Agenda item

Agenda item

[15.20-15.50] Revenue Budget Update

Report of the Deputy Chief Executive and City Treasurer.


The Council is forecasting an estimated budget shortfall of £44m in 2023/24, £85m in 2024/25, and £112m by 2025/26. After the use of c£16m smoothing reserves in each of the three years, this reduces to £28m in 2023/24, £69m in 2024/25 and £96m by 2025/26. Officers have identified potential savings options to reduce the budget gap totalling £42.3m over three years.  


This report sets out the priorities for the services in the remit of this committee and details the initial revenue budget changes proposed by officers.  


Even after these proposals there remains a budget gap of £7m to close to get to a balanced budget in 2023/24 and further savings and cuts options will be required to be worked between now and January and be reported back to Scrutiny committees in February. Each scrutiny committee is invited to consider the current proposed changes which are within its remit and to make recommendations to the Executive before it agrees to the final budget proposals in February 2023. 


In introducing the item, the Chair proposed to take items 7 and 8 together.


The Committee considered a report of the Deputy Chief Executive and City Treasurer, which outlined the priorities for the services in the remit of the Committee and detailed the initial revenue budget changes proposed by officers.


Key points and themes within the Revenue Budget Update report included:


·         The Council is forecasting an estimated budget shortfall of £44 million in 2023/24, £85 million in 2024/25, and £112 million by 2025/26;

·         After the use of circa £16 million smoothing reserves in each of the three years, the estimated budget shortfall reduces to £28 million in 2023/24, £69 million in 2024/25 and £96 million by 2025/26;

·         There remained a budget gap of £7 million to close to get to a balanced budget in 2023/24 despite proposals outlined in the report;

·         The Council’s 2023/24 funding from central government will be confirmed in the provisional finance settlement, expected late in December 2022;

·         Increases in interest rates will have a significant impact on the cost of borrowing and the ability to support the future capital programme;

·         The Council’s robust reserves strategy has proven successful in managing risk and timing differences to deliver balanced and sustainable budgets and provide the time necessary to deliver on its planned savings

·         The anticipated reduction in usable earmarked reserves over the next four years to under £100 million;

·         Resources required as a result of inflationary pressures, service pressures and the reversal of the 1.25% National Insurance increase;

·         Investment in anti-poverty measures, amounting to £1.8m in 2022/23 and £3.55m in 2023/24;

·         Progress on identifying savings and cuts options;

·         Public consultation on proposed Council Tax levels and the savings and cuts measures put forward by officers will take place between November 2022 and January 2023; and

·         Next steps for the budget process.


Key points and queries which arose from the Committee’s discussion included:


·         Acknowledging that £24 million had been reincorporated into the budget position from business rates, and queried why this was not reflected for subsequent years;

·         Whether there was any indication that the business rates pilot scheme was to continue;

·         If the staff pay award had been agreed and whether this was more than budgeted for;

·         The financial position of the Council if the period of austerity between 2010 and 2019 had not occurred;

·         Whether it could be assumed that there would be no budget gap around gas inflation from 2024/25 onwards, given the volatility of energy prices;

·         The cumulative effect of budget cuts year-on-year was powerful;

·         The need to make more assumptions due to delays from government and the instability this causes;

·         How the government’s mini budget in October 2022 impacted the Council’s borrowing costs; and

·         Commending the Council on continuing to fund and support the welfare support budget and the Voluntary and Community Sector (VCSE).


The Deputy City Treasurer explained that the business rates pilot was due to end and had been removed from forward budget assumptions. The Department for Levelling Up, Housing and Communities had strongly indicated that the pilot scheme was unlikely to end next year and £12 million had been factored into the budget assumption for this.


Members were informed that the Council had collected more money from business rates last year than anticipated. This could only be spent in arrears and £12.649 million had been factored into the forecast business rates surplus for 2023/24


The Deputy City Treasurer explained that the government was intending to review the business rates pilot as it reviewed business rates more generally and had suggested the possibility of changing the baseline of the percentage of rates which councils could keep, which could detrimentally impact the Council’s budget if increased. This was unlikely to change for 2023/24 due to delays to business rates reform and receiving the Finance Settlement.


The Deputy City Treasurer confirmed that the staff pay award had been agreed and was a flat increase of £1,925 for all employees, except the Chief Executive and craft workers, regardless of their position on their pay grade. Members were also advised that a 4% salary increase had been forecasted for subsequent years, compared to 2% usually budgeted for.


The Executive Member for Finance and Resources acknowledged that Manchester City Council was a well-managed and financially-responsible authority and stated that the fault was the direct result of ideological decisions taken by the government over the previous decade. He explained that the Council’s budget had been unfairly cut by £428 million since 2010/11 and that if Manchester had received the average cuts to funding the city council budget would be £77 million per year better off.


Members were informed that the problem was not solely experienced by Labour Councils and there was a £3 billion shortfall and gap for local authorities across the country next year. A recent survey conducted by Grant Thornton found that 1 in 6 councils would run out of money in 2023/24.


The Executive Member for Finance and Resources provided assurances that the Council would continue to provide fundamental services for residents and focus on priorities which residents want. He called on the government to support councils during this period to enable them to continue providing essential services, driving local economic growth and support the most vulnerable in our communities.


In response to a query around gas inflation, the Deputy City Treasurer explained that the Council had been prudent in its assumptions, prices had fallen since the contract was entered into and it was anticipated that energy prices would reduce from the peak levels seen as the economy went into recession.


The Committee was also informed that interest rates had stabilised upon the current Prime Minister going into office and there was sufficient funding capacity within the capital financing budgets to fund the current programme. However, it was acknowledged that there would be an impact on funding future programmes. It was difficult to predict the impact on future years’ given current uncertainty.


The Leader of the Council reiterated that this was the most unpredictable financial year which the Council had faced in a considerable amount of time. She stated that there had been an intentional and ideological approach to the role and services of local authorities from the central government, which did not match with the support provided by local authorities during the pandemic. She reiterated that budget pressures were felt by local authorities across the country, regardless of political leadership, and asked that central government matched inflationary pressures and included inflationary uplifts in addition to a flat funding figure, which would enable local authorities to protect services.


The Leader of the Council also thanked staff for identifying savings in a thoughtful and considerate way which minimised the risk of impacting residents’ lives, which the Executive Member for Finance and Resources and the Chair echoed.




That the report be noted.

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