Budget Outlook 2025-26 to 2029-30
Argyll and Bute Council · 10 October 2024
Back to Policy and Resources Committee — 10 October 2024 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 POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 10 OCTOBER 2024 BUDGET OUTLOOK 2025-26 TO 2029-30 1. EXECUTIVE SUMMARY 1.1 This report provides an update to the budget outlook covering the period 2025- 26 to 2029-30, reported to the Policy and Resources Committee on 15 August 2024. 1.2 The estimates within the report are based on the mid-range scenario with best and worst case scenarios noted in Appendix 1. 1.3 The assumptions in respect of future years Scottish Government funding remain unchanged from those reported on 9 May 2024 and range between flat cash (best case) and 1% reduction (worst case) with a mid-range of 0.5% reduction. This assumption is based on the settlement over the last few years and with the most recent year 2024-25 being a 0.5% reduction. It is, however, well publicised the significant financial pressures facing both UK and this will be kept under close review. 1.4 There have been two changes to my previous assumptions around Council Tax: In terms of Council Tax growth previously the Council tax base had been assumed to grow by 0.25% in the worst case scenario, 0.5% in the mid- range scenario and 0.75% in the best case. As a result of a review undertaken by the Assessor at Dunbartonshire and Argyll and Bute Valuation Joint Board a number of self-catering properties have been added to the Council Tax register therefore in 2025-26 only the growth has been increased by 0.25% in all scenarios resulting in additional income of £0.165m in the mid-range. In future years growth falls back to the original estimates. The second adjustment relates to a review Financial Services concluded in relation to Council Tax income received on Second Homes where projections indicate receipts will be £0.328m in excess of budgeted income. This is a positive position and is very close to the original budget agreed it February, however, Members will be aware that the budget was amended in April in response to the level of representations that had been received. 1.5 There have been three changes to the base budget since reported to Policy and Resources Committee on 15 August 2024: The Teachers pay award was originally agreed up to 31 July 2024 as
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part of a previous 28 month deal and any increase beyond that date had still to be confirmed, however a 3% increase was assumed at that time. The base budget for 2025-26 needs to reflect the full year effect of the 3% increase which amounts to £0.656m. The latest offer in relation to the 2024-25 pay award requires Councils to fund a 3.2% increase with Scottish Government funding between 3.2% and the current pay offers. This is for all pay bargaining groups. As this is more than is currently in the 2024-25, this creates a further net pressure on the base budget of £0.296m. At the time of writing, the teachers pay award has been agreed but SJC and Chief Officers is still in negotiations. In 2023-24 a £1.4m contingency was set aside for inflationary pressures, £0.936m of which was allocated to cover increased utility costs for 2024- 25 based on projections at that time. However based on actual costs at the end of 2023-24 it is estimated that £0.200m of this can be returned to the General Fund in 2024-25 resulting in a reduction to the base budget. 1.6 Assumptions in respect of employee costs for Council services are as follows: The SJC and Chief Officers pay awards for 2024-25 have still to be agreed and may have a further impact on the base budget if the pay award is higher than the updated net pressure of 3.2% now allowed for in the budget. The latest offer has again been rejected by the Trade Unions and it is still unclear at what level the pay award will be agreed for 2024-25 and subsequently the financial impact this will have on future years but this will be kept under review as further information becomes available. The Teachers pay award has been agreed up to 31 July 2024 as part of a previous 28 month deal and a net pressure of 3.2% for the remainder of 2024-25 has now been accounted for within the base budget. At the time of writing this report, the teachers pay award for 2024-25 has been agreed with the Council cost within the figure that is now in the base budget. For future years, the mid-range scenario remains at 2% but a risk remains that it could be higher and this will be closely monitored. Increments are estimated between £0.329m and £0.605m with a mid-range of £0.605m. 1.7 For non-pay inflation, only unavoidable/inescapable inflation has been built in for the best case and mid-range scenarios with a contingency of £0.250m built into the mid-range. A further general inflationary increase has been built into the worst case scenario. 1.8 There are a number of cost and demand pressures for Council services built into each scenario. Changes to these pressures since the report on 15 August 2024 are: Amended – Bus Transport Contracts – a further contract renewal has been
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received which has increased the cost pressure by £0.167m. New – Stadiums Income Saving – the saving is no longer fully achievable due to lower than anticipated income generation as more clubs are now using the all weather facilities. This will now be considered as part of the Roads and Infrastructure Review (£0.020m). New – Loans Charges – as agreed at Policy and Resources Committee on 15th August borrowing would be taken out to fund some of the costs associated with the weather incident which creates a recurring revenue pressure (£0.080m). New – Migration from Skype for Business to Teams Telephony to ensure those staff who need to make external calls can do so as agreed at Policy and Resources Committee on 15 August 2024. This pressure does not start until 2026-27. New – ICT Equipment for Hybrid Council meetings – Release of Earmarked Reserve to the General Fund as agreed by Council in September results in a recurring cost pressure (£0.012m). New – System for Debt Counselling and Welfare Rights Management – Release of Earmarked Reserve to the General Fund as agreed by Council in September results in a recurring cost pressure (£0.006m). New – Community Resilience Fund – Release of Earmarked Reserve to the General Fund as agreed by Council in September results in a recurring cost pressure (£0.005m). 1.9 In addition to the identified cost and demand pressures an allowance for unidentified cost and demand pressures has been included in mid-range of £0.500m per year (best case scenario £0.250m per year and worst case scenario £1m per year). 1.10 There will be a political decision to be made as to the future allocation to the Health and Social Care Partnership. As part of the budget in February 2024 an indicative flat cash allocation for 2025-26 was agreed which has now increased by £0.180m, as detailed in paragraph 4.1.2, in relation to the HSCP’s share of the Children’s Social Care Pay Uplift. The indicative allocation for 2026-27 increases further by £3.053m to account for the cessation of the one-off saving in relation to the Strathclyde Pension Fund. 1.11 The budget gap in the mid-range scenario after allowing for the current base commitments, employee adjustments, non-pay inflation, cost and demand pressures and not factoring in any previous savings decisions or future potential options is an estimated gap over the five year period of £50.223m with a gap of £14.543m in 2025-26. 1.12 The measures to balance the budget over the next five years are as follows: Proposed increase to fees and charges of between 3% and 9% (6% mid- range). Proposed increase to Council Tax (5% increase in 2025-26 in the mid and worst case scenarios rising to 7% in the best case scenario, with a 5% increase in all scenarios in future years). Policy savings already agreed by Council in February 2024.
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Management/Operational savings already agreed by Council February 2024. Release of Earmarked Reserves as agreed by Council in September 2024. 1.13 In the mid-range scenario, the budget gap estimated over the five year period 2025-26 to 2029-30 is £28.565m with a gap of £9.147m in 2025-26. 1.14 The budget gap in the best case scenario over the five years is £15.644m with a gap of £5.075m in 2025-26 and in the worst case scenario, the budget gap over the five years is £93.220m with a gap of £23.017m in 2025-26. A summary of all three scenarios is included within Appendix 1. 1.15 It is recommended that the Policy and Resources Committee consider the current estimated budget outlook position for the period 2025-26 to 2029-30.
