Introductory Report and Recommendations for Budget Papers
Argyll and Bute Council · 20 February 2025
Back to Budget Pack — 20 February 2025 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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ARGYLL AND BUTE COUNCIL COUNCIL FINANCIAL SERVICES 27 FEBRUARY 2025 INTRODUCTORY REPORT AND RECOMMENDATIONS FOR BUDGET PAPERS 1. EXECUTIVE SUMMARY 1.1 This report introduces the full package of papers included in the budget packs in relation to the revenue and capital budgets REVENUE PACK Revenue Budget Overview 1.2 This report summarises the overall revenue budget position covering funding, expenditure and savings. It also sets out the assumptions and proposals around non-pay inflation and the cost and demand pressures for inclusion in the revenue budget. 1.3 The Local Government Finance Circular 10/2024 was published on 12 December 2024 and provides detail of the provisional total revenue and capital funding allocations for 2025-26. The Council’s provisional General Revenue Grant is £254.995m in addition to Revenue Specific Grant of £4.539m. 1.4 Following the publication of Finance Circular 10/2024 there has been some changes to distributions in addition to previously non-distributed funding now having an agreed distribution methodology. These changes will not be confirmed until the Finance Order is approved on 27 February 2025, but I have reflected what I consider to be a reasonable estimate of the changes that are expected. This increases the General Revenue Grant for 2025-26 to £259.134m and £4.539m in specific grants. 1.5 The Cabinet Secretary for Finance and Local Government announced on Tuesday 4 February 2025 that Scottish Government has now agreed to provide an additional £144m to Local Government in respect of the Employer’s National Insurance increase and this funding represents 60% of direct staffing costs. This announcement was made to provide some certainty for councils as part of their budget setting. The increased cost is estimated to be £4.314m for 2025-26 (Council £3.450m and HSCP £0.864m). Based on the announcement it is estimated that we will receive £2.578m of funding. 1.6 On 29 November 2024 the Council received a letter from the Department of Environment Food and Rural Affairs (DEFRA) providing our authority’s estimated payment amount in respect of Extended Producer Responsibility in relation to Waste Packaging. Our estimated payment for 2025-26 is £3.847m. The final allocation will be confirmed in Autumn 2025. As it is unclear at this stage what requirements will be attached to this additional funding, in addition to not knowing the final allocation until Autumn 2025 it is recommended that only a proportion of
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the funding is used to support the 2025-26 budget. There is a non-pay inflation pressure for waste/landfill tax for £0.790m and a cost pressure for BMW Ban for £0.558m and it is recommended that £1.348m is used for these purposes with the remaining £2.499m carried forward to 2026-27. 1.7 The Council Tax budget for 2024-25 was set at £63.278m. Growth has been increased for 2025-26 to 0.75% to help rebase the position following a review undertaken by the Assessor at Dunbartonshire and Argyll and Bute Valuation Joint Board and amounts to £0.472m. 1.8 The budget for 2024-25 has been rolled forward into 2025-26 and the main changes to the 2025-26 base budget are summarised below: • Removal of cost pressures relating to 2024-25 only of £0.130m • Removal of one-off Management/Operational savings of £1.694m • Release of Contingency back to general fund in 2024-25 of £0.200m • Adjustment to re-base contribution to Joint Boards of £0.114m • Adjustment for re-basing NDR (unbudgeted 2024-25 Rate poundage increase) of £0.300m • Adjustment to right-size ferries budgets ensuring income and expenditure match as this is specific grant funded £0.037m • Adjustments relating to pay within 2024-25 for Children’s Social Work (Education service) - £0.063m • SJC Pay Award 2024-25 - £2.636m • Pay Award Elected Members 2024-25 - £0.033m • Settlement Directions (Council services) of £2.992m. 1.9 Other increases to the budget are summarised below: • Employee cost changes of £8.686m. This relates to estimated pay inflation for 2025-26, increments, employee base changes and the increase to employer’s national insurance. • Unavoidable/inescapable inflation of £2.978m. This includes utilities, catering purchases, contract inflation, insurances and landfill tax. • A number of cost and demand pressures amounting to £4.771m. The most significant being Bus Transport Contract £1.735m, compliance with BMW Ban £0.558m, School Transport for ASN pupils, £0.500m and Insurance increases £0.309m. 1.10 The revised payment to the Health and Social Care Partnership, reflects 2024-25 in year adjustments and the net changes to the settlement in respect of Social Work that we have been directed to pass over to the Health and Social Care Partnership. Due to the significant financial pressure that the Health and Social Care Partnership is facing as a result of the increasing number of older persons and the increased demand, it is recommended that Council consider passing over a further increase to the HSCP, this will pass over a share of the additional funding that the Council has received without conditions attached. It is recommended to pass over £0.370m equivalent to 1% pay award to ensure that the HSCP have sufficient budget to match the public sector pay policy for social work staff as well as
