Background
The framework for the annual budget setting process is
set out in the Medium Term Financial Strategy (MTFS). The MTFS 2024/25 –
2028/29 was considered by the Corporate Services Policy Advisory Committee
on 11 September 2023 and subsequently approved by the Cabinet at its
meeting on 20 September 2023.
The core MTFS scenario (Scenario 4) assumed that, even
after increasing the Council Tax by the maximum possible within the
referendum threshold, there would still be a budget gap of £ £925,000 in
2024/25, mainly owing to the impact of inflation on the Council’s costs,
with a steadily increasing budget gap in subsequent years. Following
consideration of budget savings proposals and other developments, as
detailed in the table at paragraph 2.34, it is now possible to recommend a
balanced budget, provided that the savings proposals are adopted and
Council Tax is increased up to the referendum threshold of 3%. However, the
longer term position remains challenging, and further work will be needed
to address this the budget gaps forecast for future years.
Local Government Finance Settlement
Separately from ongoing income from Council Tax and
Business Rates, the Local Government Finance Settlement announced on 18
December 2023 confirmed the following un-ringfenced government grants:
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2024/25
|
|
£000
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New Homes Bonus
|
1,492
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Funding Guarantee
|
3,329
|
Total
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4,821
|
Although New Homes Bonus has reduced from £1.9 million
in 2023/24 to £1.5 million in 2024/25, this is compensated for by an
increase in the Funding Guarantee. The Funding Guarantee is intended to
ensure that all councils see a minimum increase in Core Spending Power of
3%, before any increase in Council Tax. The Funding Guarantee has been a
feature of the Local Government Finance Settlement for the past two years,
but no commitment has been made that it will continue and so it must be
treated as one-off funding.
A further announcement was made by the Secretary of
State for Levelling Up, Housing and Communities on 24 January 2024, in which
it was stated that there would be a further increase of 1% in Core Spending
Power. Individual local authority allocations have not been announced yet,
but to the extent that the effect of this announcement will be to increase
the Funding Guarantee, it is proposed that recommendations in the report
relating to the Funding Guarantee will apply to any extra funding received.
One-off funding provides additional resources which it
is appropriate for the Council to invest in order to deliver its strategic
objectives. Details of relevant budget proposals are set out below.
Deprivation and Health Inequalities
The Council has been successful in securing funding from
third parties for services to address financial inclusion and health
inequalities including the food larders for the last two years, principally
from the government’s Household Support Fund, (allocated by the Department
for Work and Pensions to Kent County Council who then passport an
allocation to district councils) and from the West Kent Health and Care
Partnership (health inequalities funding stream). Implementing these
services is consistent with MBC’s Strategic Plan particularly our
cross-cutting objectives of tackling deprivation and reducing health
inequalities.
At the time of writing the government has made no
commitment to continue the Household Support Fund. Furthermore, the Council
has been advised that the funding stream that has established food larders
via the West Kent Health and Care Partnership will be redirected by the
Integrated Care Board.
It is proposed that the Council supports continuation of
financial inclusion services and the food larders by making an allocation
of £198,000 from the Funding Guarantee provided by government for 2024/25.
This would enable short term continuation of the council’s welfare offer
and food larders. It is further proposed that residual one-off funding from
other relevant council budgets is maximised to further sustain these
services. The position will be kept under review so that MBC can respond to
changes in circumstances and future funding opportunities.
Housing Investment Fund
The Council has had a longstanding policy of deploying
New Homes Bonus and Funding Guarantee to support the capital programme.
This will help the Council to implement its ambitious programme, including
new developments at Corben’s Yard, Britannia House, Maidstone East and
Springfield Library, whilst minimising external borrowing and containing
pressure on the revenue budget.
In the Autumn of 2021, the Leader of the Council announced
his ambition for the council to build 1,000 affordable homes in the
shortest period possible. This will require external borrowing on a scale
not previously undertaken by the Council. In order to ensure the
availability of funds for the first phase of this programme at a guaranteed
cost, the Council has committed to forward borrowing of £80 million, to be
drawn down between 2024 to 2026. Any such borrowing must meet the
Prudential Code requirement to be sustainable and affordable.
The provision of affordable housing involves an inherent
requirement for subsidy, as the level of borrowing required could not be
sustained by affordable rents alone. It is anticipated that some of this
subsidy will be met through external grant, but there will be a residual
requirement for the Council to provide a subsidy, which has been estimated
as £50,000 per unit.