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 10 OCTOBER 2024 BUDGET OUTLOOK 2025-26 TO 2029-30 2. INTRODUCTION 2.1 This report provides an update to the budget outlook covering the period 2025- 26 to 2029-30, reported to the Policy and Resources Committee on 15 August 2024. 2.2 The budget outlook has been prepared using three different scenarios, best case, worst case and mid-range. Relatively small variations in assumptions can lead to fairly significant changes in the outcome. In the paragraphs that follow, the mid-range outlook is shown, however, all three scenarios are detailed within Appendix 1. 3. RECOMMENDATIONS 3.1 It is recommended that the Policy and Resources Committee consider the current estimated budget outlook position for the period 2025-26 to 2029-30. 4. DETAIL 4.1 Funding Scottish Government Finance Settlement 4.1.1 There are no changes to my previous assumptions around the level of future Scottish Government funding at this stage. It is, however, well publicised the significant financial pressures facing both UK and Scottish Government and this may well have an impact for future settlements. The Cabinet Secretary for Finance and Local Government recently reported that the financial situation is not sustainable. This position will be kept under close review and Members updated should any of the assumptions change. The funding assumptions at this stage continue to be set between a 1% reduction (worst case) and flat cash (best case) with a mid-range reduction of 0.5%. 4.1.2 As reported previously to Policy and Resources Committee, in respect of the Children’s Social Care pay uplift, the Scottish Government notified us in June 2024 of Argyll and Bute Council’s share of the £19.861m funding provided which totalled £0.243m. £0.180m of this funding is a straight pass through to the HSCP, therefore the payment made to them will be adjusted accordingly, and £0.063m is for the Education Service. The base budget for Education will be increased accordingly to pay for the uplift therefore this additional funding has no overall impact on the budget gap. 4.1.3 The table below summarises the mid-range scenario estimates based on a
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0.5% settlement reduction each year. 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Estimated SG Funding 244,657 243,434 242,217 241,006 239,801 Children’s Social Care Pay Uplift 243 243 243 243 243 Total Estimated SG Funding 244,900 243,677 242,460 241,249 240,044 Council Tax 4.1.4 The Council Tax base for 2024-25 was set at £63.278m which reflected no inflationary increase as agreed by the Council on 15 April 2024. 4.1.5 Financial Services have concluded a review of Council Tax income received on second homes and projections indicate receipts will be £0.328m over budget. This is a positive position and is very close to the original budget agreed it February, however, Members will be aware that the budget was amended in April in response to the level of representations that had been received. It is assumed that a similar level of income will be received in future years and the budget outlook can be updated to reflect this. 4.1.6 There has been one change to my previous assumptions around the growth in Council Tax. Previously the Council tax base had been assumed to grow by 0.25% in the worst case scenario, 0.5% in the mid-range scenario and 0.75% in the best case. As a result of a review undertaken by the Assessor at Dunbartonshire and Argyll and Bute Valuation Joint Board, a number of self- catering properties have been added to the Council Tax register therefore in 2025-26 only the growth has been increased by 0.25% in all scenarios resulting in additional income of £0.165m in the mid-range. In future years growth falls back to the original estimates. 4.1.7 4.1.8 As reported previously, as part of the 2023-24 budget setting process a business process review was undertaken of the Revenues and Benefits Service where one of the outcomes was anticipated increased Council Tax recoveries equating to £0.200m in 2025-26 which have been built into the budget outlook. This is a reduction of £0.149m from 2024-25 as recoveries are expected to be higher in the first two years of inception dropping down to an almost steady state from 2025-26 onwards. Within this report, I will present the budget gap, prior to any Member based decisions and therefore at this stage in the report, the Council tax base is assumed to remain at the same level as 2024-25. General Fund 4.1.9 As reported in the budget pack in February 2024, reduced employer contribution rates payable to Strathclyde Pension Fund will result in one-off savings in 2024-25 and 2025-26. It was agreed that the saving in each of
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these years be transferred to the General Fund, with some being used to fund capital expenditure. £9.928m of savings will be transferred to reserves in 2025- 26 in relation to this, this amount relates to the saving for the Council and the HSCP. 4.1.10 It was also agreed at the budget meeting in February 2024 that £2m of the pension fund gain would be released each year for a period of 3 years (2024- 25 through to 2026-27) in order to help bridge the budget gap. 4.1.11 The table below summarises the estimated total funding in the mid-range scenario. 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Estimated SG Funding 244,900 243,677 242,460 241,249 240,044 Council Tax Base 63,278 63,278 63,278 63,278 63,278 Council Tax Growth 472 789 1,108 1,428 1,750 Council Tax income on Second Homes in excess of budget 328 328 328 328 328 Adjustment to additional Council Tax recoveries (para 4.1.7) (149) (147) (145) (143) (143) Transfer to Reserves in relation to Strathclyde Pension Fund (9,928) 0 0 0 0 Released Strathclyde Pension Fund Gain 2,000 2,000 0 0 0 Total Estimated Funding 300,901 309,925 307,029 306,140 305,257 4.2 Base Budget 4.2.1 The 2024-25 budget approved by Council on 22 February was £301.885m. An amendment in respect of re-running the Council Tax annual billing amounting to £0.080m was agreed on 15 April 2024 resulting in a revised base budget of £301.965m. 4.2.2 There have been three changes to the base budget since reported to Policy and Resources Committee on 15 August 2024: The Teachers pay award was originally agreed up to 31 July 2024 as part of a previous 28 month deal and any increase beyond that date had still to be confirmed, however a 3% increase was assumed at that time. The base budget for 2025-26 needs to reflect the full year effect of the 3% increase which amounts to £0.656m. The latest offer in relation to the 2024-25 pay award requires Councils to fund a 3.2% increase with Scottish Government funding between 3.2% and the current pay offers. This is for all pay bargaining groups. As this is more than is currently in the 2024-25, this creates a further net
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pressure on the base budget of £0.296m. At the time of writing, the teachers pay award has been agreed but SJC and Chief Officers is still in negotiations. In 2023-24 a £1.4m contingency was set aside for inflationary pressures, £0.936m of which was allocated to cover increased utility costs for 2024-25 based on projections at that time. However based on actual costs at the end of 2023-24 it is estimated that £0.200m of this can be returned to the General Fund in 2024-25 resulting in a reduction to the base budget. 4.2.3 For future years, there are adjustments required to the base budget from decisions by Council on 22 February 2024 and other adjustments as noted in the table below: 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Base Budget 2024-25 301,965 301,965 301,965 301,965 301,965 Adjust for one-off 2024- 25 cost pressures (130) (130) (130) (130) (130) Adjust for one-off 2024- 25 Management/ Operational savings 1,694 1,694 1,694 1,694 1,694 Children’s Social Care Pay Uplift 63 63 63 63 63 Teachers – full year impact of 3% in 2024-25 656 656 656 656 656 0.2% increase in 2024- 25 for all employees excluding Social Work 296 296 296 296 296 Release of contingency back to the general fund (200) (200) (200) (200) (200) Revised Base Budget 304,344 304,344 304,344 304,344 304,344 4.3 Employee Cost Changes Pay Award 4.3.1 The SJC and Chief Officers pay awards for 2024-25 have still to be agreed and may have a further impact on the base budget if the pay award is higher than the updated net pressure of 3.2% now allowed for in the base budget. The latest offer has again been rejected by the Trade Unions and it is still unclear at what level the pay award will be agreed for 2024-25 and subsequently the financial impact this will have on future years but this will be kept under review as further information becomes available. The Teachers pay award has been agreed up to 31 July 2024 as part of a previous 28 month deal and a net pressure of 3.2% for the remainder of 2024- 25 has now been accounted for within the base budget. At the time of writing this report, the teachers pay award for 2024-25 has been agreed with the Council cost within the figure that is now in the base budget.
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4.3.2 For future years, the previous assumption of a 2% increase remains unchanged. The best case scenario also remains at a 2% increase (on the basis that the increase is not likely to be less than this) and the worst case scenario assumes a 5% increase. The pay assumption is very difficult to predict but there is an expectation as general inflation reduces that pay inflation will also reduce, however, there remains a risk that the pay award could be higher and this will be monitored and updated as necessary. Every 1% over and above what is budgeted would add an additional pressure of circa £1.7m. 4.3.3 On 4 April 2024 a Scottish Statutory Instrument was passed regarding increasing councillors pay with effect from 1 April 2024, the detail of which was presented to Council on 25 April. The financial impact of this is an increase of £0.033m which has been adjusted for within the budget outlook. Discussions continue between the Scottish Government and the Scottish Local Authority Remuneration Committee (SLARC) regarding Councillors remuneration which may have a further impact on the budget outlook position and will be included within the budget estimates at a later date if required. Increments 4.3.4 There are no changes to my previous assumption around the cost of employee increments. It has been assumed that for future years, the best case is assumed to be half of the previous year cost, for mid-range and worst case, assumes equal to the cost in 2024-25 (£0.605m). 4.3.5 Strathclyde Pension Fund As detailed in the budget pack presented to Council in February 2024, the employer contribution rate paid to the Strathclyde Pension Fund will fall from 19.3% to 6.5% in 2024-25 and 2025-26 and rise to a sustainable long-term rate of 17.5% in the 2026-27. The reduction in the first 2 years equates to reduced costs of £6.875m per annum relating to Council employees (excluding HSCP). From 2026-27 the costs will rise again to 17.5% therefore this increase is required to be built into projections from 2026-27 onwards. Teacher Numbers 4.3.6 As part of the 2023-24 Local Government Finance Settlement the Scottish Government held back £45.5m on the condition that Council’s maintained teacher numbers at the 2022 census level. The December 2023 census showed a reduction in teacher numbers of 160. Ultimately, Scottish Government released the £45.5m to all local authorities, regardless of whether they maintained teacher numbers. Scottish Government has, for 2024-25, removed £145.5m from the General Revenue Grant and has instead issued this as a specific grant, conditional on maintaining teacher numbers at the level set out in each Council’s grant letter. For Argyll and Bute Council this is £2.1m and there is an expectation that we will maintain 848 teachers, this was the figure returned in the 2023 census and 13 teachers more than in the base
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budget. To maintain a figure of 848 teachers would result in a cost pressure of £0.880m. Discussions are continuing between COSLA and the Scottish Government and at this stage the additional cost has not been added into the budget outlook but there remains a risk that if we do not maintain the teacher numbers in our grant letter then some or all of the specific grant could be withheld. 4.3.7 The table below summarises the employee cost movements in the mid-range scenario for Council services. The employee cost increases relating to Social Work within the Health and Social Care Partnership are summarised within paragraph 4.6.4. 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Pay Award 3,448 6,651 9,918 13,250 16,649 Pay Award – Elected Members 33 33 33 33 33 Increments 605 1,210 1,815 2,420 3,025 Increase in costs after one-off reduction in Strathclyde Pension Fund rate ceases 0 6,875 6,875 6,875 6,875 Total Employee Cost Changes 4,086 14,769 18,641 22,578 26,582 4.4 Non-Pay Inflation 4.4.1 The Council only include non-pay inflation within the budget where it is deemed to be unavoidable or inescapable. In terms of the budget outlook, unavoidable/inescapable non-pay inflation is built into the best case and mid- range scenarios with a general inflation allowance over and above this built into the worst case. 4.4.2 Officers continue to review areas of non-pay inflation on an ongoing basis. The principle of only budgeting for unavoidable/inescapable remains, however, it has to be noted that in this current financial climate, some budgets with no inflation allowed for are now stretched beyond the point of containing the cost within budget and therefore the budget will now buy less than what it used to be able to buy (so in effect, we will see some cuts as a result). 4.4.3 When creating a budget outlook for future years, there is a risk that inflation assumptions could change during the year. Due to the current inflation uncertainty, it would be prudent to include a contingency for other inflation increases not included in the calculations. A contingency allowance of £0.500m is included within the worst case scenario and a £0.250m allowance included within the mid-range scenario each year. No contingency is included within the best case scenario. This contingency will either be required, reduced or removed to reflect changing circumstances before the 2025-26 budget is set.
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4.4.4 The table below summarises the non-pay inflation in the mid-range scenario for Council services with more detail available in Appendix 2. The non-pay inflation increases relating to Social Work within the Health and Social Care Partnership are summarised within paragraph 4.6.4. Inflation Category 2025-26 Previous estimates (Aug 2024) £000 2025-26 Updated estimates £000 Increase/ (Decrease) £000 Utilities - Electricity, Gas, Oil, Water 179 173 (6) Street Lighting Electricity 23 30 7 Vehicle Fuel 32 34 2 Vehicle Charging Point Electricity 5 5 0 Central Repairs-Outside Contractors 76 89 13 Waste/Landfill Tax 206 803 597 NPDO/HUB Schools 391 452 61 Community Pool Subsidies 31 37 6 Residential Schools 33 36 3 Pre-Primary Partner Providers 227 197 (30) ICT 210 215 5 Catering Purchases and Milk 64 64 0 Insurance 459 459 0 Bitumen – Roads 15 16 1 Contribution to Joint Boards 38 39 1 Annual External Audit Fee 9 10 1 Public Transport 220 231 11 School Transport 153 153 0 SEPA – Waste Disposal 7 7 0 Contingency for unidentified/ insufficient inflation estimate 250 250 0 Total 2,628 3,300 672 4.4.5 The most significant movement in non-pay inflation since last reported in August 2024 relates to Landfill Tax due to an anticipated increase in rates from 1st April 2025 to bring Scottish Landfill Tax in line with the rest of the UK. This decision is not final yet and will be considered as part of the Scottish Budget however historically Scotland has followed on from the rest of the UK therefore it would be prudent to include this increase at this stage. This would see an increase in the standard rate from £103.70 per tonne to £126.15 per tonne. The estimated financial impact of this is circa £0.700m however due to reduced tonnage volumes in Helensburgh this has a net impact of £0.597m. Note that this is a one-off increase in 2025-26 due to the review currently being undertaken in relation to the landfill tax ban. 4.4.6 The cumulative inflation for years 2026-27 to 2029-30 is noted in the table below and is based on future years estimates of inflation at this point it time, however, due to the volatility of inflation recently it is very difficult to predict and
