Report of the Deputy Chief Executive and City Treasurer.

This report sets out the latest forecast revenue budget position, and the next steps. Following the provisional finance settlement, announced on 19 December, the Council is forecasting a balanced budget for 2023/24 and 2024/25. The financial risk around balancing the budget has moved to the next Spending review period 2025/26 where a shortfall of £58m is forecast. This reduces to £41m after the proposed use of £17m smoothing reserves.

The committee considered a report of the Deputy Chief Executive and City Treasurer, which outlined the latest forecast revenue budget position and the next steps. Following the Provisional Local Government Finance Settlement announced on 19 December, the Council was forecasting a balanced budget for 2023/24 and 2024/25. The financial risk around balancing the budget had moved to the next Spending Review period in 2025/26 where a shortfall of £58m was forecasted. This would reduce to £41m after the proposed use of £17m smoothing reserves.

Key points and themes within the report included:

• The Council identified cuts and efficiencies totalling £42.3m over three years for consideration by Scrutiny Committees in November 2022. It was now proposed to progress options of £36.2m, a reduction of £6.1m overall;
• Changes arising from the Settlement, including to Business Rates Retention; the Services Grant; and Social Care and Funding;
• The additional investment proposals included within the Budget;
• £16m of reserves per annum for three years were proposed to close the pre-Settlement budget gap and this would be rephased following receipt of the Settlement to support a sustainable position, particularly to support closing the budget gap in 2024/25 and to deal expected funding shortfalls in 2025 and beyond;
• The indicative workforce reduction linked to the savings proposals has reduced from 70 Full-Time Equivalent (FTE) over the three years to 60, which was anticipated to be managed via natural turnover and vacancies;
• A second phase of public budget consultation was undertaken between 7 January and 7 February with a full analysis and results reported to Budget Scrutiny Committee on 27 February; and
• The final budget position for 2023/24 and future years will be confirmed at February 2023 Executive. This will be after the Final Finance Settlement is received, expected early February.

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

• Acknowledging that the government’s announcements had deferred difficult financial decisions to 2025/26 and did not provide certainty or financial security for councils over the longer term;
• Commending officers for their work on the budget; and
• Noting the Council’s dependency on government funding and business rates income rather than council tax, and that residents would focus on the proposed council tax increase.

The Executive Member for Finance and Resources wished to place on record his thanks to the Deputy Chief Executive and City Treasurer and her team for all their hard work following the Settlement announcement. He stated that the Budget Settlement needed to be considered in the context of over a decade of austerity imposed on Manchester. He stated that if the city had received the average cut in funding Manchester would be £77m per year better off. He commented that the decision to cut local authority funding was a result of ideological decisions taken by the Government, noting that the Government failed to recognise or apologise for the instability they had caused to the national economy. He further referenced the impact of inflation, population growth in the city and the cost-of-living crisis on budgetary pressures. He commented that the Government had failed to communicate their financial decisions for city, noting the recent experience of announcements of the Levelling Up bids.

The Executive Member for Finance and Resources stated that the budget decisions of the Government had effectively forced the Council to increase Council Tax. He advised that the Council was able to deliver a balanced budget and Council Tax would be used to support the most vulnerable residents in the city; support the social care sector and invest in the future of the city.

In response to the Chair’s comments regarding how residents would view the increase in council tax as significant despite the Council being reliant upon government funding and business rates income, the Executive Member for Finance and Resources highlighted Manchester’s low council tax base compared to other Core Cities and stated that the cumulative impact of not increasing council tax would affect the Council’s ability to provide services. He explained that the decision to increase council tax was not taken lightly and that residents on the Council Tax Support Scheme (CTSS) would be provided with additional support at the point of billing. The discretionary housing provision would also be used to support those experiencing difficulty during the cost-of-living crisis.

The Leader of the Council reiterated comments regarding the complexity of local government finances and highlighted how the profile of resources available to the Council had changed over the last decade. She stated that this was an intention strategy of the government to reduce grant funding and increase council tax rates.

Decision:

That the report be noted.