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£0.346m in relation to the anticipated shortfall in the Employer’s National Insurance funding. The revised payment amounts to £81.492m. 1.11 There are a number of measures to balance the budget that have previously been agreed at the Council’s budget meeting on 22 February 2024 which have a net effect of reducing the 2025-26 budget gap by £0.283m. In addition, the Council agreed on 26 September 2024 to release £1.558m of existing earmarked reserves to help bridge the budget gap. 1.12 There are a number of other measures to balance the budget that are for Council approval, summarised as follows: • General inflationary increase of 6% to fees and charges resulting in £0.363m of additional income. • New management/operational savings amounting to £2.102m. • New policy options savings amounting to £0.991m. 1.13 The budget gap after the measures to balance the budget is a deficit of £2.471m in 2025-26. 1.14 The setting of Council Tax should happen on the same day as the Council sets its revenue budget as once all proposals are considered, Council Tax is the balancing figure. The gap outlined in paragraph 1.13 above is based on a 5% Council Tax increase (this is the assumption that has been in the budget outlook during the year). In order to get to a balanced budget, Council will need to increase Council Tax to 8.9%. The alternative to increasing Council Tax further is that Council would need to fund the gap using reserves or other funds held, which would be a one-off fix, however, Members need to be mindful of the significant gap in future years as well as the pressures facing the capital plan. 1.15 The budget gap over the period 2026-27 to 2029-30 across each scenario is summarised in the table below. Budget Gap 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Total £000 Best Case (5,907) (7,343) 262 (344) (13,332) Mid-Range (9,528) (10,373) (4,424) (5,212) (29,537) Worst Case (16,131) (16,763) (10,981) (12,124) (55,999) 1.16 A number of funding requests have been received and Members are asked to give consideration to these requests and how they would be funded. Fees and Charges 1.17 This report sets out proposals for increases in fees and charges and the resulting impact on income included in the revenue budget. 1.18 The general increase to fees and charges is proposed at 6% for 2025-26 and is expected to generate additional income of £0.363m.
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1.19 The changes proposed to the Social Work fees and charges are noted within the report and have been the subject of a report to the Integrated Joint Board on 29 January 2024. 1.20 Harbour Fees have been increased by 3%. This 3% increase is ring fenced to fund asset improvement and sustainability within the piers and harbours. This is estimated to generate additional income of £0.279m. No general inflationary increase has been proposed for piers and harbours dues in order that the service is cost neutral. 1.21 New fees and charges which are being introduced for 2025-26 are summarised below: • Ferry Services o Jura Ferry Concession Fare, car and driver o Cuan Ferry Concession Fare, car and driver • Short-term let licensing o New fees introduced on the back of a revision of the STL Policy. • Environmental Health Section 50 Licence Certificate o New fee to recover the costs from business as a result of savings option DEG 002 25/26 • New discretionary planning fees that are part of proposed savings. Financial Risks Analysis 2025-26 1.22 This report set out the risks identified as part of preparing the revenue budget and makes an assessment of the potential financial impact of these. The financial risks are monitored routinely throughout the year and actions put in place to mitigate risks. 1.23 There are currently 7 council wide revenue risks identified for 2025-26, with a potential annual value totalling £8.1m, and with varying degrees of likelihood. Description Likelihood Assessed Financial Impact £m Unbudgeted Severe Weather costs 3 2.0 Pay Award exceeding 3% 3 1.8 Energy costs increase by 5% greater than budgeted 3 0.4 IJB refer to Council for additional funding to deliver social work services 3 2.6 1% variation in Council Tax Income 2 0.7 10% shortfall on Savings delivery 2 0.3 10% variation on General Inflation 3 0.3 Total 8.1
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1.24 There are currently 30 departmental risks, with a potential annual value totalling £3.2m, of which 4 are categorised as ‘Likely’. Reserves and Balances 1.25 This report summarises the reserves and balances, sets out an analysis of risk around the adequacy of reserves and balances and proposes a level of contingency to be held in the General Fund Reserve. 1.26 At 31 March 2024 the Council had a total of £121.701m usable reserves. Of this: • £2.763m related to the Repairs and Renewals Fund • £3.197m related to Capital Funds • £115.741m was held in the General Fund with £107.443m of this balance earmarked for specific purposes. 1.27 The Council’s General Fund contingency remains at 2% of net expenditure. This monetary level has been adjusted to take account of the revised net revenue expenditure proposed for 2025-26. The revised contingency of 2% of net expenditure amounts to £6.520m. 1.28 The estimated unallocated General Fund at the end of the financial year is a deficit of £0.283m. It may be that this position is improved if the forecast outturn is better than estimate, however, if the position remains then the Council will be using the General Fund contingency and a recovery plan will need to be put in place in order to bring the continency level back to the 2% agreed policy. . CAPITAL PACK Capital Plan Summary 1.29 This report details the revisions proposed to the capital plan approved in February 2024 for the period 2025-26 to 2026-27 and extends the capital plan for a further year to 2027-28. The revisions are based on updated capital funding assumptions, phasing and cost changes. 1.30 The Local Government Finance Settlement Circular 10/2024 provided 2025-26 General Capital Grant of £9.666m, excluding effectively ring-fenced or directed funding of £1.198m. This represents £0.832m more than previous planning assumptions. However, the 2024-25 final General Capital Grant settlement was £0.047m lower than assumed within the approved Capital Plan. There is, therefore, a net increase in capital resources of £2.449m overall for the 3 years 2025-28. 1.31 The ring-fenced or directed funding of £1.198m, included within the General Capital Grant, comprises £0.632m for Campbeltown Flood Scheme, £0.391m for Play Parks and £0.175m for Nature Restoration Fund. There is also a specific grant of £0.383m available for Active Travel (formerly known as Walking Cycling & Safer Streets).