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the estimates will be kept under close review. 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Unavoidable/Inescapable 5,444 8,193 11,107 14,203 Total Non-Pay Inflation 5,444 8,193 11,107 14,203 4.5 Cost and Demand Pressures 4.5.1 For a number of years, services have worked on the basis of having to contain any cost and demand pressures within current resources where possible, however, there are a number of cost and demand pressures already identified for Council services which were reported as part of the budget in February 2024. Since the Policy and Resources Committee on 15 August 2024 the following changes have been made to the cost and demand pressures: Amended – Bus Transport Contracts – a further contract renewal has been received which has increased the cost pressure by £0.167m. New – Stadiums Income Saving – the saving is no longer fully achievable due to lower than anticipated income generation as more clubs are now using the all weather facilities. This will now be considered as part of the Roads and Infrastructure Review (£0.020m). New – Loans Charges – as agreed at Policy and Resources Committee on 15th August borrowing would be taken out to fund some of the costs associated with the weather incident which creates a recurring revenue pressure (£0.080m). New – Migration from Skype for Business to Teams Telephony to ensure those staff who need to make external calls can do so as agreed at Policy and Resources Committee on 15 August 2024. This pressure does not start until 2026-27. New – ICT Equipment for Hybrid Council meetings – Release of Earmarked Reserve to the General Fund as agreed by Council in September results in a recurring cost pressure (£0.012m). New – System for Debt Counselling and Welfare Rights Management – Release of Earmarked Reserve to the General Fund as agreed by Council in September results in a recurring cost pressure (£0.006m). New – Community Resilience Fund – Release of Earmarked Reserve to the General Fund as agreed by Council in September results in a recurring cost pressure (£0.005m). 4.5.2 As with inflation, when creating a budget outlook beyond one year, there is a risk that unknown cost and demand pressures will emerge that have not been included within the outlook. It is suggested that a £0.250m general allowance for this is included within the best case scenario, £0.500m within the mid-range scenario and a £1m allowance included within the worst case scenario each year. 4.5.3 The cost pressures are detailed in appendix 3 and summarised in the table below and will be subject to review during the financial year. 2025-26 2026- 2027-28 2028- 2029-30
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£000 27 £000 £000 29 £000 £000 Universal Credit – HB Admin Grant 40 80 120 160 200 ASN Support 202 410 624 624 624 SEEMiS Membership Fees 0 7 7 7 7 Maintenance/Repair of School Estate 360 360 360 360 360 Election costs 0 0 350 0 0 ICT Equipment for Hybrid Council Meetings 12 12 12 12 12 System costs for Debt Counselling and Welfare Rights Management 6 6 6 6 6 Community Resilience Fund 5 5 5 5 5 Education ICT Network Infrastructure 295 295 348 348 348 Compliance with BMW Ban 462 925 925 925 925 Local Development Plan 0 50 0 0 0 Increase to borrowing costs as a result of investment agreed at February 2024. 282 282 282 282 282 Civica Revenue and Benefits System 0 0 63 63 63 Bus Transport Contracts 877 877 877 877 877 Roads & Amenity Services Income - Saving no longer achievable 100 100 100 100 100 Stadiums Income – Saving no longer fully achievable 20 20 20 20 20 Loans Charges for Weather Incident as agreed at P&R Committee 80 80 80 80 80 Migration from Skype for Business to Teams Telephony 0 63 300 300 300 Insurance premium increases 309 309 309 309 309 Allowance for pressures in future years 500 1,000 1,500 2,000 2,500 Total Cost and Demand Pressures 3,550 4,881 6,288 6,478 7,018 4.5.4 The cost and demand pressures relating to Social Work within the Health and Social Care Partnership are summarised within paragraph 4.6.4. 4.6 Health and Social Care Partnership 4.6.1 The Council, at the budget meeting on 24 February 2024, agreed a base allocation to the HSCP of £78.611m for 2024-25 as well as an indicative flat cash allocation for 2025-26. The indicative allocation for 2026-27 onwards increases by £3.053m to account for the cessation of the one-off employer
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contribution rate saving relating to the Strathclyde Pension Fund. 4.6.2 As previously reported and detailed in paragraph 4.1.2, funding has been received in respect of the Children’s Social Care pay uplift of which £0.180m is a straight pass through to the HSCP therefore the payment made to them will increase by this amount each year. 4.6.3 In the budget outlook, I have assumed flat cash allocations across all scenarios, with the exception of the Strathclyde Pension Fund adjustment. These are only assumptions and it will be a matter for Council to consider as part of the budget process next year. 4.6.4 Social Work services have already identified a number of cost and demand pressures and these are summarised below and included within Appendix 4 for information purposes. It is expected that the HSCP absorb their cost and demand pressures from their funding allocation. Note that these only extend to three years rather than the five years within this Council budget outlook. 2025-26 £000 2026-27 £000 2027-28 £000 Pay Inflation 1,049 2,301 3,590 Pay Increments 172 344 516 Non-Pay Inflation 950 1,997 3,106 Care Services for Older People 447 901 1,362 Care Services for Younger Adults 60 121 184 Adult Services - Supported Living 112 223 335 Adult Services – Mental Health 65 131 199 Continuing Care for Looked After Children 939 993 1,048 Unknown Cost and Demand Pressures 500 1,000 1,500 Total Cost Increase estimates for Social Work 4,294 8,011 11,840 4.7 Live Argyll 4.7.1 In the budget outlook, I have assumed allocations to Live Argyll on the same basis as the Scottish Government funding assumptions which range from a 1% reduction (best case) and flat cash (worst case) with a mid-range reduction of 0.5%. This is only an assumption and it will be a matter for Council to consider as part of the budget process next year. The indicative allocation for 2026-27 onwards also increases by £0.118m to account for the cessation of the one-off employer contribution rate saving relating to the Strathclyde Pension Fund. 4.8 Estimated Budget Gap PRIOR to Measures to Balance the Budget 4.8.1 The budget gap in the mid-range scenario after allowing for the current base commitments, employee adjustment, non-pay inflation and cost and demand pressures is summarised in the table below. This is the budget gap prior to factoring in any previous savings decisions or potential options towards
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balancing the budget. 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Base Budget 304,344 304,344 304,344 304,344 304,344 Employee Cost Changes 4,086 14,769 18,641 22,578 26,582 Non-Pay Inflation 3,300 5,444 8,193 11,107 14,203 Cost and Demand Pressures 3,550 4,881 6,288 6,478 7,018 Adjustment to HSCP Payment re SPF gain 180 3,233 3,233 3,233 3,233 Adjustment to Live Argyll Payment (16) 102 101 101 100 Total Estimated Expenditure 315,444 332,773 340,800 347,841 355,480 Estimated Funding 300,901 309,925 307,029 306,140 305,257 Estimated Budget Surplus / (Gap) Cumulative (14,543) (22,848) (33,771) (41,701) (50,223) 4.9 Measures to Balance the Budget 4.9.1 In 2024-25 a general inflationary increase of 6% was applied to fees and charges. For the budget outlook a range of between 3% (worst case) and 9% (best case) with a mid-range of 6% has been included. There is no general inflationary increase of 6% applied to Piers and Harbours to ensure that any income generated is not in excess of expenditure. 4.9.2 Some of the policy options were agreed at the Council meeting on 22 February 2024 that impacted on 2025-26 and beyond. These are now factored into the budget outlook, reducing the budget gap. 4.9.3 In terms of Council Tax, a 5% increase had been assumed in the mid and worst case scenarios and a 7% increase in the best case scenario for 2025-26 on the basis that the majority of Councils increased their Council Tax by at least 5% in 2023-24 prior to the freeze in 2024-25. From 2026-27 a 5% increase has been assumed in all scenarios. In light of the significant budget gap, this is an area that Members will require to give due consideration to as part of the budget setting for 2025-26 and beyond. 4.9.4 During 2024-25 a review was undertaken of all earmarked reserves to establish whether they were still required for the originally intended purpose. The results of the review were presented to Council on 26 September 2024 where Members agreed to release £1.558m of existing earmarked reserves back to the General Fund to help bridge the budget gap in 2025-26. This is one-off in nature and therefore reduces the gap in 2025-26 only. Recurring cost pressures totalling £0.023m were also identified in relation to this which have been incorporated at Section 4.5 above. 4.9.5 The table below summarises the proposed measures to balance the budget in the mid-range scenario.
