4. 2025 03 13 Local Government Finance Bulletin 2023-24
North Ayrshire Council · 13 March 2025
Back to Audit and Scrutiny Committee — 13 March 2025 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
NORTH AYRSHIRE COUNCIL 13 March 2025 Audit and Scrutiny Committee Title: Accounts Commission’s Report: Local Government in Scotland: Financial Bulletin 2023/24 Purpose: To inform the Audit and Scrutiny Committee of the findings of the recently published report. Recommendation: That the Committee i) notes the findings of the recent Accounts Commission report, and (ii) notes the current position of North Ayrshire Council in relation to the findings. 1. Executive Summary 1.1 The Accounts Commission published its 2023/24 local government finance bulletin in January 2025. The report provides a high-level independent analysis of the financial performance of local authorities during 2023/24, including funding and expenditure for 2023/24, financial position at the end of 2023/24 and the financial outlook from 2024/25. A link to the report is attached below: Local government in Scotland Financial bulletin 2023/24 1.2 The report analyses the annual accounts produced by local authorities, together with the reports of each body’s external auditors, to provide an independent overview of Scotland’s local government sector, examine their relative performance, highlight the challenges faced and assess their responses to these challenges. The report has a summary of key messages and recommendations, with more detail provided in three parts: • Part 1 - Council Funding and Budgets in 2023/24; • Part 2 - Council’s Financial Performance in 2023/24; and • Part 3 - Councils’ Financial Position 2023/24 and Financial Outlook. 1.3 Appendix 1 provides relevant North Ayrshire Council feedback on each of the key messages identified.
Page 2
2. Background 2.1 The report provides a high-level independent analysis of the financial performance of local authorities during 2023/24, including funding and expenditure for 2023/24, financial position at the end of 2023/24 and the financial outlook from 2024/25. 2.2 A summary of the key messages and recommendations is provided within the report with further information provided in 3 main sections: • Part 1 - Council Funding and Budgets in 2023/24; • Part 2 - Council’s Financial Performance in 2023/24; and • Part 3 - Councils’ Financial Position 2023/24 and Financial Outlook. 2.3 The key messages within the report are summarised below: • Scottish Government revenue funding to councils fell by 1.8% in real terms; • 21% of Scottish Government funding is ring‑fenced or provided with the expectation it will be spent on national policy commitments; • Scottish Government capital funding to councils fell by 1.2% in real terms; • Councils’ anticipated budget gaps for 2023/24 were over £759m with increased reliance on savings and reserves to balance budgets; • Overall usable reserves reduced by 5% which presents a challenge for Council’s reliant on reserves to balance their budgets; • Council’s net debt has increased by 15.8% to £19.8bn highlighting the reliance on borrowing to fund capital programmes; • Council’s must identify transformation activity to ensure their financial sustainability; • Council’s must be more transparent around their planned use of reserves, savings and transformation plans and must consult with communities on the implications of budget decisions taken. 2.4 The key recommendations indicate that councils should: • Report on savings against target within their management commentaries; • Ensure impact of capital underspends, future borrowing projections and use of financial flexibilities are reported clearly; • Provide clear statements on reserves policies, the impact of financial flexibilities, level if uncommitted reserves and the purposes of committed reserves; • Prioritise service transformation; and • Ensure financial sustainability becomes a central focus of financial monitoring and reporting.
Page 3
3. Proposals 3.1 It is proposed that the Committee i) notes the findings of the recent Accounts Commission report, and (ii) notes the current position of North Ayrshire Council in relation to the findings. 4. Implications/Socio-economic Duty Financial 4.1 The Accounts Commission report highlights the reliance of local government on Scottish Government grant funding and the need for the development of robust medium and longer term financial plans to develop sustainable solutions to bridge anticipated future funding gaps. North Ayrshire Council develops medium term financial plans on a three year rolling basis and Council has approved a Long Term Financial Outlook covering the next 10 year period. The financial sustainability of the Council is monitored regularly and reported to Cabinet throughout the year. Human Resources 4.2 As part of a sustainable financial strategy the Council continues to actively manage the size of its workforce. Regular communication and consultation takes place with the workforce and Trade Unions. Legal 4.3 None. Equality/Socio-economic 4.4 Equality impact assessment are carried out for all options identified as part of the medium and long term financial plans. Climate Change and Carbon 4.5 None. Key Priorities 4.6 In addressing the financial challenges which it faces, the Council seeks to minimise the impact on delivering its key priorities. Community Wealth Building 4.7 None.
