Budget Outlook 2024-25 to 2028-29
Argyll and Bute Council · 11 May 2023
Back to Policy and Resources Committee — 11 May 2023 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 11 MAY 2023 BUDGET OUTLOOK 2024-25 TO 2028-29 1. EXECUTIVE SUMMARY 1.1 This report summarises the budget outlook covering the period 2024-25 to 2028-29 taking into consideration the budget decisions at the Council Budget meeting on 23 February 2023. This is the first outlook of the financial year and rolls forward previous estimates as well as updating some estimates and also extends the budget outlook out to 2028-29. The assumptions will continue to be updated and refined as the year progresses. 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 have been updated from those reported to full Council on 23 February 2023 and these now range between 0.5% increase (best case) and 0.5% reduction (worst case) with a mid-range of 0%. This assumption has been updated in light of 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 The starting point for the 2024-25 budget is the approved budget for 2023-24 as agreed at Council on 23 February 2023 with the following updates: Removal of one-off release of £1.536m funding from the Earmarked Reserves in relation to the Capital Fund Adjustment for £0.442m one-off 2023-24 cost pressures Adjustment for £0.008m one-off 2022-23 Management/Operational savings Adjustment for £2.581m one-off 2023-24 Management/Operational savings 1.6 The 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
Page 2
the deal. For future years, the mid-range scenario has been estimated at 2% on the basis that it is expected that as inflation reduces it could take pressure off pay awards. . It also reflects what is affordable to Local Government and this 2% assumption is currently in line with many other Councils assumptions. Increments are estimated between £0.329m and £0.657m with mid-range £0.657m. 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: Universal Credit – HB Admin grant Implementation of IFRS16 Software ASN Support SEEMiS Group – Education Management System Sustainable Rate for Partner Providers NPDO/HUB Schools 2023-24 inflation Local Government Election Leisure SLA’s 2023-24 inflation Waste Impact of BMW Ban Waste PPP contract 2023-24 inflation Local Development Plan 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 and 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 £40.888m with a gap of £10.663m 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).
Page 3
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%). Policy savings already agreed by Council in February 2022. Management/Operational savings already agreed by Council February 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 £23.795m with a gap of £6.762m in 2024-25. 1.14 The budget gap in the best case scenario over the five years is £3.261m with a gap of £3.959m in 2024-25 and in the worst case scenario, the budget gap over the five years is £83.311m with a gap of £13.803m 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 consider the current estimated budget outlook position for the period 2024-25 to 2028-29.
Page 4
ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 11 MAY 2023 BUDGET OUTLOOK 2024-25 TO 2028-29 2. INTRODUCTION 2.1 This report summarises the budget outlook covering the period 2024-25 to 2028-29 taking into consideration the budget decisions at the Council Budget meeting on 23 February 2023. This is the first outlook of the financial year and rolls forward previous estimates as well as updating some estimates and also extends the budget outlook out to 2028-29. The assumptions will continue to be updated and refined as the year progresses. 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 2024-25 to 2028-29. 4. DETAIL 4.1 Funding Scottish Government Finance Settlement 4.1.1 4.1.2 In considering the assumption relating to future years funding, I have reflected on the funding change in the last 4 years after accounting for new policy commitments: • 2020-21 funding reduction of 0.3% • 2021-22 funding increase of 0.39%. • 2022-23 funding decrease of 0.01% • 2023-24 funding increase of 0.09% The spending review published in May 2022 indicated that the total budget for Local Government would remain flat cash until 2026-27. On further reflection since the budget meeting, the assumptions in respect of future years Scottish Government funding have been updated and these now range between 0.5% increase (best case) and 0.5% reduction (worst case) with a mid-range of 0%.
Page 5
4.1.3 The table below summarises the mid-range scenario estimates based on a flat cash settlement. 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 4.1.4 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. 4.1.5 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). 4.1.6 4.1.7 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 have now been 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. 4.1.8 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 4.1.6) 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 The 2023-24 budget approved by Council on 23 February 2023 was £284.536m. 4.2.2 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:
Page 6
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 Revised Base Budget 285,147 285,139 285,139 285,139 285,139 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 3.5% allowed for in the budget. The Scottish Government have agreed funding towards the SJC 2023-24 pay award equivalent to 2.5%, however negotiations are still ongoing.. 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. As noted above, the teachers’ pay award has been agreed to 31 July 2024 and future negotiations will have an impact on the budget outlook. 4.3.3 For future years, the mid-range scenario has been estimated at 2% on the basis that it is expected that as inflation reduces it could take pressure off pay awards. It also reflects what is affordable to Local Government and this 2% assumption is currently in line with many other Councils assumptions. The best case scenario also assumes 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 The cost of employee increments for 2023-24 was £0.657m. There remains a fairly regular turnover of staff within posts and when this happens the cost of increments can, in some cases, be absorbed by the budget provision for the previous post holder, who may have been at the top of the spinal column point
Page 7
for the grade. This is shown in adjustments to the employee base budget. 4.3.5 In terms of the budget outlook 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. 4.3.6 The table below summarises the employee cost increases 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 3,049 6,159 9,331 12,567 15,867 Increments 657 1,314 1,971 2,628 3,285 Total Employee Cost Changes 3,706 7,473 11,302 15,195 19,152 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 and above this built into the worst case. 4.4.2 Since the budget was set in February, officers have undertaken a review of areas of non-pay inflation of significant value and volatility. 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.