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2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Fees and Charges Increase 385 771 1,156 1,541 1,927 Council Tax Increase 3,170 6,530 10,075 13,812 17,753 Previously agreed Policy Savings 248 724 1,360 1,829 1,943 Previously agreed Management/Operational Savings 35 35 35 35 35 Earmarked Reserves released to the General Fund 1,558 0 0 0 0 Total Measures to Balance the Budget 5,396 8,060 12,626 17,217 21,658 4.10 Estimated Budget Gap AFTER Measures to Balance the Budget 4.10.1 The table below summarises the estimated budget gap in the mid-range scenario. 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Estimated Budget Gap Prior to Measures to Balance Budget (14,543) (22,848) (33,771) (41,701) (50,223) Savings Measures 5,396 8,060 12,626 17,217 21,658 Estimated Budget Surplus / (Gap) Cumulative (9,147) (14,788) (21,145) (24,484) (28,565) Estimated Budget Surplus / (Gap) In Year (9,147) (5,641) (6,357) (3,338) (4,081) 4.10.2 In the mid-range scenario, the budget gap estimated over the five year period 2025-26 to 2029-30 is £28.565m with a gap of £9.147m in 2025-26. 4.10.3 The budget gap in the best case scenario over the five years is £15.644m with a gap of £5.075m in 2025-26 and in the worst case scenario, the budget gap over the five years is £93.220m with a gap of £23.017m in 2024-25. A summary of all three scenarios is included within Appendix 1. 4.10.4 The changes from the previous anticipated outlook reported to the Council on 15 August 2024 are summarised in the table below: 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Previously reported budget surplus / (gap) Cumulative (9,484) (13,730) (19,610) (22,693) (26,504) Increase in Council Tax Growth by 0.25% in 165 174 185 194 205
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2025-26 Teachers Pay Award 2024-25 – full year impact of 3% increase (656) (656) (656) (656) (656) 0.2% increase in 2024- 25 Pay Award for all employees (Excl. SW) (296) (296) (296) (296) (296) Release of inflationary contingency in 2024-25 to General Fund 200 200 200 200 200 Council Tax Income on Second Homes in excess of budget 328 328 328 328 328 Adjustment to Non-Pay Inflation (672) (455) (706) (971) (1,252) Amendment to Cost Pressure – Bus Contracts (167) (167) (167) (167) (167) New Cost Pressure - Stadiums Income – Saving no longer fully achievable (20) (20) (20) (20) (20) New Cost Pressure - Loans Charges for Weather Incident as agreed at P&R Committee (80) (80) (80) (80) (80) New Cost Pressure - Migration from Skype for Business to Teams Telephony 0 (63) (300) (300) (300) New Cost Pressure – Hybrid Council Meetings Equipment Maintenance (12) (12) (12) (12) (12) New Cost Pressure – Maintenance of Debt Counselling and Welfare Rights System (6) (6) (6) (6) (6) New Cost Pressure – Community Resilience Fund (5) (5) (5) (5) (5) Earmarked Reserves released to the General Fund 1,558 0 0 0 0 Revised Budget Surplus / (Gap) Cumulative (9,147) (14,788) (21,145) (24,484) (28,565) 5. CONCLUSION 5.1 In the mid-range scenario, the budget gap estimated over the five year period 2025-26 to 2029-30 is £28.565m with a gap of £9.147m in 2025-26. Council
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officers are continuing to explore savings options during 2024-25 and these will be presented to Members at a future date. 5.2 This is a very challenging budget outlook position and the level of Scottish Government grant and the pay award are two assumptions that could alter the figures significantly. These will be kept under close review and the budget outlook updated as and when further information becomes available. 6. IMPLICATIONS 6.1 Policy - Sets out the budget outlook that provides the financial envelope for policy decisions. 6.2 Financial - Sets best, worst and mid-range scenarios in respect of the budget outlook. The medium to longer term financial strategy is being updated and the Council are actively continuing to pursue opportunities to mitigate against future budget gaps. 6.3 Legal - None directly from this report but Council will need to balance the budget. 6.4 HR - None directly from this report but there is a strong link between HR and budgets. 6.5 Fairer Scotland Duty - See below 6.5.1 Equalities None directly from this report but any proposals to address the estimated budget gap will need to consider equality issues. 6.5.2 Socio Economic Duty None directly from this report but any proposals to address the estimated budget gap will need to consider socio economic issues. 6.5.3 Islands Duty None directly from this report but any proposals to address the estimated budget gap will need to consider any island specific issues. 6.6 Climate Change The Council is committed to addressing climate change and reviews how Services are delivering this on an ongoing basis within the available budget resources. 6.7 Risk - None directly from this report but any proposals to address the estimated budget gap will need to consider risk. 6.8 6.9 Customer Service – The Rights of the Child (UNCRC) - None directly from this report but any proposals to address the estimated budget gap will need to consider customer service. None Kirsty Flanagan Executive Director/Section 95 Officer 27 September 2024 Policy Lead for Finance and Commercial Services: Councillor Ross Moreland APPENDICES:
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Appendix 1 – Budget Outlook, Best, Worst and Mid-Range Scenarios Appendix 2 – Non Pay Inflation Appendix 3 – Cost and Demand Pressures (Council Services) Appendix 4 – Cost and Demand Pressures (Social Work) For further information contact Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk
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BUDGET OUTLOOK 2025-26 to 2029-30 APPENDIX 1 POLICY AND RESOURCES COMMITTEE - 10 OCTOBER 2024 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Base Budget 301,965 301,965 301,965 301,965 301,965 301,965 301,965 301,965 301,965 301,965 301,965 301,965 301,965 301,965 301,965 Base Budget Adjustments 2,269 2,269 2,269 2,269 2,269 2,379 2,379 2,379 2,379 2,379 2,371 2,371 2,371 2,371 2,371 Revised Base Budget 304,234 304,234 304,234 304,234 304,234 304,344 304,344 304,344 304,344 304,344 304,336 304,336 304,336 304,336 304,336 Pay Award 3,448 6,651 9,918 13,250 16,649 3,448 6,651 9,918 13,250 16,649 11,414 22,873 34,905 47,539 60,805 Pay Award - Elected Members 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 Pay Increments 329 658 986 1,315 1,643 605 1,210 1,815 2,420 3,025 605 1,210 1,815 2,420 3,025 Adjustment to Employee Base 0 6,875 6,875 6,875 6,875 0 6,875 6,875 6,875 6,875 0 6,875 6,875 6,875 6,875 Total Employee Cost Changes (Council Services) 3,810 14,217 17,812 21,473 25,200 4,086 14,769 18,641 22,578 26,582 12,052 30,991 43,628 56,867 70,738 Non-Pay Inflation - Council Services 2,739 4,537 6,920 9,442 12,116 3,300 5,444 8,193 11,107 14,203 5,461 9,555 14,275 19,193 24,325 Housing Benefits Admin Grant 40 80 120 160 200 40 80 120 160 200 40 80 120 160 200 ASN Support 202 410 624 624 624 202 410 624 624 624 202 410 624 624 624 SEEMIS Membership Fees 0 7 7 7 7 0 7 7 7 7 0 7 7 7 7 Maintenance/Repair of School Estate 360 360 360 360 360 360 360 360 360 360 360 360 360 360 360 Election Costs 0 0 327 0 0 0 0 350 0 0 0 0 370 0 0 Equipment Maintenance associated with Hybrid Council Meetings 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 Maintenance of Debt Counselling and Welfare Rights System 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 Community Resilience Fund 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Education ICT Network Infrastructure 295 295 348 348 348 295 295 348 348 348 295 295 348 348 348 Compliance with BMW Ban 462 925 925 925 925 462 925 925 925 925 2,116 925 925 925 925 Planning (Local Development Plan) 0 50 0 0 0 0 50 0 0 0 0 50 0 0 0 Borrowing to pay for weather incident costs 282 282 282 282 282 282 282 282 282 282 282 282 282 282 282 Civica Revenue and Benefits System 0 0 37 37 37 0 0 63 63 63 0 0 137 137 137 Bus Transport Contracts 877 877 877 877 877 877 877 877 877 877 877 877 877 877 877 Roads and Amenity Services saving no longer achievable in full 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Stadiums Income saving no longer achievable in full 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Loans Charges relating to Weather Incident 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 Migration from Skype for