Accordingly, it is envisaged that the balance of the
2024/25 un-ringfenced government grants referenced in paragraphs 2.5 and
2.6 will be transferred to the Housing Investment Fund. This is consistent
with previous decisions of the Council and with the Medium Term Financial
Strategy, which has been considered regularly by the Policy Advisory
Committees and the Cabinet throughout the last 12 months.
Feedback from Policy Advisory Committees and Overview
and Scrutiny Committee on Budget Proposals
Corporate Services Policy Advisory Committee (11
September 2023)
The revenue budget proposals for services within the
remit of the Committee. were approved, with the exception of the two growth
items relating to biodiversity and climate change, which would need further
review by the Committee in conjunction with a further report on the
Biodiversity and Climate Change Action Plan. Following further review,
these growth proposals have now been included in the final budget
proposals.
There was no other substantive feedback from the Policy
Advisory Committees or the Overview and Scrutiny Committee.
Updates to Budget Proposals
Council Tax
The Cabinet agreed at its meeting on 17 January 2024
that the Council Tax Base for 2024/25 would be 68,263.55. The agreed
Council Tax Base will yield total Council Tax income of £19,997,807 if Band
D Council Tax is increased by 3% (£8.46). This is marginally more than the
original MTFS assumption of £19.967 million.
Assuming the maximum potential increases in precepts
from other organisations, the overall level of Band D Council Tax would be
as follows:
|
% change from last year
|
£
|
Kent County Council
|
5.0
|
1,610.82
|
Maidstone Borough Council
|
3.0
|
292.95
|
Kent Police and Crime Commissioner
|
5.4
|
256.15
|
Kent Fire and Rescue Service
|
3.0
|
89.91
|
ANNUAL CHARGE FOR 2024/25
|
4.7
|
£2,249.83
|
The Council Tax base report to the Cabinet on 24 January
2024 projected a deficit of £301,992 as at 31 March 2024, which will be
debited to the Funding for Future Collection Fund Deficits Reserve in
2024/25.
Within the Council Tax base, allowance has been made for
the Council Tax that may currently be collected on empty homes and second
properties. With effect from 1 April 2024 the Regeneration and Levelling-Up
Act 2023 will allow Councils to collect further Council Tax on such
properties.
Currently, if a property has been unoccupied and
unfurnished for 2 years but less than 5 years, then a 100% council tax
premium can be applied to the property. The Act provides for this 2-year
period to be shortened to 1 year. This will encourage owners to bring
properties back into use so they are not left empty for extended periods.
So far as second homes are concerned, it will become
possible to charge a council tax premium on second homes. Second homes are
already liable for Council Tax, but the Act allows councils to apply a 100%
council tax premium on second homes. This would mean an owner of a second
home in the borough would pay double the normal council tax charge.
Approval is sought to implement these changes with
effect from 1 April 2025.
Business Rates
The Business Rates income estimate for 2024/25 is based
on the recently completed NNDR1 return that has to be provided to the
Department for Levelling Up Housing and Communities each January.
The government’s Settlement Funding Assessment, i.e. the
notional amount that the government calculates as due to the Council, after
payments to preceptors and the government’s tariff, excluding any growth,
is £4.456 million, as set out in the Provisional Local Government Finance
Settlement. This includes an element for inflation, which at the relevant
date was 6.4% per annum. Together with inflation on business rates growth,
this is worth an additional £643,000 compared with the amount anticipated
in the MTFS.
The NNDR1 return indicates that, as in previous years,
business rates will be higher than the baseline, owing to growth in excess
of inflation over the years since the baseline was set in 2013/14.
Kent County Council and eight of the Kent districts
continue to pool their business rates growth, which has the effect of
reducing the levy on business rates growth that would otherwise be payable
to central government. As previously agreed by Council, Maidstone’s 30%
share of the saving on the levy is ringfenced for investment in the
Council’s economic development strategy. A further 30% represents a Growth
Fund, which it has been agreed with Kent County Council will be split 50:50
for initiatives at Maidstone East. Neither of these amounts are reflected
in the Strategic Revenue Projection, as they have been earmarked for
specific purposes.
The NNDR1 indicates that there will be a deficit of
£85,812 on the NNDR element of the collection fund as at 31 March 2024,
which will be debited to the Funding for Future Collection Fund Deficits
Reserve.
