Budget Outlook 2024-25 to 2028-29
Argyll and Bute Council · 12 October 2023
Back to Policy and Resources Committee — 12 October 2023 and its agenda
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 12 OCTOBER 2023 BUDGET OUTLOOK 2024-25 TO 2028-29 1. EXECUTIVE SUMMARY 1.1 This report provides an update to the budget outlook covering the period 2024- 25 to 2028-29, reported to the Policy and Resources Committee on 10 August 2023. 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 10 August 2023 and range between 0.5% increase (best case) and 0.5% reduction (worst case) with a mid-range of 0%. This assumption is based on the settlement over the last few years and the estimates within the spending review which indicate that a flat cash settlement in future years may be the most likely position, however this assumption will be kept under review and updated as necessary during 2023-24. 1.4 There are no changes to my previous assumptions around the growth in Council Tax. The Council tax base has 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. 1.5 There has been one change to the base budget since the report on 10 August 2023 and that relates to the provision of floral displays. The Environment, Development and Infrastructure Committee agreed to pursue a blended model of options for the provision of floral displays and recommended that £0.008m be built into the budget outlook for future years in relation to this. This was subsequently approved at Council on 28 September 2023 and therefore has been built into the base budget. 1.6 Assumptions in respect of employee costs for Council services are as follows: The SJC pay award for 2023-24 has still to be agreed and may have an impact on the base budget if the pay award is greater than the 3.5% allowed for in the budget. The teachers’ pay award for 2023-24 has already been agreed to 31 July 2024 and the current budget is sufficient to cover the deal. For future years, a 2% increase had previously been built into the mid-range scenario, however there is pressure on Local Authorities for an increase beyond this therefore it is prudent to amend the assumptions contained within the budget outlook to 3% in 2024-25 falling back to 2% in 2025-26 onwards.
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Increments are estimated between £0.329m and £0.657m with mid-range £0.657m. A decrease to the long term employer contribution rate paid to Strathclyde Pension Fund (SPF) from 19.3% to 17.5% has resulted in a reduction to employee costs of £1.061m in all scenarios within the budget outlook. 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 10 August 2023 are: Removed - Public Transport Fares – shortfall in previously agreed saving is now able to be offset against underspends elsewhere within public transport therefore the cost pressure is no longer required. New – Persistent Organic Pollutants (POPs) – regulations indicate there will be a ban on placing materials such as sofas and mattresses in landfill resulting in a cost pressure relating to their disposal. 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 agreed in February 2023, indicative allocations for 2024-25 to 2025-26 were agreed on the basis of a flat cash allocation. In the budget outlook I have assumed flat cash allocations across all three scenarios. 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 £43.942m with a gap of £12.193m in 2024-25. 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 2024-25 in all scenarios, reducing to a 3% increase in the mid-range and worst case scenarios in future years with the best case scenario remaining at 5%). Proposed implementation of 100% premium on Council Tax for second homes. Policy savings already agreed by Council in February 2022. Management/Operational savings already agreed by Council February
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2023. Policy savings already agreed by Council in February 2023. 1.13 In the mid-range scenario, the budget gap estimated over the five year period 2024-25 to 2028-29 is £24.728m with a gap of £4.768m in 2024-25. 1.14 The budget gap in the best case scenario over the five years is £2.960m with a gap of £0.447m in 2024-25 and in the worst case scenario, the budget gap over the five years is £85.947m with a gap of £14.181m in 2024-25. A summary of all three scenarios is included within Appendix 1. 1.15 It is recommended that the Policy and Resources Committee: (a) Consider the current estimated budget outlook position for the period 2024- 25 to 2028-29. (b) Recommend to Council that the budget for winter maintenance is right sized by utilising £0.326m of the £1.4m contingency that was set aside for inflationary increases as part of the 2023-24 budget setting process.
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 12 OCTOBER 2023 BUDGET OUTLOOK 2024-25 TO 2028-29 2. INTRODUCTION 2.1 This report provides an update to the budget outlook covering the period 2024- 25 to 2028-29, reported to the Policy and Resources Committee on 10 August 2023. 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: (a) Consider the current estimated budget outlook position for the period 2024- 25 to 2028-29. (b) Recommend to Council that the budget for winter maintenance is right sized by utilising £0.326m of the £1.4m contingency that was set aside for inflationary increases as part of the 2023-24 budget setting process. 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. In my report in August, I advised that in considering the assumptions relating to future years funding I have reflected on the funding over the last 4 years after accounting for new policy commitments, and also the spending review published in May 2022 which indicated that the total budget for Local Government would remain flat cash until 2026-27. As a result of this the assumptions in respect of future years Scottish Government funding range between a 0.5% increase (best case) and a 0.5% reduction (worst case) with a mid-range of 0%. 4.1.2 The table below summarises the mid-range scenario estimates based on a flat cash settlement.
