Agenda item

This report sets out the Draft Capital and Revenue Budgets for 2024/25. In accordance with the Constitution, Cabinet is required to develop ‘initial budget proposals’ approximately three months before finalising the budget and setting Council Tax levels at the end of February 2024. The Draft Budget is based on the principles set out in the Medium Term Financial Outlook 2023-2028 (MTFO) considered by the Cabinet on 26 September 2023. 

Discussion:

The Chief Finance Officer introduced the report and highlighted the new approach to balancing the budget where each directorate would operate within an agreed budget allocation. The directorate had responsibility to deliver savings or additional income to meet the identified gap. The current identified draft budget gap stood at c£36m.

The government’s Autumn Statement was announced the day after the Cabinet at which the Draft Budget was discussed (22 November 2023), however there was little in the Statement which would affect Medway’s finances as it was in line with the Draft Budget projections. The Department of Levelling Up, Housing and Communities were expected to publish the Provisional Local Government Finance Settlement before Christmas and any impact would be included in the next report to Cabinet in January 2024.

Portfolio Holders were working with officers to close the draft budget gap. In addition, the Council was working with CIPFA (Chartered Institute Public Finance and Accountancy) and Partners in Care & Health to review of spending Council assumptions and these bodies were expected to report informally ahead of Christmas.

The following issues were discussed:

Staffing Costs – in response to a question whether the proposed increase in staff costs of £10m was affordable, the Chief Finance Officer explained that the current Council staff budget increases had been capped in recent times at 1%-2% and then a flat rate increase of £1,000 in 2022-23 which represented less than 2% for many staff. Recruitment and retention was a significant issue for the Council and this had led to agency staff being employed at a higher cost to the Council than permanent staff.  If the Council paid more attractive rates of pay then it may reduce costs and improve services through more effective recruitment and retention of staff via changes to Medpay.

The Chief Finance Officer added that in previous years the Council had been criticised by unions and Members during pay negotiations where salary budgets had been already been capped in the draft budget.

Housing Infrastructure Fund (HIF) staff – A Member noted the £375,000 cost to integrate HIF staff into the Council. The Chief Finance officer explained that the Council had recruited permanent staff into the department to deliver the HIF given the long timescales, however, the end of the HIF programme did not end the Council’s regeneration programme, for which those staff were an important part.

Increase to School Costs - In response to a request for clarification regarding the £263,000 increase in costs charged to schools, the Chief Finance Officer reported that the costs to the Council of delivering these services in 2023/24 were not covered by the charges made to schools but had been increased to cover the costs in 2024/25. Schools purchased services in an academic year and there had not been a significant loss to the Council since the changes had been made.

Increase to Court Costs – In response to a question whether the additional £500,000 in court costs claimed by the Council was achievable, the Chief Finance Officer explained that the amount was considered reasonable and that the costs recovered by authorities across Kent had been reviewed and even with the increase proposed, Medway would remain amongst the lowest in the region.

Increase in Business Rates – the increase in collection of Business Rates was noted, the Chief Finance Officer informed the Committee that Business Rates continued to slowly increase from a healthy tax base.

Council Tax – in response to a question regarding reviews of the single person discounts awarded, the Chief Finance Officer explained the increased revenue would mostly not be due to fraud detection but proactive work which would identify earlier where people’s circumstances had changed and lead to an increase in council tax.

Concern was raised that the changes to Council Tax in relation to second homes would affect landlords and in turn raise rents in the area. The Chief Finance Officer informed the Committee that the Council did a significant amount of work to bring empty homes back into use, so the council tax discount for empty second homes was contrary to those policies. The discount was discretionary and was not considered the best use of resources in the current financial climate.

Return on investment in services – A Member commented that where the Council had invested in services to make savings it would be helpful to show the planned return within the draft budget such as the Transformation investment of £427,000. The Chief Operating Officer acknowledged this and informed the Committee further detail would be provided within the Medway 2.0 programme.

Gun Wharf - in response to a query whether additional cost pressures related to the partial closure of Gun Wharf had been included in the report, the Chief Operating Officer stated that the Council was currently considering its options and it was not possible to predict additional costs at this time, however, it would be included in the draft budget when costs were available.

Budget Gap – It was commented that the gap in next year’s budget remained significant. The Chief Operating Officer acknowledged the challenging gap in the draft budget, the senior leadership team was working with services and partners to review spending assumptions.

Decision

1.               The Committee noted that Cabinet has instructed officers to continue to work with Portfolio Holders in formulating robust proposals to balance the budget for 2024/25.  

2.               The Committee considered and noted the proposals outlined in the Draft Capital and Revenue Budgets and forwarded the proposals to the individual overview and scrutiny committees.  

3.               The Committee noted that the Cabinet agreed to recommend to Full Council that in February 2024 when setting the Council Tax, the following changes are applied to Council Tax premia in line with the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018, as set out in paragraph 8.18 of this report:

•              the 100% premium for long-term empty properties may be brought forward so that it can commence after being empty for one year rather than two with effect from 1 April 2024; and

•              a 100% premium may be charged for properties that are unoccupied but furnished (known as second homes) with effect from 1 April 2025.  

4.               The Committee noted that the Cabinet agreed to recommend to Full Council that in February 2024 when setting the Council Tax, the following changes are applied to the Council Tax discretionary discounts, as set out in paragraph 8.18 of this report: 

•              reduce the discount in respect of class C to 0% from the day on which a property becomes vacant, and 

•              reduce the discount in respect of class D to 0%.