Fees and Charges
The level of fees and charges made by each Service Area
was considered by Policy Advisory Committees and the Cabinet at their
meetings in December 2023. As part of these decisions, it was agreed that
there would be no increase in parking fees and there would be no charges
for bin replacements. This has created additional pressures of £250,000 and
£100,000 which have been reflected in the updated Strategic Revenue
Projection at Appendix B to the report.
Inflation
For the purpose of the draft Medium Term Financial
Strategy presented to the Cabinet in September 2023, it was assumed that
the cost services would increase by 5% for the rate of inflation was
assumed. The detailed budget proposals in the SRP at Appendix 2 to the
report now include line-by-line estimates for individual categories of
expenditure. In some cases the assumption is for a higher increase, e.g. where
contract prices are linked to inflation indices.
The assumption in relation to pay costs in the Medium
Term Financial Strategy is a 5% increase in the pay envelope, representing
5% for basic pay and 1% to allow for increments awarded as staff move up
the spine points on their pay grade. Under the Constitution, responsibility
for undertaking negotiations and consultation with staff through their
trade unions on all matters relating to employment lies with the Chief
Cabinet as the Head of Paid Service. These matters include the annual pay
settlement, as the Council is not part of any national pay agreements.
An additional £1 million contingency for excess
inflation was included in the strategic revenue projections when the
Council set a budget for 2022/23, and was retained in 2023/24, given the
increasing rate of inflation at the time. The rate of inflation now appears
to be on a downward trajectory and it is therefore proposed that this
contingency be removed from the budget for 2024/25.
Revenue costs of capital programme
A review of the budget provision for the revenue costs
of the capital programme, i.e. financing costs and Minimum Revenue
Provision, in light of the 10-year capital programme proposals, has led to
an increase of £30,000 as compared with initial projections. It will
increase further in subsequent years in line with the expansion of the
capital programme.
Updated savings proposals
There have been some changes in the savings proposals
since the September meeting following further developments, as follows.
- Assuming that the numbers in
temporary accommodation remain at the current levels, an additional
provision of £250,000 is required (in addition to the existing growth of
£200,000, which is net of £400,000 savings from accommodating families in
our own stock.
- The budget includes provision
for income of £125,000 from new commercial property acquisitions. None have
been made so far in 2023/24, so this income needs to be removed from the
budget. The corresponding borrowing costs have been included within the
amendment to revenue costs of the capital programme (see above).
- Additional savings of £9,000
are expected from the proposed expansion of the Revenues and Benefits
shared service.
- Savings of £25,000 and £50,000
respectively have been deferred by one year in Payroll Services and
Transformation
- A restructure of the major
projects team within Planning Services has allowed a saving of £86,000 to
be made.
Summary
In summary, the impact of the above changes to the
Strategic Revenue Projection for 2024/25, as compared with the position
shown in the scenario 4 within the Medium Term Financial Strategy agreed by
the Cabinet on 20 September 2023, is as follows:
|
£000
|
Budget Gap as presented to Cabinet September 2023
|
-925
|
|
|
Funding
|
|
CT funding assumptions - increase in property base
(CTB)
|
31
|
BR funding assumptions - inflationary increase
|
643
|
|
|
Pressures
|
|
Fees and charges shortfall - including £250k re no
parking fee increase
|
-180
|
Refuse bins - new pressure from policy decision
|
-100
|
Change to cost inflation
|
106
|
Increased cost from Capital Programme Revenue Costs
|
-30
|
|
|
Savings
|
|
New Savings - original figure
|
902
|
Temporary Accommodation - additional growth
|
-250
|
Commercial Property - reduced saving as no acquisitions
likely in 23/24
|
-125
|
Revenues and Benefits - additional savings from
expanded shared service
|
9
|
Savings deferred by one year (Payroll Services and
Transformation)
|
-75
|
Major projects saving
|
86
|
|
|
Budget Surplus
|
92
|
It is recommended that the budget surplus be carried
forward to 2025/26 to offset the budget gap anticipated in future years.
The updated Strategic Revenue Projections indicate that
there will be a budget gap in 2025/26. The likely impact of a business
rates reset and the implementation of fair funding means that a still
larger deficit is projected in 2026/27, and this deficit will increase over
the remaining term of the MTFS.
Revenue Estimates (‘Budget Book’)
Attached at Appendix C to the report is a summary of the
revenue budget for 2024/25, based on the assumptions above. The summary
shows the Original Estimate 2023/24 as approved by Council in February
2023; the Revised Estimate 2023/24 calculated as part of the budget
development work completed this year; and the Estimate for 2024/25 based
upon the details set out in the report. The Estimate for 2024/25 is
analysed between gross expenditure, income and net expenditure, so that
Members may see clearly how income generated by the Council contributes
towards expenditure budgets.