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2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Estimated SG Funding 223,738 223,738 223,738 223,738 223,738 Council Tax 4.1.3 The Council Tax base for 2023-24 was set at £58.896m which reflected a 5% inflation increase and 1.5% growth in the Council Tax base in 2023-24 and 0.5% growth in future years as agreed by the Council on 23 February 2023. 4.1.4 There are no changes to my previous assumptions around the growth in Council Tax. It has been assumed that there will be a 0.5% growth in the mid-range scenario for all years from 2024-25 (0.75% in best case and 0.25% in worst case). 4.1.5 4.1.6 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 £0.264m in 2024-25. Furthermore, the creation of the self-funded Counter Fraud team also ensures minimum additional collections of £0.085m in 2024-25. These additional Council Tax recoveries totalling £0.349m in 2024-25 are built into the budget outlook. 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 2023-24. 4.1.7 The table below summarises the estimated total funding in the mid-range scenario. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Estimated SG Funding 223,738 223,738 223,738 223,738 223,738 Council Tax Base 58,896 58,896 58,896 58,896 58,896 Council Tax Growth 294 590 887 1,186 1,486 Additional Council Tax recoveries (para 4.1.5) 349 200 202 204 206 Total Estimated Funding 283,277 283,424 283,723 284,024 284,326 4.2 Base Budget 4.2.1 4.2.2 The 2023-24 budget approved by Council on 23 February 2023 was £284.536m. There has been one change to the base budget since the report on 10 August 2023 and that relates to the provision of floral displays. The Environment, Development and Infrastructure Committee agreed to pursue a blended model of options for the provision of floral displays and recommended that £0.008m be built into the budget outlook for future years in relation to this. This was
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subsequently approved at Council on 28 September 2023 and therefore has been built into the base budget. 4.2.3 4.2.4 For future years, there are adjustments required to the base budget from decisions by Council on 23 February 2023 and other adjustments as noted in the table below: 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Base Budget 2023-24 284,536 284,536 284,536 284,536 284,536 Remove one-off release of funding from the Earmarked Reserves in relation to the Capital Fund (1,536) (1,536) (1,536) (1,536) (1,536) Adjust for one-off 2023- 24 cost pressures (442) (442) (442) (442) (442) Adjust for one-off 2022- 23 Management/ Operational savings 8 0 0 0 0 Adjust for one-off 2023- 24 Management/ Operational savings 2,581 2,581 2,581 2,581 2,581 Provision of floral displays 8 8 8 8 8 Revised Base Budget 285,155 285,147 285,147 285,147 285,147 It should be noted that Phase 1 of the ASN review is currently in the early stages of planning and the revenue costs associated with this have been estimated at £0.500m. The Service have identified budget that can be used to fund this phase of the project through income received from Scottish Government. While the funding could have been used elsewhere it has the potential of reducing the increased demand pressure for ASN support therefore has an overall nil impact to the budget gap position. 4.3 Employee Cost Changes Pay Award 4.3.1 4.3.2 The SJC pay award for 2023-24 has still to be agreed and this may have an impact on the base budget if the pay award is greater than the total of what has been allowed for the in the budget. The Council has set aside budget equivalent to 3.5%, and the Scottish Government has agreed funding equivalent to 2.5%, which gives a total pay award budget equivalent to a 6% increase. The Teachers pay award for 2023-24 has already been agreed (28 months deal covering the period 1 April 2022 – 31 July 2024) and the current year budget is sufficient to cover the deal, however future negotiations will have an impact on the budget outlook. 4.3.3 For future years, a 2% increase had previously been built into the mid-range scenario, however, it is looking likely that this will be insufficient, based on the
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pressure to increase the current years pay offer. It would therefore be prudent to increase the assumption from 2% to 3% for 2024-25, reducing back to 2% from 2025-26 on the basis that reducing inflation could eventually take the pressure off the pay award. The best case scenario 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. There remains a risk that the pay award could be higher and this will be monitored and updated throughout the year if more information becomes available. Every 1% over and above what is budgeted would add an additional pressure of circa £1.5m. Increments 4.3.4 4.3.5 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 2023-24 (£0.657m). Strathclyde Pension Fund The Strathclyde Pension Fund (SPF) has reported an exceptionally strong set of results with a surplus of almost £9bn which will allow a reduction in the employer contribution rate. The largest employers, including 12 councils of which Argyll and Bute Council is one, will see a reduction in their employer contributions from 19.3% to 6.5% over the next two years, before reverting to a sustainable long-term rate in the third year of 17.5%. The recurring saving associated with the long term reduction to 17.5% equates to £1.061m and has been built into the budget outlook estimates in all scenarios. Consideration will also be required as to how best to utilise the additional surplus in the first two years as a result of reducing contributions to 6.5%. 4.3.6 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 4.6.3. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Pay Award 4,574 7,714 10,917 14,184 17,517 Increments 657 1,314 1,971 2,628 3,285 SPF Employers Pension Rate reduction to 17.5% (1,061) (1,061) (1,061) (1,061) (1,061) Total Employee Cost Changes 4,170 7,967 11,827 15,751 19,741 4.4 Non-Pay Inflation 4.4.1 Over the last few years, the Council have only included non-pay inflation within the budget where it was deemed to be unavoidable or inescapable. In terms of the budget outlook, only unavoidable/inescapable non-pay inflation is built into the best case and mid-range scenarios with a general inflation allowance over
