Agenda item

Agenda item

Provisional Local Government Finance Settlement 2023/24 and Budget Assumptions

Report of the Deputy Chief Executive and City Treasurer.

 

This report updates on the main announcements from the provisional local government finance settlement 2023/24 announced 19 December 2022. There is a focus on the impact on the Council’s budget for 2023/24 to 2025/26 and the next steps in the 2023/24 budget setting process.  

 

Minutes:

The committee considered a report of the Deputy Chief Executive and City Treasurer which provided an update on the main announcements from the provisional local government finance settlement 2023/24, which was announced on 19 December 2022. The report also focused on the impact on the Council’s budget for 2023/24 to 2025/26 and the next steps in the 2023/24 budget setting process.

 

Key points and themes within the report included:

 

  • The Council faced significant inflationary and demand pressures in both the current financial year and next, which the settlement addressed in part;
  • The Council’s proposed strategy was to use any additional funding, after covering new priority investment requirements and demand pressures, to help close the budget gap in future years and reduce the need for significant cuts in 2025/26 and beyond;
  • Confirmation that the savings reported to the committee in November 2022 were sufficient to deliver a balanced budget next year without any additional savings requirement;
  • The referendum principles for 2023/24, including a limit of 4.99% for upper tier authorities;
  • Changes to business rates retention and the introduction of additional grant funding for social care;
  • The scale of these policy changes could not have been predicted in advance of the Provisional Finance Settlement and are a significant change from the messages coming from government prior to the autumn statement; and
  • Implications for the Council, including the medium- and longer-term risks.

 

Key points and queries that arose from the committee’s discussions included:

 

  • What was meant by additional targeted support for most vulnerable residents, if the Council Tax precept was raised;
  • Whether additional funds for adult social care and children’s services potentially raised from a 1% adult social care precept and the Social Care grant could be directed into specific areas of need;
  • Staff pay awards;
  • Noting that central government assumed that the Council would increase council tax;
  • What the proposed council tax increase of 4.99% would equate to for the top and bottom band; and
  • How questions were phrased on the council tax consultation.

 

The Executive Member for Finance and Resources introduced the item and explained that there had been a recent marked shift in the Autumn Statement, the Policy Statement and the Provisional Local Government Finance Settlement which acknowledged a gap in public sector finances that would take four years to remedy, with public sector cuts deferred until after 2025.

 

He explained that central government anticipated the Council increasing council tax to 4.99% to enhance income. He stated that the Provisional Local Government Finance Settlement provided breathing space for the authority but the additional funding outlined within the report would not mitigate the inflationary pressures faced by the Council.

 

The Deputy Chief Executive and City Treasurer explained that there had been three significant policy changes arising from the Autumn Statement and the Provisional Local Government Finance Settlement. Business rates would be frozen and local authorities would be compensated by central government for the difference. 3 additional grants for social care would also be awarded to the Council and would be ringfenced for supporting hospital discharges, social care improvement and a broader grant for children’s and adult’s social care. The final policy shift was around the reliance on the council tax precept to provide additional funding and an increase in the referendum limit from 2.99% with a further 1% for the adult social care precept and a further 1% for the general fund precept. She reiterated that none of this funding was guaranteed after the Spending Review period and that significant unknowns and budget gaps were anticipated following the public sector cuts planned for after 2025.

 

Members were also advised that additional funding would also result in additional costs. Inflation was predicted to be 7% in the next financial year, which was higher than originally anticipated and officers were working to link funding and costs.

In response to a member enquiry about potential additional support for vulnerable residents, the Deputy Chief Executive and City Treasurer advised that officers were working through options for this and explained that £3.55m had been added to the Council’s budget to address immediate pressures including support for food banks, VCSE organisations and expanding the Council’s welfare provisions. Members were also informed of a government scheme in 2024 which would provide a rebate of up to £25 to those on the Council Tax Support Scheme to mitigate the impact of increased council tax and the Council would look to provide similar support, particularly for residents at risk of first-time debt and those who have previously had a repayment plan with the Council.

 

The Executive Member for Finance and Resources reiterated that social care funding grants were ringfenced and would be used to reduce pressures and demand. Options for how grant funding would be spent were still being assessed and work was ongoing with the Director of Adult Social Care to identify investment proposals and priorities and assurances were provided that members would have the opportunity to discuss proposals before a decision is taken.

 

The Deputy Chief Executive and City Treasurer responded to a member’s query about staff pay awards and explained that the pay award for 2022/23 had only been confirmed in December and pay negotiations for 2023/24 had begun. She advised that an uplift of 4% was originally budgeted for the pay award and this would be assessed during the budget process to ensure it is sufficient.

 

In response to a question around the proposed council tax increase and what this would equate to for the top and bottom band, the Deputy Chief Executive and City Treasurer confirmed that an increase of 2.99% was proposed. The impact of this increase had been modelled for those properties in Band A, Band D and on the Council Tax Support Scheme which had informed initial ideas around support for residents. The increase would result in an additional c.£2m income for the Council.

 

It was also highlighted that Manchester had the smallest council tax base of all metropolitan authorities and although some grant funding compensated for this, it did not counteract the issue and raising council tax would provide some financial benefits. 

 

The Executive Member for Finance and Resources stated that raising council tax was not done lightly, especially in the current financial climate, and clarified that the public consultation on council tax increases provided indications of where residents wanted their council tax money to be spent. The consultation explained that an increase of 2.99% of the general precept and 2% on the adult social care precept was proposed and that this additional revenue would be directed to those issues identified as priorities for residents and to improve adult social care. 

 

The Deputy Chief Executive and City Treasurer wished to put her thanks on record to the Council’s Finance team for their work on the Provisional Local Government Finance Settlement, particularly as it was received close to Christmas. The Chair concurred with this sentiment.

 

Decision:

 

That the report be noted.

Supporting documents: