Item 09 - Financial Update
West Dunbartonshire Council · 17 June 2026
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WEST DUNBARTONSHIRE COUNCIL Report by Chief Officer - Resources Council: 17 June 2026 Subject: Financial Update 1. PURPOSE 1.1 To provide an update on the financial challenges facing the Council and the estimated 2027/28 – 2031/32 revenue budget gaps. 1.2 This is the first financial update since the 2026/27 budget was set on 4 March 2026 and rolls forward previous estimates as well as updating assumptions. The assumptions will continue to be refined as the financial year progresses. 2. RECOMMENDATIONS 2.1 Members are asked to note the updated position regarding projections for the Council’s estimated revenue budget gaps in 2027/28-2031/32, particularly the updated estimated mid-range 2027/28 budget gap of £10.005m. 3. BACKGROUND 3.1 On 4 March 2026, the Council agreed a balanced 2026/27 revenue budget, a revised capital budget and revenue estimates for 2027/28-2030/31. That budget report highlighted estimated future year budget gaps based on a range of assumptions including future Scottish Government funding, inflation and future interest rates. The consequences of the decisions taken by Council on 4 March to agree a balanced 2026/27 budget reduced the cumulative estimated future budget gap in the mid-range as set out in Exhibit 1. Exhibit 1 – Future Year Estimated Cumulative Budget Gaps (Mid-Range 4 March 2026 Budget Budget Gap 27/28 £000 28/29 £000 29/30 £000 30/31 £000 Mid-Range Gap Before Council Decisions 16,401 31,027 40,897 49,826 Management Adjustments (775) (775) (775) (775) Saving Options (2,586) (2,888) (2,888) (2,888) Council Tax Increase (3,541) (3,541) (3,541) (3,541) HSCP Funding 1,140 1,140 1,140 1,140 West Dunbartonshire Leisure Pay 234 234 234 234 Council Growth Items 32 32 32 32 Mid-Range Gap After Council Decisions 10,905 25,229 35,099 44,028 ITEM 9
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4. MAIN ISSUES 4.1 Since the budget was agreed on 4 March 2026, a further year has been added to the budget outlook to take it to 2031/32 and the key assumptions and cost pressures detailed in the Council Budget paper have been revisited. This is summarised in the paragraphs below. 4.2 Scottish Government Finance Settlement The 4 March 2026 report advised that assumptions in relation to future year Scottish Government funding were for a flat cash assumption. This being based on the Scottish Government three-year spending review which illustrated that local government funding is expected to decrease slightly (0.07%) over the three-year period 2026/27-2028/29. On that basis I am assuming: • Best Case – 0.5% increase • Mid-Range – Flat Cash • Worst Case – 0.5% decrease Future Scottish Government funding levels is one of the key assumptions within the Finance Update. While it is considered good practice to prepare longer term financial plans it is challenging to do so with great accuracy due to single year Scottish Government finance settlements. 4.3 Changes to Base Budget There has been one change to the Council’s base budget since the 4 March 2026 Budget report to Council. 4.4 Base Budget Adjustment 1 – Estimated Reduction in Strathclyde Pension Fund Contributions (£1.800m Favourable) The next formal actuarial valuation of the Strathclyde Pension Fund will be carried out as at 31 March 2026 and reported in 2027. This will establish contribution requirements for the subsequent 3-year period. Based on the reported funding position in relation to the Fund it is anticipated the contribution rate will decrease from the 17.5% currently budgeted for. However, this is not certain and will depend on the valuation. I have assumed no change in the worst-case scenario, a reduction to 15% in the mid-range scenario (£1.800m) and a reduction to 13% in the best-case scenario (£3.400m). These estimates will be updated throughout the year as more information becomes available. Cost Pressures 4.5 Generally services work on the basis of having to contain any cost pressures
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within current resources, however, there are cost pressures which are unavoidable and need to be factored into future budget processes. There has been two new cost pressures identified since the 4 March 2026 Budget report to Council. 4.6 Cost Pressure 1 – Loan Charges (£0.600m Adverse) The finance team update their estimates for loan charges on an annual basis (usually in October) to ensure future budget estimates are based on the most up to date projections of future interest rates and the Council’s borrowing requirements (linked to the capital plan). This exercise will be carried out in October 2026 with the outcome reported to Council in December however it is already evident that interest rates are not decreasing at the rates previously predicted with geopolitical issues in the Middle East being a key reason. On that basis a prudent measure has been taken to create a £0.600m cost pressure at the current time which can be adjusted after the October review is conducted. 4.7 Cost Pressure 2 – General Services Bad Debt Provision (£0.300m Adverse) Finance has carried out a review of the provision for anticipated bad debt which has concluded there is insufficient budget available for it. The need to add £0.300m is not a consequence of a sudden increase in bad debt but more of a cumulative impact of bad debt increasing over a number of years. This cost pressure is required to right size the budget to reflect that cumulative impact. Employee Costs 4.8 There have been no changes to assumptions about the extent to which the Council will need to fund future pay awards. For 2027/28 a planning assumption of the Council having to fund 3% of any pay award has been applied in the best case and mid-range scenarios (already built into the estimated budget gap), with 4% assumed in the worst-case scenario. Each 1% over 3% would increase the gap by a further £1.869m. Revised Mid-Range Estimated Budget Gap 4.9 Exhibit 2 sets out the revised cumulative estimated budget gap in the range for 2027/28 to 2031/32. Exhibit 2 illustrates that, in the mid-range scenario the Council are faced with a budget gap of £10.005m in 2027/28 rising cumulatively to £52.161m in 2031/32.