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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 2024-25 budget is set. 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 4.6.3. Inflation Category 2024-25 Previous estimates (August 2023) £000 2024-25 Updated estimates £000 Increase/ (Decrease) £000 Utilities - Electricity, Gas, Oil, Water 831 930 99 Street Lighting Electricity 121 121 0 Vehicle Fuel 53 50 (3) Central Repairs - Outside Contractors 68 72 4 Waste PPP/Landfill Tax 578 578 0 NPDO/HUB Schools 909 956 47 Community Pool Subsidies 95 95 0 Residential Schools 54 49 (5) Pre-Primary Partner Providers 175 179 4 ICT 181 195 14 Catering Purchases and Milk 342 280 (62) Insurance 83 81 (2) Bitumen – Roads 24 24 0 Contingency for unidentified/ insufficient inflation estimate 250 250 0 Total 3,764 3,860 96 4.4.5 The most significant movement in non-pay inflation since last reported in August 2023 relates to energy costs. Over the last sixteen months the wholesale cost of energy, particularly electricity, has risen significantly. During 2022-23, the
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Council was largely protected from the increase in prices as it had forward purchased its energy needs before prices increased. However, having reached the end of the period this covered, the Council is now exposed to the current market rates which are significantly higher. The non-pay inflation figures have been adjusted to account for early estimates of the potential impact on the Council however this will be monitored throughout the year and updated accordingly. 4.4.6 The cumulative inflation for years 2025-26 to 2028-29 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 the estimates will be kept under close review. 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Unavoidable/Inescapable 6,532 9,384 12,431 15,688 Total Non-Pay Inflation 6,532 9,384 12,431 15,688 4.5 Cost and Demand Pressures 4.5.1 4.5.2 4.5.3 Over the last few years, services have worked on the basis of having to contain any cost and demand pressures within current resources, 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 2023. Since the Policy and Resources Committee on 10 August 2023 the following changes have been made to the cost and demand pressures: Removed - Public Transport Fares – shortfall in previously agreed saving is now able to be offset against underspends elsewhere within public transport therefore the cost pressure is no longer required. New – Persistent Organic Pollutants (POPs) – regulations indicate there will be a ban on placing materials such as sofas and mattresses in landfill resulting in a cost pressure relating to their disposal. As mentioned in paragraph 4.4.5, the forward purchasing of the Council’s energy needs largely protected the Council from the significant increases in energy costs, particularly electricity. However, the Council is now re-contracting and is as the Council re-contracts for its energy now and is exposed to significantly higher market rates, which is likely to exceed the current year (2023-24) budget. This will create an in-year cost pressure which will be reported via the budget monitoring but will also create a cost pressure for future years. At the time of writing it is expected that this cost pressure could be in the region of £1m, however, a more precise estimate is currently being calculated by the Energy Team and will be reported in the Budget Outlook in December 2023. 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
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4.5.4 4.5.5 Management system currently used by Revenue and Benefits services, Social Care, Human Resources and Creditors will end in September 2024. The Council is currently considering its options but there is pressure to migrate both of these systems to the Cloud as on premise support will not be available in the future which is likely to increase the annual costs although we do not have a definitive position on this as yet. The impact of this will be refined as conversations with our suppliers progress over the coming months therefore will be included within a future budget outlook once there is more certainty regarding the financial impact. Over the last few years the Winter Maintenance budget has been overspent. Additional budget of £0.500m was allocated in 2019-20 however inflation over the last few years has put significant pressure on this budget. The average overspend over the last 5 years was £0.235m, with the smallest overspend being £0.044m and the largest £0.541m. Further information regarding this is included within appendix 5 which details that if treatment runs were similar to 2022-23, an additional budget of £0.326m would be required therefore it is recommended that the base budget is increased by this amount. During the 2023-24 budget setting process a contingency of £1.4m was agreed which was circa 0.5% of the Councils budget at that time. This was included due to the volatility in prices, the increases in inflation together with continuing increased demand. This contingency could be used to offset the above mentioned pressures within utilities, ICT systems and Winter Maintenance, both in 2023-24 and future years, once their financial impact has been refined. 4.5.6 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. This contingency is over and above the £1.4m detailed in paragraph 4.5.5. 4.5.7 The cost pressures are detailed in appendix 3 and are summarised in the table below and will be subject to review during the financial year. 2024- 25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Universal Credit – HB Admin Grant 40 80 120 160 200 IFRS16 Implementation Software 18 18 18 18 18 ASN Support 198 400 608 822 822 SEEMiS Membership Fees 2 4 7 7 7 Sustainable rate for partner providers 327 327 327 327 327 NPDO/HUB Schools – 2023-24 inflation 480 480 480 480 480 Election costs 0 0 0 300 0 Leisure SLA’s – 2023-24 10 10 10 10 10