Busines to Teams Telephony 0 19 282 282 282 0 63 300 300 300 0 108 318 318 318 Increase in insurance premiums 309 309 309 309 309 309 309 309 309 309 309 309 309 309 309 Allowance for Cost and Demand Pressures Future Years 250 500 750 1,000 1,250 500 1,000 1,500 2,000 2,500 1,000 2,000 3,000 4,000 5,000 Total Cost and Demand Pressures 3,300 4,337 5,471 5,434 5,724 3,550 4,881 6,288 6,478 7,018 5,704 5,926 7,900 8,570 9,610 Adjustment to Health and Social Care Partnership Payment 180 3,233 3,233 3,233 3,233 180 3,233 3,233 3,233 3,233 180 3,233 3,233 3,233 3,233 Adjustment to Live Argyll Management Fee (33) 86 85 84 83 (16) 102 101 101 100 0 118 118 118 118 Total Estimated Expenditure PRIOR to measures to balance the budget 314,230 330,643 337,755 343,899 350,590 315,444 332,773 340,800 347,841 355,480 327,733 354,159 373,490 392,317 412,360 Scottish Government Grant 246,129 246,129 246,129 246,129 246,129 244,900 243,677 242,460 241,249 240,044 243,670 241,236 238,826 236,440 234,078 Transfers to/from Reserves - Strathclyde Pension Fund (7,928) 2,000 0 0 0 (7,928) 2,000 0 0 0 (7,928) 2,000 0 0 0 Council Tax 64,086 64,565 65,047 65,533 66,020 63,929 64,248 64,569 64,891 65,213 63,778 63,940 64,104 64,268 64,427 Total Funding 302,287 312,694 311,176 311,662 312,149 300,901 309,925 307,029 306,140 305,257 299,520 307,176 302,930 300,708 298,505 Budget Surplus / (Gap) PRIOR to measures to balance the budget (11,943) (17,949) (26,579) (32,237) (38,441) (14,543) (22,848) (33,771) (41,701) (50,223) (28,213) (46,983) (70,560) (91,609) (113,855) Measures to Balance the Budget: Fees and Charges 578 578 578 1,156 1,156 385 771 1,156 1,541 1,927 193 385 578 771 963 Council Tax Increase above SG Funding 4,449 7,873 11,492 15,317 19,357 3,170 6,514 10,042 13,762 17,684 3,162 6,490 9,993 13,679 17,557 Council Tax Increase (Growth element) 0 89 157 230 306 0 16 33 50 69 0 32 65 100 137 Management/Operational Savings agreed Feb 2023 35 35 35 35 35 35 35 35 35 35 35 35 35 35 35 Policy Savings Agreed Feb 2023 248 724 1,360 1,829 1,943 248 724 1,360 1,829 1,943 248 724 1,360 1,829 1,943 Earmarked Reserves Released to the General Fund 1,558 0 0 0 0 1,558 0 0 0 0 1,558 0 0 0 0 Total Measures to Balance the Budget 6,868 9,299 13,622 18,567 22,797 5,396 8,060 12,626 17,217 21,658 5,196 7,666 12,031 16,414 20,635 Budget Surplus / (Gap) Cumulative AFTER measures to balance the budget (5,075) (8,650) (12,957) (13,671) (15,644) (9,147) (14,788) (21,145) (24,484) (28,565) (23,017) (39,317) (58,529) (75,195) (93,220) Budget Surplus / (Gap) In Year AFTER measures to balance the budget (5,075) (3,575) (4,307) (714) (1,974) (9,147) (5,641) (6,357) (3,338) (4,081) (23,017) (16,299) (19,212) (16,666) (18,024) Mid-Range Scenario Worst Case ScenarioBest Case Scenario
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# NON-PAY INFLATION (COUNCIL) Appendix 2 Service Category Basis of Inflation Inflation Percentage Mid Range 2025/26 Council Wide Electricity Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 115,736 Council Wide Gas Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 23,290 Council Wide Heating Oils Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 11,279 Council Wide Solid Fuel Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 8,116 Council Wide Water Charges Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 15,967 Council Wide Vehicle Fuel Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 33,783 Council Wide Central Repairs - Outside Contractors Based on estimate for RPI at 2025 Q1 tracking the Bank of England forecast for CPI at August 2024, with 0.5% tolerance for best and worst case. 4.20% 89,119 Council Wide Insurances Mid-point set at 20% for 2025/26 per uplifts in 2024/25. Reduced to 15% in subsequent years, with 0.5% tolerance for best and worst case. 20.00% 459,473 Council Wide Contribution to Joint Boards Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 39,361 Council Wide Contingency for unidentified/insufficient inflation estimate £250k built in to mid-range and £500k built in to worst case scenario 250,000 1,046,124 Education Pre-Primary Partner Provider Uplift Estimate for the increase in the Real Living Wage, with a tolerance of 0.5% for best and worst case.To be updated when new RLW figure is announced in November 2024. 5.00% 197,070 Education External School Placements Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 36,106 Commercial Services Catering Purchases Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 63,784 Legal & Regulatory Support Leisure SLA-MAKI/Islay Pools Based on estimate for RPI at 2025 Q1 tracking the Bank of England forecast for CPI at August 2024, with 0.5% tolerance for best and worst case. 4.20% 8,407 Legal & Regulatory Support Leisure SLA-Atlantis Based on estimate for RPI at 2025 Q1 tracking the Bank of England forecast for CPI at August 2024, with 0.5% tolerance for best and worst case. 4.20% 28,529 Legal & Regulatory Support NPDO-Variable Element Based on estimate for RPI at 2025 Q1 tracking the Bank of England forecast for CPI at August 2024, with 0.5% tolerance for best and worst case. 4.20% 366,569 Legal & Regulatory Support NPDO-Utilities Rebate Based on estimate for RPI at 2025 Q1 tracking the Bank of England forecast for CPI at August 2024, with 0.5% tolerance for best and worst case. 4.20% (13,867) Legal & Regulatory Support NPDO-Electricity Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 18,308 Legal & Regulatory Support NPDO-Gas Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 7,420 Legal & Regulatory Support NPDO-Heating Oil Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 2,909 Legal & Regulatory Support NPDO-LPG Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 2,532 Legal & Regulatory Support NPDO-Water Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 10,881 Legal & Regulatory Support HUB-Variable Element Based on estimate for RPI at 2025 Q1 tracking the Bank of England forecast for CPI at August 2024, with 0.5% tolerance for best and worst case. 4.20% 57,372 786,020 Customer and Support Services ICT Estimate added at 10% to reflect input from ICT on increasing costs. 10.00% 214,650 Financial Services Annual External Audit Fee Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 9,529 Roads and Infrastructure Public Transport Reflects a 3% uplift for annual inflation set within the terms of the contracts between the Council and the service providers. 3.00% 231,131 Roads and Infrastructure School Transport Reflects a 3% uplift for annual inflation set within the terms of the contracts between the Council and the service providers. 3.00% 152,562 Roads and Infrastructure Waste PPP-Private Contractor Inflation Based on 85% of an estimate for RPIX Rate at 2025 Q1 tracking the Bank of England CPI forecast for CPI at February 2024, with a 0.5% tolerance for best and worst case. 3.00% 224,792 Roads and Infrastructure Waste PPP-Central Government Inflation Based on Landfill Tax increase between 23/24 and proposed 24/25 rate with a 0.5% tolerance for best and worst case. 21.65% 508,770 Roads and Infrastructure Helensburgh Waste Disposal Costs Based on estimate for RPI at 2025 Q1 tracking the Bank of England forecast for CPI at August 2024, with 0.5% tolerance for best and worst case. 4.20% 68,875 Roads and Infrastructure Scottish Environmental Protection Agency Reflects the annual inflation trend in the 2023/24 and 2024/25 financial years with a 0.5% tolerance for best and worst case. 8.00% 7,211 Roads and Infrastructure Roads - Bitumen for Road Surfacing Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 15,639 Roads and Infrastructure Electricity - Street Lighting Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 29,915 Roads and Infrastructure Electricity - Vehicle Charging Points Based on the August 2024 Bank of England Monetary Policy Committee CPI Forecast for 2025 Q1, with a 0.5% tolerance for best and worst case. 2.70% 4,781 1,467,855 3,299,999 Council Wide Total Executive Director Douglas Hendry - Total Executive Director Kirsty Flanagan - Total Total Non-Pay Inflation in the Mid Range