Appendix C to the report presents the Committee with the
budget structured in line with the relevant Policy Advisory Committees and
separately structured in line with the strategic priorities set out in the
Strategic Plan.
The Revised Estimate 2023/24 shown in Appendix C to the report
totals £25.777 million. This figure is net of all income with the exception
of the use of balances and the council tax requirement.
The Estimate for 2024/25 shown in Appendix C to the
report totals £27.278 million. This incorporates all the items discussed
above. The figure is net of all income with the exception of Council Tax
and Business Rates income. It excludes precepts.
Capital Programme
A draft Capital Programme was reported to the Cabinet at
its meeting on 24 January 2024. The Capital Programme totals £434 million
over ten years. Details are set out Appendix D to the report.
It should be noted that the capital programme sets an
overall framework for spending, and specific approval is required for
individual schemes within the programme. Accordingly, for example, the
balance between private rented sector housing and affordable housing within
the capital programme may alter from that shown in Appendix D to the
report.
Treasury Management Strategy
The framework for funding the capital programme and the
Council’s activities generally is set out in the Treasury Management
Strategy. The Council has adopted CIPFA’s Code of Practice for Treasury
Management in Public Services, which requires the Council to produce three
linked strategy documents: a Treasury Management Strategy, an Investment
Strategy and a Capital Strategy. These are included as Appendix E to the
report and have already been considered by the Audit, Governance and
Standards Committee at its meeting on 15 January 2024.
In summary, the Treasury Management Strategy envisages
that the capital programme will be funded by borrowing, as permitted
subject to the guidance set out in the Prudential Code. The proposals set
out in the report indicate a need for up to £327 million of prudential borrowing
over the lifetime of the capital programme. The revenue costs of this
borrowing are reflected in the Strategic Revenue Projections.
Balances / Earmarked Reserves
Attached at Appendix F to the report is a statement of
general fund balances and details of earmarked reserves. The earmarked
reserves incorporate a capital reserve that includes all of the retained
New Homes Bonus and other revenue support to the capital programme
available from previous years.
Unallocated General fund balances are estimated to
remain at around the current level of around £15 million. In considering
the level of reserves that should be maintained the Committee should
consider the minimum below which the Committee cannot approve the use of
balances without agreement by the Council. It was agreed by Council at its
meeting on 22 February 2023 that the minimum level of balances be increased
to £4 million and no change is proposed to this amount.
It can be seen that the level of reserves is comfortably
in excess of the minimum level of £4 million. However, they still only
represent around three months’ worth of service expenditure, so are not
excessive.
Medium Term Financial Strategy
Attached as Appendix G to the report is the Medium Term
Financial Strategy, updated to reflect the latest position as described in
the report.
The financial projection that complements the Medium
Term Financial Strategy is the Strategic Revenue Projection given at
Appendix B to the report. The financial projection considers the need for
growth and savings over the period of the Medium Term Financial Strategy
and incorporates assumptions about inflation and changes in local and
national pressures.
The financial projection that complements the Capital
Medium Term Financial Strategy Statement is the capital programme given at
Appendix D to the report.
Amendments to the Strategy may be recommended by the
Policy Advisory Committee. The Strategy may require amendment following the
Cabinet’s consideration of the report or following consideration by Council
on 21st February 2024. The final versions will be published as part of the
budget documents on the Council’s website following the Council meeting.
Consultation Results And Previous Committee Feedback
The Cabinet received an initial report on the MTFS at
its meeting on 26 July 2023 and has subsequently received further reports
on the development of the budget for 2024/25.
A Residents’ Survey was carried out in Autumn 2023 to
obtain their views on the issues to be considered when setting a budget.
The findings were reported to Policy Advisory Committees and the Cabinet in
December 2023.
Detailed budget proposals were considered by the Policy
Advisory Committees and the Overview and Scrutiny Committee. The outcomes
of this consultation are set out in this record of decision.
Following the Corporate Services Policy Advisory
Committee on 5 February 2024, where it was recommended that all of the
report recommendations be approved, an additional recommendation was
outlined to the Committee to utilise the £92,000 budget surplus for
financial inclusion, including the hiring of a welfare officer, a dashboard
for tracking low income families and at least one issue per annum of the
Council magazine, Borough Insight.
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