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inflation Repairs and Maintenance – Helensburgh Waterfront Leisure Complex 105 105 105 105 105 Depots – saving shortfall 108 108 108 108 108 Waste (107) 87 (242) 128 128 Compliance with BMW Ban 0 608 2,433 2,433 2,433 Waste PPP Contracts – 2023-24 inflation 255 255 255 255 255 Persistent Organic Pollutants (POPs) 173 173 173 173 173 Local Development Plan 50 0 50 0 0 Insurances 126 126 126 126 126 Allowance for pressures in future years 500 1,000 1,500 2,000 2,500 Total Cost and Demand Pressures 2,285 3,781 6,078 7,452 7,692 4.5.8 The cost and demand pressures relating to Social Work within the Health and Social Care Partnership are summarised within paragraph 4.6.3. 4.6 Health and Social Care Partnership 4.6.1 The Council, at the budget meeting on 23 February 2023, agreed a base allocation to the HSCP of £76.253m for 2023-24 as well as indicative flat cash allocations for 2024-25 to 2025-26. 4.6.2 In the budget outlook, I have assumed flat cash allocations across all scenarios. These are only assumptions and it will be a matter for Council to consider as part of the budget process next year. 4.6.3 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. 2024-25 £000 2025-26 £000 2026-27 £000 Pay Inflation 691 1,396 2,115 Pay Increments 152 304 456 Non-Pay Inflation 3,770 7,564 11,513 Care Services for Older People 426 859 1,299 Care Services for Younger Adults 437 883 1,338 Adult Services - Supported Living 108 215 215 Continuing Care for Looked After Children 0 250 500 Unknown Cost and Demand Pressures 500 1,000 1,500 Total Cost Increase estimates for Social Work 6,084 12,471 18,936
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4.7 Estimated Budget Gap PRIOR to Measures to Balance the Budget 4.7.1 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 balancing the budget. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Base Budget 285,155 285,147 285,147 285,147 285,147 Employee Cost Changes 4,170 7,967 11,827 15,751 19,741 Non-Pay Inflation 3,860 6,532 9,384 12,431 15,688 Cost and Demand Pressures 2,285 3,781 6,078 7,452 7,692 Total Estimated Expenditure 295,470 303,427 312,436 320,781 328,268 Estimated Funding 283,277 283,424 283,723 284,024 284,326 Estimated Budget Surplus / (Gap) Cumulative (12,193) (20,003) (28,713) (36,757) (43,942) 4.8 Measures to Balance the Budget 4.8.1 In 2023-24 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 has been an amendment to the fees and charges figure within the budget outlook in relation to Piers and Harbours where the 6% general inflationary increase has been removed (£0.476m in the mid-range) to ensure that any income generated is not in excess of expenditure. 4.8.2 Some of the policy options were agreed at the Council meeting on 23 February 2023 that impacted on 2024-25 and beyond. These are now factored into the budget outlook, reducing the budget gap. 4.8.3 4.8.4 In terms of Council Tax, a 5% increase has been assumed across all scenarios for 2024-25 on the basis that the majority of Councils increased their Council Tax by at least 5% in 2023-24 and this is something that Council could consider for another year. From 2025-26 the assumption on the Council Tax increase has been reduced to 3% in the mid-range and worst case scenarios and left at 5% within the best case scenario. It will be a matter for Council to decide the level of Council Tax increase. The Scottish Government recently carried out a consultation on Council Tax for second homes and the outcome was announced in September 2023 advising that Local Authorities will be able to charge a premium of up to 100% (double charge) on council tax for second homes from 1st April 2024 bringing it in line with the policy already in place for empty homes. This legislation has still to be approved by Parliament and will also be subject to Elected Members agreeing its implementation within Argyll and Bute, however if agreed it would not only generate additional income for the Council to support delivery of services but
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may also help alleviate pressure on the local housing market and encourage long-term rental. Within the budget outlook £4m of additional income in respect of this has been included within the mid-range scenario, with £4.2m in the best case and zero in the worst case should Parliament not agree the legislation or Elected Members choose not to implement it within Argyll and Bute. A report will be brought to Council in November with further detail of this proposed policy change but currently it is assumed that Scottish Government will not impose that this income is ring fenced for any particular purpose. 4.8.5 The table below summarises the proposed measures to balance the budget in the mid-range scenario. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Fees and Charges Increase 372 744 1,116 1,488 1,859 Council Tax Increase 2,960 4,848 6,795 8,811 10,896 Council Tax Second Homes Consultation 4,000 4,120 4,244 4,371 4,502 Policy Savings agreed February 2022 3 3 3 3 3 Management/Operational Savings agreed February 2023 45 80 80 80 80 Policy Savings agreed February 2023 45 293 769 1,405 1,874 Total Measures to Balance the Budget 7,425 10,088 13,007 16,158 19,214 4.8.6 4.9 The Scottish Government are currently undertaking a further consultation in relation to Council Tax, looking at a fairer council tax system for properties in bands E-H acknowledging the persisting regressive nature of the current structure where lower-value properties are taxed proportionately more than higher-value ones. This consultation closes on 20 September 2023 and at this stage no estimate has been built into the budget outlook until we are clear whether this is likely to happen. If agreed by Scottish Government, it will generate a significant amount of additional Council Tax income (circa £4m) that would reduce the budget gap. A further update on this will be provided at the December Policy and Resources Committee meeting. Estimated Budget Gap AFTER Measures to Balance the Budget 4.9.1 The table below summarises the estimated budget gap in the mid-range scenario. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Estimated Budget Gap Prior to Measures to Balance Budget (12,193) (20,003) (28,713) (36,757) (43,942) Savings Measures 7,425 10,088 13,007 16,158 19,214