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COUNCIL COST AND DEMAND PRESSURES 2025-26 to 2029-30 Department Service Cost/Demand Pressure 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Executive Director - Kirsty Flanagan Financial Services Universal Credit “Full” Service went live in Sept 2018, managed migration for working age claimants began in August 2023 and will be completed by December 2025. Details of the migration of Pension age Housing Benefit claimants have not yet been released initial indications was that the overall migration to Pension Credit will be completed in 2028/2029 although that looks unlikely now. The DWP will reduce the Housing Benefit Administration Subsidy they pay to the Council as some claimants come off of Housing Benefit processed by Council staff and go onto Universal Credit processed by the DWP. The Council’s caseload has reduced since implementation of Universal Credit but it is hard to predict just how quickly the rest of the caseload will migrate from Housing Benefit to Universal Credit between now and 2028/2029. These figures represent our best estimates at this time. 40 80 120 160 200 40 80 120 160 200 40 80 120 160 200 Executive Director - Douglas Hendry Education The demand for ASN support in Argyll and Bute has continued to grow with a significant increase in, and early identification of children and young people presenting with complex additional support needs, including mental health difficulties which manifests often in dysregulated behaviours. It is anticipated that growth continues over the next 5 years however the extent of this growth is difficult to determine. Scottish Government statistics show that the number of pupils identified with ASN has increased markedly since 2010 and there continue to be year on year increases. These increases are likely due to continue as we see the impact of the Covid 19 pandemic on children and young people who were born from 2020 onwards and as we work with partners to streamline assessment processes which help us to understand need more thoroughly. Scottish Government statistical datasets show that the percentage of school roll in mainstream schools of pupils with ASN has increased by approximately 3% year on year. Within many authorities, this means increased numbers of children accessing specialist provision. As Argyll and Bute do not have equitable access to Specialist provision in all areas, the cost pressure associated with offering appropriate support within our local schools continues to increase in line with need. 202 410 624 624 624 202 410 624 624 624 202 410 624 624 624 Executive Director - Douglas Hendry Education The SEEMiS group, provider of the Council's Education Management Information System, recently reviewed their long term financial plan and it is anticipated there may be a small pressure from 2026-27 onwards. 0 7 7 7 7 0 7 7 7 7 0 7 7 7 7 Executive Director - Douglas Hendry Education There is an ongoing need for the Council to manage the maintenance/repair of Schools estate through the education central repairs budget. The demand on this budget has continued to increase due to the amount of statutory maintenance work and emergency repairs which no longer allows for any planned maintenance to be carried out. The cost of planned maintenance has fallen on the service which cannot be sustained. Failure to carry out planned maintenance will impact significantly on the cost of emergency repairs in the future. The Council has over 75 school buildings to maintain and more reactive maintenance work is required from Education Central Repairs due to reduced capital funding. 360 360 360 360 360 360 360 360 360 360 360 360 360 360 360 Executive Director - Douglas Hendry Legal and Regulatory Services Estimated cost (to be borne by the Council) of carrying out local Government elections in May 2027 (and in financial year 2027/28). Operating approx. 100 polling stations and carrying out poll and count for 11 Multi member wards – requiring 11 separate counts 0 0 327 0 0 0 0 350 0 0 0 0 370 0 0 Executive Director - Douglas Hendry Legal and Regulatory Services As a result of the Earmarked Reserve associated with Hybrid Council meetings being released back to the General Fund, as presented to Council on 26th September 2024, recurring funding is required to maintain the ICT Equipment. 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 Executive Director - Douglas Hendry Legal and Regulatory Services As a result of the Earmarked Reserve associated with the Debt Counselling and Welfare Right Management System being released back to the General Fund, as presented to Council on 26th September 2024, recurring funding is required to maintain the system. 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 Non Departmental Non Departmental/Legal & Regulatory Support As a result of the Earmarked Reserve associated with the Community Resilience Fund being released back to the General Fund, as presented to Council on 26th September 2024, recurring funding is required based on historic spend. 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Executive Director - Douglas Hendry and Kirsty Flanagan Education and ICT The Education ICT Network infrastructure in its current design is no longer suitable to support the future delivery of the education digital learning vision and strategy. It requires a transformative technology upgrade, improved security, and reconfiguration to support in-school and at home learning. There are increased security threats and risks to the corporate and education networks by retaining the education network in its present state. ICT does not have the resource or capacity to undertake a strategic transformation of this scale and complexity without significant investment in hardware and software solutions, and additional engineering resources. It is anticipated a programme of works could take up to two years to fully deliver, and due to the rising security threats, commencement by Summer 2024 is recommended. Capital Costs and revenue costs for 2024-25 have been identified through repurpose of earmarkings. The cost pressure for Education from 2025-26 is £180k for specialist software licensing and an annual revenue requirement for additional engineering resource of £115k as a future cost pressure for ICT. 295 295 348 348 348 295 295 348 348 348 295 295 348 348 348 Best Case Mid Range Scenario Worst Case APPENDIX 3
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COUNCIL COST AND DEMAND PRESSURES 2025-26 to 2029-30 Department Service Cost/Demand Pressure 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2029-30 £000 Best Case Mid Range Scenario Worst Case APPENDIX 3 Executive Director - Kirsty Flanagan Roads & Infrastructure Services Achieving compliance with ban on biodegradable municipal waste (BMW) in 2025. This is the estimated revenue costs from potential scenarios, remaining in or coming out of the current waste PPP contract. Coming out of the Waste PPP contract would create an additional one-off cost (reflected in the worst case senario in financial year 2025-26). Due to the complexity of the model, estimates are subject to change and Caledonian Economic Consultants are currently updated the figures in the original options appraisal. The best case scenario reflects option 4 detailed in the report to the Environment, Development and Infrastructure Committee on 01/12/2022. The worst case scenario reflects option 3 included in the same report and takes into account the risk that the SG will not agree a derogation. The mid-range scenario assumes that the positive discussions with the Scottish Government will result in the Scottish Government contributing towards the pressure facing the Council. 462 925 925 925 925 462 925 925 925 925 2,116 925 925 925 925 Executive Director - Kirsty Flanagan Development & Economic Growth Local development plan will require to be done under the new Planning legislation which is a revised process from the current one and will have a 10 year life. The new process has 2 stages where there is likely to be a cost pressure - a gate check followed by an examination some time later. 0 50 0 0 0 0 50 0 0 0 0 50 0 0 0 Executive Director - Kirsty Flanagan Financial Services/Roads and Infrastructure Services At the budget setting meeting in February 2024 it was agreed to borrow to pay for the £4.348m of costs relating to the weather incident that were not claimable through the Bellwin scheme. Whilst the Council secured additional funding in relation to the weather related costs, this allowed the Council to freeze the Council Tax, therefore the borrowing is still required, some in relation to the weather cost and some in relation to other capital investments. 