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1.32 The settlement also provides for additional, non-recurring capital grant funding of £40m across Scotland in 2025-26 for Climate Emergency, to be included within the General Capital Grant. Given that project planning across the programme will already take cognisance of climate change, as a key consideration, it has not been necessary to augment planned project expenditure in this respect. As such, this funding represents additional available resources for 2025-26. 1.33 The amount of capital resources effectively top-sliced from the General Capital Grant and allocated to Private Sector Housing Grant (PSHG) is provided for at £1.033m per annum over the 3 years 2025-28, similar to previous years’ levels, although the funded GAE level has reduced to £0.707m in 2025-26. 1.34 As at 31 December 2024, there is a forecast overspend of £0.117m on the current 2024-27 Capital Plan. In addition, spending requirements deemed to be essential, either critical to maintain service delivery, or to comply with legislation or regulation (Red RAG status risks), total an estimated £0.376m. 1.35 After taking account of budget pressures and proposed allocations, the balance of additional capital resources, available for additional capital investment over the 3 years 2025-28 is £3.560m. This may be augmented by additional borrowing for capital purposes, with the revenue consequences, in terms of debt charges, accounted for as part of the annual revenue budget for 2025-26 and future years. There is also an option to redirect resources, allocated but not yet committed, to other priorities, including in respect of the allocation to PSHG at the historic, above GAE level. 1.36 A range of currently unfunded investment priorities across council services have been identified, including in respect of the Roads Maintenance programme for 2025-26, with an estimated funding shortfall of £9m to maintain current level standards. Corporate Asset Management Strategy and Plan 1.37 This report outlines the overall principles, policies and priorities within the Council’s Asset Management Strategy and Plan. 1.38 This report identifies key issues for this planning cycle in managing the asset base, the proposed actions and any risk assets not addressed through the proposed Capital Plan. It includes the Priority Investment Plans (PIPS) for each service asset group. 2. RECOMMENDATIONS 2.1 It is recommended that the Council: a) Approve the revenue estimates for 2025-26 and that consequently the local tax requirement estimated at £69.570m is funded from Council Tax. Approve the following rates and charges for the year, 2025-26:
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1. Council Tax to be paid in respect of a chargeable dwelling in Band “D” of £1,610.85 representing a 8.9% increase. 2. Council Tax to be paid in respect of a chargeable dwelling in each of the other valuation bands in accordance with Section 74(1) of the Local Government Finance Act 1992 as amended. 3. Business Rates as determined by Scottish Ministers. b) Approve the revenue budget for 2025-26 as set out in the revenue budget overview report. c) Approve a base allocation to the Health and Social Care Partnership of £81.492m for 2025-26. Approve indicative base allocations for 2026-27 and 2027-28 of £84.545m. The level of future years funding is subject to the level of Scottish Government funding and the Council’s overall financial position in future years. d) Endorse the new management/operational savings as outlined in Appendix 5 of the revenue budget overview report. e) Approve the policy savings options for 2025-26 as outlined in Appendix 6 of the revenue budget overview report and agree that any policy savings relating to 2026-27 onwards will be considered as part of next year’s budget process, unless it’s a full year effect of the 2025-26 saving. f) Agree to implement the Local Governance (Scotland) Act 2004 (Remuneration) Amendment Regulations 2025 and that the payments from 1 April 2025 be as noted in the table below, accepting that implementation of these payments will supersede the Council’s decision of 19 May 2022 in relation to Member’s remuneration. Leader £50,063 Civic Head (Provost) £37,458 Senior Councillor (Policy Lead) £37,458 Senior Councillor (Area Chair) £30,038 Senior Councillor (Leader of the Largest Opposition Group) £30,038 Councillor £25,982 g) Consider the funding requests received as set out within Appendix 8 of the Revenue Budget Overview Report. h) Approve the following in relation to fees and charges with effect from 1 April 2025 unless otherwise noted: 1. Approve the proposals for the fees and charges inflationary increase of 6% and approve the charges that are over and above inflation. Note that this would generate additional income of £0.363m in total. 2. Approve all other charges as noted within the Fees and Charges Schedule.
