing statutory and regulatory framework, the Chief Finance Officer, as Responsible Financial Officer (or “Proper Officer”), is responsible for advising the Council on the level of Reserves it should hold.
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7.2 In determining Medium Term Financial Plans and preparing budgets, the Council needs to consider the establishment and maintenance of Reserves in accordance with its statutory powers. Reserves can be held for three main purposes: Working balances to help cushion the impact of uneven cash flows and avoid unnecessary temporary borrowing – this forms part of General Reserves. A contingency to cushion the impact of unexpected events or emergencies – this also forms part of General Reserves. A means of building up funds often referred to as Earmarked Reserves, to meet known or predicted liabilities. 7.3 LAAP Bulletin 99 also provided guidance on the further categories of Earmarked Reserve that the Council is permitted to hold including insurance, unspent grants and school balances. 7.4 The audited 2023/24 Annual Accounts included £83.794 million of General Fund Reserves. More details on the levels of cash backed Reserves are set out in Appendix E. When the earmarked Reserves of £65.083 million (see Appendix G) were removed, there was an uncommitted balance of £18.711 million which equates to 4% at 31 March 2024. Proposals to Earmark Reserves 7.5 Revenue Budget 2024/25 - Update No 3, which was considered by the Finance and Resources Committee on 5 February 2025 (Report No. 25/24 refers), included the projected outturn for the Council’s 2024/25 General Fund Revenue Budget. These projections have been further refined to recognise several adjustments which are required in closing the Council’s 2024/25 Annual Accounts and represent material changes to the projected outturn. 7.6 The impact of these projections on the level of balances is summarised in Appendix F, which indicates a projected General Fund (excluding HRA) balance of £61.403 million at 31 March 2025. Of this projected balance, £43.174 million is earmarked for the specific purposes as set out in Appendix G with a projected uncommitted balance of £18.229 million. 7.7 As is the case in previous years, there remain some areas of uncertainty in relation to the projected level of balances at 31 March 2025 including the final impact of weather-related events or additional grant income. 7.8 Based on the Council’s existing financial and policy commitments and the work undertaken in preparing the Provisional Revenue Budgets, it is proposed that the amounts included in Appendix G be earmarked against the projected General Fund balance.
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7.9 The balances of £43.174 million identified in Appendix G above and described in more detail in Appendix H will be monitored as part of the revenue monitoring process. Any proposals to make use of the balances will be subject to approval by either the Finance and Resources Committee or Council. 7.10 Subject to approval of the revised application of £6 million of Service Concession funding as described above, this would result in movements to the following earmarked Reserves which would come into effect on 1 April 2025 – Anti-Poverty Measures – updated balance - £2.985 million Transformation and Workforce Management – update balance of £6.855 million Balance of £2 million has been applied in the 2025/26 Provisional Revenue Budget as a contribution to the Insurance Fund 7.11 ACTION: The Council is asked to maintain a prudent approach to the application of Reserves and earmark the General Fund Balances of £43.174 million identified in Appendix G – RECOMMENDATION F. Proposed Approach to Managing Unearmarked General Fund Reserves 7.12 To assess the adequacy of unearmarked General Fund Reserves, it is necessary to take account of the strategic, operational and financial risks facing the Council, which are set out in Section 8 of this report. 7.13 In addition, Councils are expected to retain the equivalent of 0.2% of their annual Net Revenue Budget to deal with unforeseen emergencies (£845,464 in 2024/25 for Perth and Kinross Council) before being eligible for support through the Bellwin Scheme. 7.14 Taking account of all the risks and historical experience in Perth and Kinross since 1996, it is recommended that the targeted level of uncommitted non- HRA General Fund Reserves continues to be in the range of 2% to 4% of the Council’s Net Revenue Budget in the medium term. 7.15 Based on the Net Provisional Revenue Budget for 2025/26 of £499.273million as detailed in Appendix B, this would mean a level of uncommitted Reserves of between approximately £9.985 million and £19.970 million for 2025/26. 7.16 The Council has targeted a level of uncommitted Reserves between 2% and 4% range for several years. Whilst this range is still considered to be appropriate, it should be noted that the level of risk involved in managing the Council’s Revenue Budget is significant. There is currently no confirmation of the Council’s Scottish Government funding beyond 2025/26 and it is anticipated that Council services will continue to operate in a challenging financial environment in future years.
