Report of the Deputy Chief Executive and City Treasurer.

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.

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

Key points and themes within the report included:

·         An estimated budget shortfall of £46m was expected in 2024/25, £86m in 2025/26, and £105m by 2026/27;

·         This gap would reduce to £1.6m in 2024/25, £30m in 2025/26 and £49m by 2026/27 after the application of approved and planned savings and the use of c£17m smoothing reserves in each of the three years; 

·         Changes to the Medium-Term Financial Plan; 

·         The resources available to the Council and those required; 

·         Additional directorate pressures; 

·         The planned public consultation on proposed council tax levels and savings and cuts measures;

·         Next steps for the budget process;

·         An overview of the service area and priorities of the Corporate Core directorate, including the base budgets for each service area for 2023/24;

·         The savings plan for 2024-27 and further options for saving; 

·         Workforce implications, including a review of vacant posts, particularly those vacant for longer than 12 months, to determine which should be deleted with the least impact on service delivery;

·         Additional funding of £1m had been allocated to offset the lower rental income that can be realised due to the Christmas Markets using a smaller footprint as a result of the temporary closure of Albert Square. This funding will then be used to meet some of the increased operating costs of running the civic estate once the Town Hall is reopened;

·         Government grants and the income they provide; 

·         Future opportunities and risks;

·         The indicative medium-term budgets by service area; and

·         The indicative medium-term budgets by type of spend/income. 

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

·         Recommending residents read the Leader’s letter to the Chancellor of the Exchequer prior to completing the Council’s budget consultation; 

·         Noting that high inflation was costing the Council £21m per year, which was not recognised by the government;

·         Expressing frustration at the lateness with which the Local Government Finance Settlement was provided;

·         How many grants the Council was currently in receipt of, and how this compared to previous years;

·         Why the costs for IT to move to a hybrid cloud solution were revenue and not capital spend;

·         Why the year-on-year spend for cloud-based services increased and if there were any potential savings as a result of moving to a hybrid cloud solution; 

·         What work was underway to reduce the need for agency staff within the IT service;

·         How eligible families were identified for the Household Support Fund 4 (HSF4) and how the Council could continue to provide such support if the government cut this funding in the future; 

·         How the Finance Settlement might affect the Greater Manchester Business Rates Retention pilot scheme;

·         The staff pay award;

·         Whether the government may offer inflationary assistance in order for the Council to maintain service delivery;

·         Suggesting that the public consultation on the budget should reference where the Council had successfully made savings previously;

·         Noting that most savings would be the result of deleting vacant posts, and querying at what point long-term vacant posts were identified for deletion; and

·         Commending the work of officers and expressing concern over the growing funding gap in future years.

In introducing the item, the Executive Member for Finance and Resources stated that there had been warnings of budgetary pressures amongst local authorities since 2012 and the LGA had recently found that English councils were facing a shortfall of £4bn in the next financial year. He stated that Manchester was a well-managed council, despite having lost £443m of its overall budget since 2012, and that difficult financial decisions had been made at the appropriate time and smoothing reserves had been used prudently. He argued that the government did not value or recognise the work and services of local authorities and that budget cuts were driven by ideology which meant that councils like Manchester with higher levels of deprivation were more significantly impacted.

The Executive Member for Finance and Resources also advised the committee that the government’s Autumn Statement would be provided on 22 November and the Leader of the Council had written to the Chancellor of the Exchequer to call on him to provide adequate funding for councils like Manchester and to end the practice of issuing Local Government Finance Settlements at the last minute, which did not provide any certainty or ability to plan for the future. 

The Deputy City Treasurer explained that the challenges highlighted by the Executive Member had been compounded by the Covid-19 pandemic and rising inflation rates. He reminded members that a balanced budget for 2024/25 had been set as part of the 2023/24 budget process and this was based on the Council delivering £36m of savings and using £53m of reserves to ease pressure on frontline services. He advised that there was now a gap of £1.6m in this balanced budget and that a £49m gap was emerging by the 2026/27 financial year. He also advised that the proposals in the report aimed to protect investments made previously into street cleaning, neighbourhoods and cost-of-living support.

The Deputy City Treasurer advised that the Council was in receipt of around 200 grants and most of these were only guaranteed for the following year, which he stated made spending decisions and planning difficult. He also advised that there were overheads involved with receiving some of these grants, such as time and resource required to prepare and submit bids. 

In response to queries regarding the budget for a hybrid cloud solution, the committee was informed that the Capital Programme was fairly mature and underpinned by significant borrowing, for which the Council had the budget to fund. He noted, however, that the capacity for borrowing was restricted due to high inflation rates. He explained that there was a drive to decrease the amount of on-premise IT hardware and to buy software services instead. 

The Director of ICT explained that agency staff had been recruited where there was additional demand and there was work underway to review the target operating model for IT. This would seek to identify continued demand and how this could be met by recruiting more permanent staff. He noted that contract resources were occasionally needed to provide specific skills for which the Council did not require on a long-term basis. 

In response to a question regarding HSF4, the Deputy City Treasurer explained that this amounted to around £13m of funding per year and an allocation policy for this had been designed as part of the 2023/24 budget process. Around half of this funding was spent on administering Free School Meals and the Holiday Activities programme. There were also a number of targeted schemes such as food support.

He stated that the Council had a package of cost-of-living support measures which would be retained, although some of this budget would be used to fund the increase in the Council Tax Support Scheme discount and he recognised that it would be challenging if the HSF4 scheme was to end. The Head of Finance explained that there was a criterion of residents who would be supported through HSF4, including disabled households and the elderly, and that work was ongoing to review the Council’s support packages with a report to this committee in January 2024 which would set out the future model of support. 

The Deputy City Treasurer explained that the GM Business Rates Retention Pilot scheme would continue for 10 years as part of the Devolution Trailblazer and that this had been factored into the Medium-Term Financial Plan. He advised that the Council tended to be compensated for any business rates relief schemes and that there was an ongoing government consultation on proposed changes to the indexation rate. 

It was also confirmed that this year’s staff pay award had been agreed and would be a flat fee increase of £1,925 again. There were indications that future pay awards may revert to previous practice of a 2.2% increase, but the Council had prudently budgeted for a 4% increase. 

In response to a member’s question, the Deputy City Treasurer stated that he did not anticipate the government providing financial help for rising inflation costs. He also stated that officers were proposing to begin work on the 2025/26 budget soon after this year’s budget had been approved. 

Regarding the proposed deletion of vacant posts, the Deputy City Treasurer explained that a lot of work was underway on this. He acknowledged difficulties in recruiting to certain posts and stated that part of this work included challenging service areas on the need to keep posts that had been vacant for more than 12 months. He noted the need to approach this sensitively and confirmed that more detail on this would be provided in February 2024. A member also suggested that this information should be broken down into service areas for greater clarity. 

In closing the item, the Executive Member for Finance and Resources commended officers for their dedicated work and reinforced the importance of a sustainable budget for residents. 

Decision: 

That

1.    the report be noted, and 

2.    the committee requests that information on vacant posts which could be deleted be broken down by service area in the next Budget report.