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Estimated Budget Surplus / (Gap) Cumulative (4,768) (9,915) (15,706) (20,599) (24,728) Estimated Budget Surplus / (Gap) In Year (4,768) (5,147) (5,791) (4,893) (4,129) 4.9.2 In the mid-range scenario, the budget gap estimated over the five year period 2024-25 to 2028-29 is £24.728m with a gap of £4.768m in 2024-25. 4.9.3 The budget gap in the best case scenario over the five years is £2.960m with a gap of £0.447m in 2024-25 and in the worst case scenario, the budget gap over the five years is £85.947m with a gap of £14.181m in 2024-25. A summary of all three scenarios is included within Appendix 1. 4.9.4 The changes from the previous anticipated outlook reported to the Policy and Resources Committee on 10 August 2023 are summarised in the table below: 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Previously reported budget surplus / (gap) Cumulative (7,580) (12,272) (17,606) (22,038) (25,700) Provision of floral displays (8) (8) (8) (8) (8) Increase pay award to 3% in 2024-25 (1,525) (1,555) (1,586) (1,617) (1,650) Reduction in SPF Employers Pension Contribution 1,061 1,061 1,061 1,061 1,061 Adjustment to Non-Pay Inflation (96) (165) (239) (320) (408) Cost Pressure – Public Transport Saving shortfall offset from underspend within Public Transport 29 29 29 29 29 Cost Pressure – Disposal of Persistent Organic Pollutants (POPs) (173) (173) (173) (173) (173) Fees and Charges adjustment re Piers and Harbours (476) (952) (1,428) (1,904) (2,381) Council Tax Consultation on Second Homes 4,000 4,120 4,244 4,371 4,502 Revised Budget Surplus / (Gap) Cumulative (4,768) (9,915) (15,706) (20,599) (24,728)
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5. CONCLUSION 5.1 In the mid-range scenario, the budget gap estimated over the five year period 2024-25 to 2028-29 is £24.728m with a gap of £4.768m in 2024-25. Council officers are continuing to explore savings options during 2023-24 and these will be presented to members for consideration in December 2023. Consideration also needs to be given as to how best to utilise the two year surplus that will be created due to the temporary reduction in the Strathclyde Pension Fund employers contribution rate. 5.2 This is a very challenging budget outlook position and the level of Scottish Government grant, the pay award, the Council Tax consultations and the further potential cost and demand pressures outlined within the report 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 Customer Service - None directly from this report but any proposals to address the estimated budget gap will need to consider customer service.
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Kirsty Flanagan Executive Director/Section 95 Officer 18 September 2023 Policy Lead for Finance and Commercial Services: Councillor Gary Mulvaney APPENDICES: 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) Appendix 5 – Winter Maintenance For further information contact Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk
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BUDGET OUTLOOK 2024-25 to 2028-29 APPENDIX 1 POLICY AND RESOURCES COMMITTEE - 12 OCTOBER 2023 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Base Budget 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 Base Budget Adjustments 619 611 611 611 611 619 611 611 611 611 619 611 611 611 611 Revised Base Budget 285,155 285,147 285,147 285,147 285,147 285,155 285,147 285,147 285,147 285,147 285,155 285,147 285,147 285,147 285,147 Pay Award 3,049 6,159 9,331 12,567 15,867 4,574 7,714 10,917 14,184 17,517 7,622 18,892 30,725 43,150 56,196 Pay Increments 329 658 986 1,315 1,643 657 1,314 1,971 2,628 3,285 657 1,314 1,971 2,628 3,285 Adjustment to Employee Base (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) Total Employee Cost Changes (Council Services) 2,317 5,756 9,256 12,821 16,449 4,170 7,967 11,827 15,751 19,741 7,218 19,145 31,635 44,717 58,420 Non-Pay Inflation - Council Services 3,394 5,822 8,404 11,152 14,077 3,860 6,532 9,384 12,431 15,688 4,075 8,843 13,572 18,526 23,725 Housing Benefits Admin Grant 40 80 120 160 200 40 80 120 160 200 40 80 120 160 200 IFRS16 Implementation 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 ASN Support 198 400 608 822 822 198 400 608 822 822 198 400 608 822 822 SEEMIS Membership Fees 2 4 7 7 7 2 4 7 7 7 2 4 7 7 7 Sustainable Rate for Partner Providers 327 327 327 327 327 327 327 327 327 327 327 327 327 327 327 NPDO and HUB Schools 2023/24 inflation 480 480 480 480 480 480 480 480 480 480 480 480 480 480 480 Election Costs 0 0 0 250 0 0 0 0 300 0 0 0 0 350 0 Leisure SLA's 2023/24 inflation 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 Repairs and Maintenance - Helensburgh Waterfront Leisure Complex 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 Depots - saving shortfall 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 Waste (117) 9 (263) 37 37 (107) 87 (242) 128 128 (97) 165 (221) 218 218 Compliance with BMW Ban 0 0 462 925 925 0 608 2,433 2,433 2,433 0 608 2,433 2,433 2,433 Waste PPP Contract 2023/24 Inflation 255 255 255 255 255 255 255 255 255 255 255 255 255 255 255 Waste disposal of Persistent Organic Pollutants (POPs) 79 79 79 79 79 173 173 173 173 173 366 366 366 366 366 Planning (Local Development Plan) 50 0 50 0 0 50 0 50 0 0 50 0 50 0 0 Insurances 126 126 126 126 126 126 126 126 126 126 126 126 126 126 126 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 1,931 2,501 3,242 4,709 4,749 2,285 3,781 