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3. In respect of Electric Vehicle charging, approve a delegation to the Director with responsibility for Roads and Infrastructure in consultation with the Leader and the Policy Lead for Roads, Transport and Amenity Services, to vary the charge in line with increasing utility prices. i) Note the financial risks analysis. j) Approve the contingency level for the General Fund balance at a level of 2% of net expenditure, equivalent to £6.520m and note the report on reserves and balances. k) Approve the capital plan as set out in Appendix 3, noting that this incorporates the red risks (£0.376m) and estimated forecast overspend on the capital plan (£0.117m). l) Consider how the total available capital resources of £3.560m are allocated, noting the unfunded priorities outlined in the report and outlined in the Priority Investment Plans. m) Consider options for increasing the level of investment from the redirection of resources or from additional borrowing, noting that any additional borrowing would have an impact on the revenue budget. n) Note that a review of the capital arrangements will be undertaken during the year and reported to Members. o) Approve the Corporate Asset Management Strategy and Plan including the Priority Investments Plans (PIPS). 3. IMPLICATIONS 3.1 Policy – There are policy implications associated with proposals to balance the revenue budget as well as the policy options that have been subject to employee consultation. 3.2 Financial – The report outlines the revenue budget position over 2025-26 to 2029- 30 and the funding and commitments for the capital plan 2025-28. 3.3 Legal – Any legal implications have and will be considered when developing the savings options required for the revenue budget. 3.4 HR – Any HR implications have and will be considered when developing savings options required for the revenue budget. There are risks that the capital funding available will have an impact on the sustainability of the property design team and the design team within Roads and Amenity Services. 3.5 Fairer Scotland Duty – See Below
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3.5.1 Equalities - Equality and Socio-Economic Impact Assessments have been carried out where appropriate for savings options already agreed or developed. Equality and Socio-Economic Impact Assessments will be a key consideration in developing future savings proposals. These assessments can be found on the Councils website here: Equality and Socio-Economic Impact Assessments (argyll- bute.gov.uk) 3.5.2 Socio-Economic Duty - Equality and Socio-Economic Impact Assessments have been carried out where appropriate for savings options already agreed or developed. Equality and Socio-Economic Impact Assessments will be a key consideration in developing future savings proposals. 3.5.3 Islands Duty – Islands duty is considered as part of the Equality and Socio- Economic Impact Assessments 3.6 Climate Change – The Council is committed to addressing climate change and reviews of how Services are delivered is ongoing within the available budget resources. 3.7 Risk – There is a separate report assessing financial risks and there is also an overall assessment of risk included within the separate report on Reserves and Balances. In respect of the capital programme, there are risks around the level of capital receipts, ongoing cost increases, grant funding, future pressures and there are a number of other risks highlighted within the corporate asset management plan. 3.8 Customer Service – There may be some customer service implications arising from previously agreed savings options and the new policy options. Future customer service implications will be considered when developing savings options. 3.9 The Rights of the Child (UNCRC) - None Kirsty Flanagan Executive Director/Section 95 Officer 13 February 2025 Councillor Ross Moreland, Policy Lead for Finance and Commercial Services For further information please contact Carolyn Earl, Interim Head of Financial Services carolyn.earl@argyll-bute.gov.uk