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7.17 Based on the level of Earmarked Reserves of £43.174 million as set out in Appendix G, the level of unearmarked Reserves is £18.229 million which equates to 3.65%. 7.18 ACTION: The Council is asked to approve that uncommitted Reserves are maintained at a minimum of 2% to 4% of the 2025/26 Net Revenue Budget which equates to £9.985 million to £19.970 million – RECOMMENDATION G. 7.19 In the event that any use of General Fund Reserves is made in determining the 2025/26, 2026/27 and/or 2027/28 Revenue Budgets, this should only be done on the basis of a sustainable strategy, which ensures that future years’ Revenue Budgets are not dependent upon the continuing use of Reserves. 7.20 Appendix I to the report shows the contributions to and from Reserves recommended in setting the Provisional Revenue Budget for 2025/26 and anticipated in 2026/27 and 2027/28. 8. Risk Assessment 8.1 Determining the Revenue Budget and Reserves Strategy requires consideration of the strategic, operational and financial risks potentially facing the Council. The General Fund Reserves Strategy is integral to supporting the Council’s approach to the management of financial risk. Both the uncertainty of future events and resource constraints make it impractical to mitigate against all potential risks. In developing its medium-term financial plan, the Council must also be aware of the sustainability of its expenditure proposals. Significant risks, which are of relevance are outlined below. 8.2 The Medium Term Financial Plan that was agreed by Council on 4 December 2024 (Report No. 24/350 refers), included an analysis of the risks that may impact on the Council both now and in the future as included: Local Government Funding Expenditure Pressures Council Tax Perth and Kinross Integration Joint Board and funding to support social care Inflation Current Economic Climate Demographics Climate Change ALEOs Severe Weather 8.3 The Medium Term Financial Plan also included commentary on future pay awards. The Council has budgeted for an increase of 3% in each of the next three financial years for all staff groups.
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8.4 The pay claim for 2025/26 only, for non-teaching staff groups was received in late January and included a request for an uplift of 6.5% across all spinal column points. Without additional funding, this represents a significant risk to the Council’s finances. 8.5 At this time there is still limited clarity on funding that may be available to mitigate the impact of the increase in Employers’ National Insurance Contributions of approximately £5.5 million. 8.6 The Scottish Government has indicated that £144 million (60%) has been made available nationally for Councils’. The allocation of this funding will not be known until after the Council sets the 2025/26 Revenue Budget. 8.7 Furthermore, there is no information on whether there will be additional financial support to contribute towards the additional costs incurred by the Council’s ALEOs, Tayside Contracts, social care providers and third sector organisations providing statutory services on behalf of the Council. 8.8 Funding of £2.8 million has been allocated within the 2025/26 Provisional Revenue Budget to contribute to this pressure, but, at this stage, there is no certainty that this will be sufficient. 8.9 Elected members will be kept up to date on the impact of these risks through the revenue monitoring reports that are presented to the Finance and Resources Committee. 9. Conclusions 9.1 This annual Strategic Planning and Budget report is a key pillar of the Council’s commitment to achieving its organisational Vision and Corporate Priorities. The report and the work in developing it, is about more than balancing income with spending and cost pressures. It is a confirmation of commitment to delivering on the strategic priorities and vision set out in the Corporate Plan. It is a statement of commitment to tackling poverty and inequality whilst continuing to support and resource the Council's ongoing organisational change. 9.2 The 2025/26, 2026/27, and 2027/28 Provisional Revenue Budgets have been prepared in that context – balancing financial sustainability with protecting services which support those in the greatest need. 9.3 Whilst the Scottish Government's funding allocation for 2025/26 represents a cash increase, much of this is directed towards specific commitments, and financial challenges remain which require choices to be made about how the Council’s resources are allocated. 9.4 The Council's prudent approach to Reserves management ensures a buffer against financial uncertainties, while Earmarked Reserves support targeted initiatives.
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The Council is advised to maintain a cautious approach, ensuring that future budgets are not overly reliant on Reserves and that financial planning remains adaptable to changing circumstances. 9.5 Overall, this report shows that while the financial challenges are significant, by: focusing on strategic priorities, investing in innovation, and ensuring prudent financial management, we can: continue to deliver services for people with the greatest need, protect frontline jobs and place communities at the heart of future delivery. 9.6 The report is a continuing commitment to Working together towards a Perth and Kinross where everyone can live life well, free from poverty and inequality. 10. Impact Value Assessment 10.1 The impact value assessment can be found here – Impact Value Assessment - Strategic Planning and Revenue Budget Report 11. Appendices A. Transformation Update B. 2025/26, 2026/27 and 2027/28 Provisional Revenue Budgets C. Executive Summaries D. 2025/26 Fees and Charges E. Summary Cash Backed Reserves – 2023/24 Actual and 2024/25 Projected F. Projected General Fund Balance at 31 March 2025 G. Earmarked Reserves at 31 March 2025 H. Summary of Earmarked Reserves at 31 March 2025 I. Summary of Projected Use of General Fund Balances 2025/26, 2026/27 and 2027/28