6,078 7,452 7,692 2,988 5,052 7,792 9,785 10,475 Total Estimated Expenditure PRIOR to measures to balance the budget 292,797 299,226 306,049 313,829 320,422 295,470 303,427 312,436 320,781 328,268 299,436 318,187 338,146 358,175 377,767 Scottish Government Grant 224,846 225,971 227,101 228,237 229,378 223,738 223,738 223,738 223,738 223,738 222,630 221,517 220,409 219,307 218,211 Council Tax 59,687 59,983 60,433 60,887 61,344 59,539 59,686 59,985 60,286 60,588 59,394 59,397 59,549 59,702 59,856 Total Funding 284,533 285,954 287,534 289,124 290,722 283,277 283,424 283,723 284,024 284,326 282,024 280,914 279,958 279,009 278,067 Budget Surplus / (Gap) PRIOR to measures to balance the budget (8,264) (13,271) (18,515) (24,705) (29,700) (12,193) (20,003) (28,713) (36,757) (43,942) (17,412) (37,273) (58,188) (79,166) (99,700) Measures to Balance the Budget: Fees and Charges 558 1,116 1,673 2,231 2,789 372 744 1,116 1,488 1,859 186 372 558 744 930 Council Tax Increase 2,967 6,105 9,422 12,927 16,630 2,960 4,833 6,771 8,777 10,852 2,952 4,816 6,741 8,728 10,779 Council Tax Increase (Growth element) 0 59 122 188 259 0 15 24 34 44 0 30 48 67 87 Council Tax - Second Homes Consultation 4,200 4,410 4,631 4,862 5,105 4,000 4,120 4,244 4,371 4,502 0 0 0 0 0 Policy savings agreed February 2022 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 Management/Operational Savings agreed Feb 2023 45 80 80 80 80 45 80 80 80 80 45 80 80 80 80 Policy Savings agreed February 2023 45 293 769 1,405 1,874 45 293 769 1,405 1,874 45 293 769 1,405 1,874 Total Measures to Balance the Budget 7,818 12,066 16,700 21,696 26,740 7,425 10,088 13,006 16,157 19,214 3,231 5,594 8,199 11,027 13,753 Budget Surplus / (Gap) Cumulative AFTER measures to balance the budget (447) (1,206) (1,815) (3,008) (2,960) (4,768) (9,915) (15,706) (20,599) (24,728) (14,181) (31,680) (49,989) (68,139) (85,947) Budget Surplus / (Gap) In Year AFTER measures to balance the budget (447) (759) (609) (1,193) 48 (4,768) (5,147) (5,791) (4,893) (4,129) (14,181) (17,499) (18,309) (18,150) (17,808) Best Case Scenario Mid-Range Scenario Worst Case Scenario
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NON-PAY INFLATION (COUNCIL) Appendix 2 Service Category Basis of Inflation Inflation Percentage Mid Range 2023/24 Council Wide Electricity Due to current market condition for electricity 16% increase mid range, with a 0.5% tolerance for best and worst case. 16.00% 671,989 Council Wide Gas Due to current market condition for gas 15% increase with mid range based on latest information available from Property Services, with a 0.5% tolerance for best and worst case. 15.00% 167,923 Council Wide Heating Oils Due to current market condition for gas 6.80% increase with mid range reflecting July 2023 CPI rate, with a 0.5% tolerance for best and worst case. 6.80% 34,825 Council Wide Solid Fuel Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 14,682 Council Wide Water Charges Due to current market condition for gas 6.80% increase with mid range reflecting July 2023 CPI rate, with a 0.5% tolerance for best and worst case. 6.80% 39,751 Council Wide Vehicle Fuel Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 49,911 Council Wide Central Repairs - Outside Contractors Based on labour and materials costs survey data from the Royal Institute of Chartered Surveyors (RICS) and information from the property team on the typical allocation of their costs between labour and materials. 3.39% 72,360 Council Wide Insurances Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 81,435 Council Wide Contingency for unidentified/insufficient inflation estimate £250k built in to mid-range and £500k built in to worst case scenario 250,000 1,382,876 Education Pre-Primary Partner Provider Uplift Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 178,872 Education External School Placements Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 48,515 Commercial Services Catering Purchases Based on Office for National Statistics Inflation Rate for Food and Non-Alcoholic Beverages at July 2023, with a 0.5% tolerance for best and worst case . 14.90% 280,280 Legal & Regulatory Support Leisure SLA-MAKI/Islay Pools Based on average actual CPI rate for 2023 Q2, with a 0.5% tolerance for best and worst case. 8.40% 16,154 Legal & Regulatory Support Leisure SLA-Atlantis Based on RPI at September 2022 with a 0.5% tolerance in the best and worst case scenarios. 12.64% 78,857 Legal & Regulatory Support NPDO-Variable Element Based on average actual CPI rate for 2023 Q2, with a 0.5% tolerance for best and worst case. 8.40% 704,351 Legal & Regulatory Support NPDO-Utilities Rebate Based on average actual CPI rate for 2023 Q2, with a 0.5% tolerance for best and worst case. 8.40% -26,646 Legal & Regulatory Support NPDO-Electricity Due to current market condition for electricity 16% increase mid range, with a 0.5% tolerance for best and worst case. 16.00% 93,528 Legal & Regulatory Support NPDO-Gas Due to current market condition for gas 15% increase with mid range based on latest information available from Property Services, with a 0.5% tolerance for best and worst case. 15.00% 35,844 Legal & Regulatory Support NPDO-Heating Oil Due to current market condition for gas 6.80% increase with mid range reflecting July 2023 CPI rate, with a 0.5% tolerance for best and worst case. 6.80% 8,979 Legal & Regulatory Support NPDO-LPG Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 3,953 Legal & Regulatory Support NPDO-Water Due to current market condition for gas 6.80% increase with mid range reflecting July 2023 CPI rate, with a 0.5% tolerance for best and worst case. 6.80% 26,250 Legal & Regulatory Support HUB-Variable Element Based on average actual CPI rate for 2023 Q2, with a 0.5% tolerance for best and worst case. 8.40% 110,240 1,559,177 Customer and Support Services ICT Estimate based on feedback from ICT staff in relation to significant price increases for ICT services and equipment. 