282 282 282 282 282 282 282 282 282 282 282 282 282 282 282 Executive Director - Kirsty Flanagan Financial Services The Council’s contract with Civica for the Revenue and Benefits Management System ends in August 2024, this is the system that allows us to bill and collect Council Tax and administer Housing Benefit on behalf of the UK government under statute. In addition the contract for the corporate Electronic Document Management system currently used by Revenue and Benefits services, Social Care, Human Resources and Creditors will end in September 2024. The Council has been engaged in discussions with the supplier of both systems, Civica for around a year to negotiate a reasonable way forward before Civica press ahead with plans to migrate their systems to the Cloud and remove its support and development of its existing on premise solutions. The outcome of these discussions is an extension to the contracts for current on premise solutions for three further years to August/September 2027 with full support, however with increases in annual recurring support and maintenance charges and licensing costs. Beyond that three year period we expect significant increases in charges as the supplier moves the systems to the Cloud. The cost pressure for 2027-28 onwards will be added when more information becomes available. 0 0 37 37 37 0 0 63 63 63 0 0 137 137 137 Executive Director - Kirsty Flanagan Roads & Infrastructure Services Bus Transport contracts have seen a siginificant increase in new contract prices due to increased costs for fuel, insurance, maintenance, regualtory compliance and driver wages. New contracts have seen a combined annual increase of £710k across Argyll and Bute Work ongoing on whether savings could be made by reducing services or providing services in a different manner. 877 877 877 877 877 877 877 877 877 877 877 877 877 877 877 Executive Director - Kirsty Flanagan Roads & Infrastructure Services Previously agreed saving from 2018-19 for Roads and Amenity Services Charging (TB13b) is now not fully achievable with a shortfall of £100k. Limited resources within Roads and Infrastructure Services has hampered the ability to procure external work and therefore the income generation expected as part of this saving. Further possible methods to secure external income will be looked at as part of the RIS Review. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Executive Director - Kirsty Flanagan Roads & Infrastructure Services Previously agreed saving from 2018-19 for Stadiums (TB12b) is now not fully achievable with a shortfall of £20k. More clubs are now using the all weather facilities and this has had an impact on Council income that we are unlikley to see improve. Further possible methods to secure external income will be looked at as part of the RIS Review. 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Executive Director - Kirsty Flanagan Roads & Infrastructure Services Loans charge for borrowing agreed at P&R on 15 August 2024 to cover £2.029m of the Weather Incident costs. £50k of the loans charges has been funded from elsewhere within the current budget. 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 Executive Director - Kirsty Flanagan ICT Migration from Skype for Business to Teams Telephony to ensure those staff who need to make and receive external calls can do so. This was agreed at Policy & Resources Committee on 15 August. 0 19 282 282 282 0 63 300 300 300 0 108 318 318 318 Council Wide Council Wide Rightsize Council Insurance Budget - Insurance premiums have risen higher than previous inflationary forecasts due to changes in law, Increase in building values, higher contractor costs for building works, repairs and higher component parts for cars - Inflation 22% 309 309 309 309 309 309 309 309 309 309 309 309 309 309 309 Council Wide Council Wide General provision for unidentified Cost and Demand Pressures 250 500 750 1,000 1,250 500 1,000 1,500 2,000 2,500 1,000 2,000 3,000 4,000 5,000 TOTAL 3,300 4,337 5,471 5,434 5,724 3,550 4,881 6,288 6,478 7,018 5,704 5,926 7,900 8,570 9,610
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# SOCIAL WORK COST AND DEMAND PRESSURES - 2025-26 to 2027-28 APPENDIX 4 Service Cost/Demand Pressure 2025-26 £000 2026-27 £000 2027-28 £000 2025-26 £000 2026-27 £000 2027-28 £000 2025-26 £000 2026-27 £000 2027-28 £000 All Social Work Estimated Pay inflation reflecting a best case 2%, a mid-range of 3% for 2024/25 then 2% for 2025/26 and 2026/27 and a worst case of 5%. Adjusted for the impact of the reduction in the employer's pension contribution rate to 6.5% in 2024/25 and 2025/26 and to 17.5% in 2026/27. 699 1,526 2,369 1,049 2,301 3,590 1,748 3,583 5,802 All Social Work Estimated Pay increments, best case is that 50% of the incremental changes based on 2023/24 are absorbed and in the mid-range and worst case, the increase is in line with the increase in 2023/24. 86 172 258 172 344 516 172 344 516 All Social Work Non-pay inflation, best and worst case based on unavoidable/inescapable inflation and worst case. 775 1,583 2,452 869 1,824 2,838 981 2,067 3,231 All Social Work Non-pay inflation impact of payroll inflation on NHS posts which are recharged to Social Work. 66 142 221 81 173 268 96 204 316 Adult Care Older People Demand Growth: The number of older people is increasing and older people are living longer with significant health and support needs and significant expectations of the support they are entitled to receive. Demand pressure estimates 3% growth in homecare and care home placements, this increase is supported by the growth in clients and care requirements over a number of years although in some areas the service capacity is being fully utilised and service expansion is proving difficult. The best case assumes a 0% increase in spending reflecting the limited service capacity in the area, the mid-range reflects 1.5% growth and the worst case reflects 3% growth. 0 0 0 447 901 1,362 893 1,816 2,769 Adult Care Younger Adults Demand Growth - Physical Disability: There has been continuing increase in demand for care and support services for profoundly disabled younger adults (ie under 65) whose parents have historically provided care but are no longer able to. The best case assumes a 1% increase in spending reflecting the limited service capacity in the area, the mid-range reflects 2% growth and the worst case reflects 3% growth. 30 60 91 60 121 184 90 183 279 Adult Care Mental Health Demand Growth - There has been a continuing increase in demand for residential placements and supported living for mental health services. The best case assumes a 1% increase in spending reflecting the limited service capacity in the area, the mid-range reflects 2% growth and the worst case reflects 3% growth. 32 65 98 65 131 199 97 198 302 Children and Families Looked After Children Demand Growth - there is a continuing demand for placements of children who are cared for by the HSCP. The best case scenario is that the expected additional demand can be funded from within existing resources as a result of planned improvements to the service delivery model (eg shift away from high cost external residential care to local foster and kinship care), the mid case reflects that additional demand in 24/25 be funded from existing resource with £250k per annum thereafter and the worst case reflects £250k per annum. 26 53 80 53 107 162 79 161 245 Children and Families Looked After Children Budget Adjustment - to reflect significant increase in demand for placements in external residential care facilities. 886 886 886 886 886 886 886 886 886 Adult Care Mental Health Budget Adjustment - The Mental Health Supported Living and Residential budgets are carrying a recurring unbudgeted commitment. To address this situation, it is proposed to continue to realign the budget over 2025-26, 2026-27 and 2027-28 whilst also reviewing cases and redesigning services. The adjustment will be reviewed annually to reflect spending reductions delivered as well as any changes to funding and practice resulting from the implementation of the Independent Review of Adult Social Care. 112 223 335 112 223 335 112 223 335 All Social Work Allowance for unknown cost and demand pressures which could arise. The best case assumes unknown pressures totalling £250k per annum, the mid range £500k per annum and the worst case £750k per annum. 250 500 750 500 1,000 1,500 750 1,500 2,250 TOTAL UNFUNDED COST AND DEMAND PRESSURES 2,962 5,210 7,540 4,294 8,011 11,840 5,904 11,165 16,931 Worst CaseMid RangeBest Case