Page 4
5. Consultation 5.1 Executive Directors are consulted in the development of the Medium and Long term Financial plans and the development of investment and recovery and renewal strategies. Mark Boyd Head of Service (Finance) For further information please contact David Forbes, Senior Manager (Strategic Business Partner), on 01294 324551 or DavidForbes@north-ayrshire.gov.uk. Background Papers None
Page 5
Appendix 1 Local Government in Scotland Financial Bulletin 2023/24 Ref Key Message NAC Feedback F1 In 2023/24, councils’ total revenue and income fell, including another real terms decrease in revenue funding from the Scottish Government. Councils are increasingly reliant on identifying savings, which becomes progressively more difficult year-on-year, and again used reserves to remain within their agreed budgets. During 2023/24 NAC received a total of £349.366m income from the Scottish Government, including General Revenue Grant, Non Domestic Rates and Specific Grants. Although this was an increase of £2.173m from 2022/23, due to high inflation, this represented a 5.2% real terms reduction in grant income. As detailed in the Medium-Term Financial Plan for 2023/24, the budget gap for the year was £19.946m. This was met through a 5% Council Tax increase, Use of reserves of £3.410m and the identification of net savings totalling £13.481m. The indicative funding gaps for 2024/25 and 2025/26 were identified as £17.126m and £10.834m respectively. This position continues to present a significant challenge to the sustainability of the Council’s finances. F2 In 2023/24, capital funding remained constrained, with councils borrowing more and managing a range of complex funding models. Capital funding from the Scottish Government reduced slightly in real terms, continuing a longer-term trend. Capital expenditure was lower than planned. Councils continue to borrow more to enable investment in their estates and council debt, and annual interest costs, continue to increase. During 2023/24, NAC invested £127.313m in our General Fund and HRA capital programmes. Major cost risks were reported across the Capital Investment Programmes as a result of ongoing cost volatility and uncertainty around potential future changes to local authority capital accounting. In addition, upward movements on the interest rates applicable to public sector borrowing presented further risks to the deliverability of both the General Fund and HRA capital programmes over the medium term resulting in an additional revenue cost of £1.587m per year to support the additional costs of borrowing during 2023/24. F3 In 2023/24, usable reserves, which are those that can be used to support service delivery, reduced and most are already committed for specific purposes. This presents an ongoing During 2023/24 NAC used £31.922m usable reserves to support service delivery across the Council. Overall usable reserves
Page 6
Appendix 1 challenge for councils reliant on reserves to balance their budgets, as well as to longer-term financial sustainability. Using reserves to routinely balance budgets is not sustainable. dropped by £9.340m and all funds are committed for specific purposes. F4 Councils need to intensify transformation activity, progressing at scale and pace to ensure their financial sustainability. How councils plan to use their reserves, make savings and transform their services needs to become more transparent. The need to consult local communities and clearly communicate the implications for local services of the budget decisions taken has never been more important. The Council’s Transformation programme delivered savings of £0.268m during 2023/24 with planned savings of over £10.4m forecast over the medium term to 2026/27 As part of the General Services Revenue Budget 2023/24 to 2025/26, North Ayrshire Council approved the application of £16.146m of earmarked reserves to support the budget programme. Face to Face Community Budget engagement sessions took place during the month of January 2023 across all localities. In addition, 1,400 responses were received from an on-line questionnaire issued to support the Budget process and capture areas of prioritisation from citizens and communities. During October and November 2024, an extensive programme of budget engagement took place across our communities, and we received 4,461 responses to our survey across six main themes. The results of this survey will be used to inform future decisions on our Council budget.