10.00% 194,634 Roads and Infrastructure Waste PPP-Private Contractor Inflation Based on 85% of the Bank of England Monetary Policy Committee CPI Forecast for 2023 Q2, with a 0.5% tolerance for best and worst case. 7.00% 509,360 Roads and Infrastructure Waste PPP-Central Government Inflation Based on Landfill Tax increase between 22/23 and 23/24 with a 0.5% tolerance for best and worst case. Will be updated once the 2024/25 rate is published. 3.55% 68,777 Roads and Infrastructure Roads - Bitumen for Road Surfacing Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 23,856 Roads and Infrastructure Electricity - Street Lighting Due to current market condition for electricity 16% increase mid range, with a 0.5% tolerance for best and worst case. 16.00% 120,958 917,585 3,859,638 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 2024-25 to 2028-29 Department Service Cost/Demand Pressure 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 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. 198 400 608 822 822 198 400 608 822 822 198 400 608 822 822 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 refreshed it to cover the period 2021/22 to 2025/26. As a result of this exercise there were implications on Membership fees with a cost pressure on the Education service arising from financial year 2023/24. Indicative membership fees were provided for financial years 2021/22 to 2022/23 and these have been factored in accordingly. 2 4 7 7 7 2 4 7 7 7 2 4 7 7 7 Executive Director - Douglas Hendry Education The Council has had a requirement to deliver 1140 hours of Early Learning and Childcare from August 2021. The Council has been notified that the ring fenced funding will be reduced by £1.124m from 2022-23. Also, as part of the 1140 expansion programme, the Scottish Government 'Funding Follows the Child' guidance, requires local authorities to set a rate locally that is paid to funded providers in the private and third sectors, including childminders, to deliver the funded entitlement that allows them to deliver a high quality ELC experience for all children. This rate should be sustainable and reflect national policy priorities, including funding to enable payment of the real Living Wage to all childcare workers delivering the funded entitlement and have a margin for re-investment built in. The service has worked hard to mitigate the effects of this and has reduced expenditure as far as possible. However there remains a funding gap, the service are able to cover the over spend for 2022-23 and 2023-24 from carry forwards so the cost pressure is requested from 2024-25 onwards. The service will continually review their plans looking for efficiencies where possible. 327 327 327 327 327 327 327 327 327 327 327 327 327 327 327 Executive Director - Douglas Hendry Education Adjustment to the base budget for the Schools NPDO and Hub Schools contracts due to the rate of inflation at February 2023 being higher than forecast when the 2023/24 budget was prepared. 480 480 480 480 480 480 480 480 480 480 480 480 480 480 480 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 0 250 0 0 0 0 300 0 0 0 0 350 0 Executive Director - Douglas Hendry Commercial Services Adjustment to the base budget for the swimming pools service level agreements due to the rate of inflation at February 2023 being higher than forecast when the 2023/24 budget was prepared. 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 Executive Director - Douglas Hendry Commercial Services There is an ongoing need for the Council to manage the maintenance and repair of its buildings. Now that the new Helensburgh Waterfront Leisure Complex is operational there are additional pressures on this budget for maintenance and inspection of fabric, mechanical systems and electrical systems for this new asset. The cost of maintenance and inspection over the next 9 years is estimated at £939k, averaging £105k per annum. 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 Best Case Mid Range Scenario Worst Case APPENDIX 3
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COUNCIL COST AND DEMAND PRESSURES 2024-25 to 2028-29 Department Service Cost/Demand Pressure 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 Best Case Mid Range Scenario Worst Case APPENDIX 3 Executive Director - Kirsty Flanagan Financial Services Universal Credit “Full” Service went live in Sept 2018, but managed migration has been deferred to 2023 and will not be completed until 2028. 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 marginally since implementation of Universal Credit but it is hard to predict just how quickly the rest of the working age caseload will migrate from Housing Benefit to Universal Credit between now and 2028. 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 - Kirsty Flanagan Financial Services Implementation of new IFRS16 system to manage leases and accounting requirements of the IFRS Finance Leases accounting standard. 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 Executive Director - Kirsty Flanagan Roads & Infrastructure Services Previously agreed saving from 2018-19 for Depots (TB07) is now not fully achievable with a shortfall of £107,500. Delays in progressing the Depot Rationalisation programme and limited capital investment available has resulted in the savings not being realised. Cost pressure to remove this saving with further work ongoing on the Depot Rationalisation programme which will hopefully generate further savings in the future. 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 Executive Director - Kirsty Flanagan Waste Additional costs derived from the current waste model. Note that the treatment of waste going forward has not been fully costed due to uncertainty as to how the council will deal with the Bio Municipal Waste ban and the Deposit Return Scheme. Pressure has increased due to an updated waste model. (117) 9 (263) 37 37 (107) 87 (242) 128 128 (97) 165 (221) 218 218 Executive Director - Kirsty Flanagan Waste Achieving compliance with ban on biodegradable municipal waste 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. There are also capital cost implications that are not included within these estimates. Due to the complexity of the model, estimates are subject to change. The best case scenario reflects option 4 detailed in the report to the Environment, Development and Infrastructure Committee on 01/12/2022. The mid range and worst case scenarios reflects option 3 included in the same report and take into account the risk that the SG will not agree a derogation. 