Page 8
Inflation Category 2024-25 Previous estimates (as at Feb 2023) £000 2024-25 Updated estimates £000 Increase £000 Utilities - Electricity, Gas, Oil, Water 661 644 (17) Street Lighting Electricity 121 121 0 Vehicle Fuel 64 36 (28) Central Repairs - Outside Contractors 68 68 0 Waste PPP/Landfill Tax 567 578 11 NPDO/HUB Schools 881 938 57 Community Pool Subsidies 94 95 1 Residential Schools 61 37 (24) Pre-Primary Partner Providers 393 119 (274) ICT 132 110 (22) Catering Purchases and Milk 118 371 253 Insurance 88 53 (35) Bitumen – Roads 28 17 (11) Contingency for unidentified/insufficient inflation estimate 250 250 0 Total 3,526 3,437 (89) 4.4.5 The most significant movements in non-pay inflation since last reported in February 2023 relate to: Pre-Primary Partner Providers which have reduced by £0.274m due to a reduction in RPI percentage from 8% previously applied to 3%, as projected for the first quarter of 2023-24. Catering Purchases which have increased by £0.253m due to ongoing significant price hikes in food costs which have increased year on year by 17.1% as at January 2023 and indications suggest this will continue to rise. 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 5,897 8,528 11,344 14,359 Total Non-Pay Inflation 5,897 8,528 11,344 14,359 4.5 Cost and Demand Pressures 4.5.1 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
Page 9
number of cost and demand pressures already identified for Council services which were reported as part of the budget in February 2023. Since the budget meeting on 23 February 2023 the following changes have been made to the cost and demand pressures: New – NPDO and HUB Schools contracts due to 2023-24 rate of inflation being higher than anticipated. New – Leisure Service Level Agreements due to 2023-24 rate of inflation being higher than anticipated. New – Waste PPP Contracts due to 2023-24 rate of inflation being higher than anticipated. 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 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 75 206 206 206 206 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 inflation 10 10 10 10 10 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 Local Development Plan 50 0 50 0 0 Allowance for pressures in future years 500 1,000 1,500 2,000 2,500 Total Cost and Demand Pressures 1,650 3,075 5,164 6,324 6,564 4.5.4 The cost and demand pressures relating to Social Work within the Health and Social Care Partnership are summarised within paragraph 4.6.3.
Page 10
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 698 1,410 2,136 Pay Increments 152 304 456 Non-Pay Inflation 4,061 7,485 10,352 Care Services for Younger Adults 496 1,002 1,519 Adult Services - Supported Living 497 994 994 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 6,404 12,445 17,457 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 285,147 285,139 285,139 285,139 285,139 Employee Cost Changes 3,706 7,473 11,302 15,195 19,152 Non-Pay Inflation 3,437 5,897 8,528 11,344 14,359 Cost and Demand Pressures 1,650 3,075 5,164 6,324 6,564 Total Estimated Expenditure 293,940 301,584 310,133 318,022 325,214 Estimated Funding 283,277 283,424 283,723 284,024 284,326 Estimated Budget Surplus / (Gap) Cumulative (10,663) (18,160) (26,410) (33,978) (40,888)
Page 11
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. 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 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. 4.8.4 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 848 1,696 2,544 3,392 4,240 5% Council Tax Increase 2,960 4,848 6,795 8,811 10,896 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 3,901 6,920 10,191 13,691 17,093 4.9 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 (10,663) (18,160) (26,410) (33,978) (40,888) Savings Measures 3,901 6,920 10,191 13,691 17,093 Estimated Budget Surplus / (Gap) Cumulative (6,762) (11,240) (16,219) (20,287) (23,795) Estimated Budget Surplus / (Gap) In Year (6,762) (4,477) (4,979) (4,068) (3,508)
Page 12
4.9.2 In the mid-range scenario, the budget gap estimated over the five year period 2024-25 to 2028-29 is £23.795m with a gap of £6.762m in 2024-25. 4.9.3 The budget gap in the best case scenario over the five years is £3.261m with a gap of £3.959m in 2024-25 and in the worst case scenario, the budget gap over the five years is £83.311m with a gap of £13.803m in 2024-25. A summary of all three scenarios is included within Appendix 1. 4.9.4 The changes from the previous anticipated outlook to 2026-27 (as noted at the budget meeting on 23 February 2023) are summarised in the table below. Note that the budget meeting report was not extended to 2028-29 which is why the table below only extends to 2027-28. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 Previously reported budget surplus / (gap) Cumulative (8,125) (14,633) (22,077) (28,510) Adjustment to Capital funding relating to pay award (3) (3) (3) (3) Council Tax Calculation Adjustment (27) (30) (33) (36) Correction re policy saving in future years 287 287 Updated funding assumptions to flat cash 1,108 2,221 3,329 4,431 Council Tax increase of 5% in 2024-25 instead of 3% previously included 1,184 1,225 1,261 1,299 Adjustment to Fees and Charges calculation (11) (34) (68) Adjustment to Non-Pay Inflation 89 1,219 2,528 4,039 Cost & Demand Pressures – general allowance increase (250) (500) (750) (1,000) Cost Pressure – NPDO/HUB Schools 2023-24 inflation (480) (480) (480) (480) Cost Pressure – Leisure SLA’s 2023-24 inflation (10) (10) (10) (10) Cost Pressure – Waste PPP Contract 2023-24 inflation (255) (255) (255) (255) Counter Fraud Team increased income recovery 10 11 13 15 Rounding adjustment (3) 6 5 4 Revised Budget Surplus / (Gap) Cumulative (6,762) (11,240) (16,219) (20,287)
Page 13
5. CONCLUSION 5.1 In the mid-range scenario, the budget gap estimated over the five year period 2024-25 to 2028-29 is £23.795m with a gap of £6.762m in 2024-25. Council officers are continuing to explore savings options during 2023-24 and these will be presented to members at a future date to help balance the budget in future years. 5.2 This is a very challenging budget outlook position and the level of Scottish Government grant and the pay award are the two assumptions that could alter the figures significantly. Both 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. Kirsty Flanagan Executive Director/Section 95 Officer 21 April 2023
Page 14
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) For further information contact Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk
Page 15
BUDGET OUTLOOK 2024-25 to 2028-29 APPENDIX 1 POLICY AND RESOURCES COMMITTEE - 11 MAY 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 611 603 603 603 603 611 603 603 603 603 611 603 603 603 603 Revised Base Budget 285,147 285,139 285,139 285,139 285,139 285,147 285,139 285,139 285,139 285,139 285,147 285,139 285,139 285,139 285,139 Pay Award 3,049 6,159 9,331 12,567 15,867 3,049 6,159 9,331 12,567 15,867 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 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Total Employee Cost Changes (Council Services) 3,378 6,817 10,317 13,882 17,510 3,706 7,473 11,302 15,195 19,152 8,279 20,206 32,696 45,778 59,481 Non-Pay Inflation - Council Services 2,984 5,214 7,592 10,127 12,833 3,437 5,897 8,528 11,344 14,359 3,640 8,182 12,671 17,374 22,309 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 0 198 198 198 198 75 206 206 206 206 145 444 444 444 444 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 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 Planning (Local Development Plan) 50 0 50 0 0 50 0 50 0 0 50 0 50 0 0 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 1,315 1,881 2,414 3,667 3,707 1,650 3,075 5,164 6,324 6,564 2,230 4,391 6,923 8,702 9,392 Total Estimated Expenditure PRIOR to measures to balance the budget 292,824 299,051 305,462 312,815 319,189 293,940 301,584 310,133 318,002 325,214 299,296 317,918 337,429 356,993 376,321 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 (8,291) (13,096) (17,928) (23,691) (28,467) (10,663) (18,160) (26,410) (33,978) (40,888) (17,272) (37,004) (57,471) (77,984) (98,254) Measures to Balance the Budget: Fees and Charges 1,272 2,544 3,816 5,088 6,360 848 1,696 2,544 3,392 4,240 424 848 1,272 1,696 2,120 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 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 4,332 9,084 14,212 19,691 25,206 3,901 6,920 10,191 13,691 17,093 3,469 6,070 8,913 11,979 14,943 Budget Surplus / (Gap) Cumulative AFTER measures to balance the budget (3,959) (4,012) (3,716) (4,000) (3,261) (6,762) (11,240) (16,219) (20,287) (23,795) (13,803) (30,934) (48,558) (66,005) (83,311) Budget Surplus / (Gap) In Year AFTER measures to balance the budget (3,959) (53) 296 (284) 738 (6,762) (4,477) (4,979) (4,068) (3,508) (13,803) (17,132) (17,623) (17,447) (17,306) Best Case Scenario Mid-Range Scenario Worst Case Scenario
Page 16
NON-PAY INFLATION (COUNCIL) APPENDIX 2 Service Category Basis of Inflation Inflation Percentage Mid Range 2024/25 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% 500,244 Council Wide Gas Due to current market condition for gas 10.4% increase mid range reflecting February 2023 CPI rate, with a 0.5% tolerance for best and worst case. 10.40% 77,176 Council Wide Heating Oils Due to current market condition for gas 10.4% increase mid range reflecting February 2023 CPI rate, with a 0.5% tolerance for best and worst case. 10.40% 41,627 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. 3.00% 8,640 Council Wide Water Charges Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 3.00% 16,280 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. 3.00% 35,945 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% 68,223 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. 3.00% 53,034 Council Wide Contingency for unidentified/insufficient inflation estimate £250k built in to mid-range and £500k built in to worst case scenario 250,000 1,051,169 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. 3.00% 119,156 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. 3.00% 36,679 Commercial Services Catering Purchases Based on Office for National Statistics Inflation Rate for Food for Domestic Market, with a 0.5% tolerance for best and worst case . 17.10% 371,651 Legal & Regulatory Support Leisure SLA-MAKI/Islay Pools Based on Bank of England Monetary Policy Committee CPI Forecast for 2023 Q2, with a 0.5% tolerance for best and worst case. 8.50% 16,282 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 Bank of England Monetary Policy Committee CPI Forecast for 2023 Q2, with a 0.5% tolerance for best and worst case. 8.50% 709,919 Legal & Regulatory Support NPDO-Utilities Rebate Based on Bank of England Monetary Policy Committee CPI Forecast for 2023 Q2, with a 0.5% tolerance for best and worst case. 8.50% -26,856 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 10.4% increase mid range reflecting February 2023 CPI rate, with a 0.5% tolerance for best and worst case. 10.40% 24,852 Legal & Regulatory Support NPDO-Heating Oil Due to current market condition for gas 10.4% increase mid range reflecting February 2023 CPI rate, with a 0.5% tolerance for best and worst case. 10.40% 10,733 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. 3.00% 2,695 Legal & Regulatory Support NPDO-Water Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 3.00% 11,581 Legal & Regulatory Support HUB-Variable Element Based on Bank of England Monetary Policy Committee CPI Forecast for 2023 Q2, with a 0.5% tolerance for best and worst case. 8.50% 111,111 1,560,188 Customer and Support Services ICT Carried forward 2024/25 assumption from February 2023 budget outlook. 10.00% 109,842 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. 3.00% 16,644 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% 120,958 825,581 3,436,938 Council Wide Total Executive Director Douglas Hendry - Total Executive Director Kirsty Flanagan - Total Total Non-Pay Inflation in the Mid Range
Page 17
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. 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 continued improvements in recording and the introduction of the additional need types 'Child plans' and ‘Other’ in 2011. 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. 0 198 198 198 198 75 206 206 206 206 145 444 444 444 444 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 - Kirsty Flanagan Financial Services Universal Credit “Full” Service went live in Sept 2018, but managed migration has been deferred to 2021 and will not be completed until 2024. 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 2024. 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 Best Case Mid Range Scenario Worst Case APPENDIX 3
Page 18
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 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 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 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 1,315 1,881 2,414 3,667 3,707 1,650 3,075 5,164 6,324 6,564 2,230 4,391 6,923 8,702 9,392
Page 19
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%. 698 1,410 2,136 698 1,410 2,136 1,745 3,578 5,502 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. 3,514 6,390 8,670 3,862 7,123 9,819 4,210 7,862 10,982 All Social Work Non-pay inflation impact of payroll inflation on NHS posts which are recharged to Social Work. 184 330 482 199 362 533 214 394 584 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. 210 422 636 420 849 1,287 630 1,280 1,950 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. 38 76 115 76 153 232 113 230 351 Adult Care Learning Disability Budget Adjustment - The Learning 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. 391 782 782 391 782 782 391 782 782 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. 25 50 50 25 50 50 25 50 50 Best Case Mid Range Worst Case
Page 20
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 Best Case Mid Range Worst Case 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. 81 162 162 81 162 162 81 162 162 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 COST AND DEMAND PRESSURES 5,467 10,274 14,011 6,404 12,445 17,457 8,561 16,642 23,819