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Exhibit 2 – Revised Mid-Range Estimated Budget Gaps (Cumulative Para Ref 2027/28 £000 2028/29 £000 2029/30 £000 2030/31 £000 2031/32 £000 Budget Gap 5 March 3.1 10,905 25,229 35,099 44,028 53,061 Reduction in Pension Contributions 4.4 (1,800) (1,800) (1,800) (1,800) (1,800) Loan Charges 4.6 600 600 600 600 600 Bad Debt Provision 4.7 300 300 300 300 300 Revised Budget Gap 10,005 24,329 34,199 43,128 52,161 Best Case / Mid-Range and Worst Case Analysis 4.10 There are three material assumptions in the current budget gap forecast set out in Exhibit 2 which will have a material impact on the forecast gap if the assumptions prove to be materially different from what transpires. These are: • Para 4.2 - Each 0.5% change to local government settlement would change the settlement by £1.336m • Para 4.4 – Impact of pension reduction to 15% not happening (add £1.800m to gap) or further decreasing to 13% (saving of £1.600m) • Para 4.8 – Impact of Council contribution to pay awards increasing from 3% to 4% in worst case scenario (increase gap by £1.869m) Exhibit 3 sets out a best case, mid-range and worse case analysis for these three assumptions. Exhibit 3 – Best Case, Mid-Range and Worst-Case Summary Scenario 2027/28 £000 2028/29 £000 2029/30 £000 2030/31 £000 2031/32 £000 Best Case 7,069 21,393 31,263 40,192 49,225 Mid-Range 10,005 24,329 34,199 43,128 52,161 Worst Case 13,212 27,536 37,406 46,335 55,368 Other Issues 2027/28 Budget Process 4.11 Given the scale of the financial challenge facing the Council in 2027/28 and future years, it is important that early progress is made to identify saving options with momentum on this maintained between now and setting the
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budget in March 2027. The Senior Leadership Team will shortly commence this process and continue to meet periodically to develop saving options which will be presented to members for their consideration at an appropriate time. 4.12 Health and Social Care Partnership Requisition The Council, at the budget meeting on 4 March 2026, agreed an HSCP requisition of £97.736m. There is a working assumption that the future allocation to the HSCP is on the basis of ‘flat cash’ plus the appropriate share of the Health & Social Care funding commitments made by the Scottish Government. However, this is only an assumption and the HSCP requisition will be a matter for Council to consider as part of the budget process. 4.13 Council Tax The estimated budget gap makes no assumption over future Council Tax increases as setting Council Tax is subject to a political decision when agreeing the budget in March 2027. However, by means of illustration a 10% Council Tax increase would generate an additional £4.980m and increase the weekly bill for a Band D taxpayer by £3.23 (assuming they are liable for the full Council Tax charge). 4.14 Fees and Charges In 2026/27 an increase of 5% was applied to fees and charges. The current assumption built into the estimated future budget gaps is an annual increase of 5% in all three scenarios (best case, mid-range and worst case). Every 1% increase beyond 5% would generate an estimated £0.057m in revenue. 5. PEOPLE IMPLICATIONS 5.1 None directly from this report but there is a strong link between HR and budgets. 6. FINANCIAL AND PROCUREMENT IMPLICATIONS 6.1 Sets out the estimated revenue budget gaps in 2027/28 to 2030/31. There are no direct procurement implications arising from this report. 7. RISK ANALYSIS
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7.1 None directly from this report but any proposals to address the estimated budget gap will need to consider risk. 8. EQUALITIES IMPACT ASSESSMENT (EIA) 8.1 None directly from this report but any proposals to address the estimated budget gap will need to consider equality issues. 9. CONSULTATION 9.1 The views of all Chief Officers have been requested on this report and feedback incorporated herein. 10. STRATEGIC ASSESSMENT 10.1 Proper budgetary control and sound financial practice are cornerstones of good governance and support Council and officers to pursue the strategic priorities of the Council’s Strategic Plan. 10.2 The General Services revenue budget contributes to all categories by providing funding in specific areas to help the Council achieve and develop these priorities. Laurence Slavin Chief Officer - Resources Date: 01 June 2026 Person to Contact: Laurence Slavin, Chief Officer - Resources E-mail: laurence.slavin@west-dunbarton.gov.uk Background Papers Budget Report to Council - 4 March 2026