0 0 462 925 925 0 608 2,433 2,433 2,433 0 608 2,433 2,433 2,433 Executive Director - Kirsty Flanagan Waste Adjustment to the base budget for the Waste PPP contract due to the rate of inflation at February 2023 being higher than forecast when the 2023/24 budget was prepared. 255 255 255 255 255 255 255 255 255 255 255 255 255 255 255 Executive Director - Kirsty Flanagan Waste Disposal of Persistent Organic Pollutants (POPs) as a result of the Persistent Organic Pollutants Regulation 2007 and the anticipated ban on placing these materials in landfill. Disposal of these will create a cost pressure to transport, shred and process the shredded material through Energy from Waste (EfW). 79 79 79 79 79 173 173 173 173 173 366 366 366 366 366 Executive Director - Kirsty Flanagan Planning 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. 50 0 50 0 0 50 0 50 0 0 50 0 50 0 0 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. 126 126 126 126 126 126 126 126 126 126 126 126 126 126 126 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 1,931 2,501 3,242 4,709 4,749 2,285 3,781 6,078 7,452 7,692 2,988 5,052 7,792 9,785 10,475
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SOCIAL WORK COST AND DEMAND PRESSURES - 2024-25 to 2026-27 APPENDIX 4 Service Cost/Demand Pressure 2024-25 £000 2025-26 £000 2026-27 £000 2024-25 £000 2025-26 £000 2026-27 £000 2024-25 £000 2025-26 £000 2026-27 £000 All Social Work Estimated Pay inflation reflecting a best case and mid-range of 2% and worst case of 5%. 691 1,396 2,115 691 1,396 2,115 1,729 3,544 5,450 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. 76 152 228 152 304 456 152 304 456 All Social Work Non-pay inflation, best and worst case based on unavoidable/inescapable inflation and worst case. 3,188 6,387 9,687 3,586 7,229 11,020 3,985 8,077 12,373 All Social Work Non-pay inflation impact of payroll inflation on NHS posts which are recharged to Social Work. 170 305 446 184 335 493 198 365 541 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 0 426 859 1,299 852 1,731 2,638 Adult Care Younger Adults Demand Growth (Excluding 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. 188 378 570 375 758 1,149 563 1,144 1,743 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. 31 62 94 62 125 189 93 189 288 Adult Care Phyisal Disability Budget Adjustment - The Physical Disability 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 2024-25 and 2025-26 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. 26 52 52 26 52 52 26 52 52 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 2024-25 and 2025-26 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. 82 163 163 82 163 163 82 163 163 Children and Families Continuing Care demand for Looked After young people 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. 0 0 0 0 250 500 250 500 750 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 4,702 9,395 14,105 6,084 12,471 18,936 8,680 17,569 26,704 Worst CaseMid RangeBest Case
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Winter Maintenance APPENDIX 5 The cost for Winter Maintenance during 2022-23 was £2.661M with a budget of £2.120M, equating to an overspend of £541k. There has been an overspend of winter maintenance for a number of years and in 2022-23 this overspend was higher due to inflationary increases (particularly for grit and salt) and the change in respect of the use of red diesel (which was banned from April 2022 – red diesel being subject to a lower excise duty). Over the last 5 years we have seen an increase in Winter Maintenance costs. This is due to weather and more ‘treatments’ being required but also due to increased costs. The costs for winter can split into fixed and variable, as per table 1 below. Fixed costs are for vehicles, standby and weather forecasting and variable costs are mainly for staff, salt and fuel. Table 1 2018-19 2019-20 2020-21 2021-22 2022-23 Fixed Costs 798,828.28 1,099,864.19 1,053,263.07 1,214,039.23 1,323,841.48 Variable Costs 1,122,355.24 1,080,858.54 1,225,741.02 1,053,587.73 1,337,508.74 1,921,183.52 2,180,722.73 2,279,004.09 2,267,626.96 2,661,350.22 As per the Winter Policy, we have set treatment routes in each area, if each of these routes was treated once, this would equate to 1 treatment run. Table 2 below shows the variable cost per treatment run over the last 5 years. Table 2 2018-19 2019-20 2020-21 2021-22 2022-23 Full Fleet Runs (equivalent) 62 78 79 65 66 Variable cost per Full Fleet Run (equivalent) 18,102.50 13,857.16 15,515.71 16,209.04 20,265.28 As per table 1 above, the variable cost per run has increased significantly over recent years, particularly between 2021-22 and 2022-23. Detailed analysis shows the increase in the variable costs is a result of increased salt costs and fuel costs and the increase in the fixed costs is a result of increased vehicle costs for hire and maintenance. The budget for 2023-24 is £2.335M, an increase of £214k from 2022-23 for inflationary increases for salt and employee costs. This budget will allow 50 treatment runs based on the same variable and fixed costs as 2022-23 which is considerably less than the average treatment runs over the last 5 years. The average treatment run over the last 5 years is 70. Budget required for this would be £2.742M, an increase of £407k. If treatment runs were similar to 2022-23, an additional budget of £326k would be required and it is recommended that the base budget is increased by this amount. There is currently a £1.4m recurring contingency set aside for inflationary pressures that has not been used that could fund this budget increase from 2023-24 onwards.