Report of the Deputy Chief Executive and City Treasurer attached.

The Executive considered a report of the Deputy Chief Executive and City Treasurer, which set out the strategic and financial context which supported the 2024/25 Budget based on the outcome of the Final Local Government Finance Settlement.

 

The report went on to set out the strategic and statutory context for setting the budget, which included:-

 

·            The Our Manchester Strategy;

·            Progress to date on delivering the Our Manchester Strategy,

·            The Corporate Plan;

·            A summary of the financial position and context;

·            The required statutory assessment of the robustness of the proposed budget and adequacy of proposed reserves;

·            Other fiduciary and statutory duties; and

·            Financial Governance.

 

The Medium-Term Financial Strategy (MTFS), approved in February 2023, recognised that significant budget cuts would need to be delivered over the Spending Review period to set a balanced budget in future years. When the three-year MTFS was presented in February 2023 an indicative balanced 2024/25 budget was set out. The forecast gap for 2025/26 was £40m.

 

It was reported that the provisional finance settlement had been disappointing. Despite the well reported financial difficulties being faced by Local Authorities across the sector there was no new funding for public services announced and instead, an unexpected 84% cut in core funding Services Grant was announced.  The budget impact of the provisional settlement was a £2.4m worsening of the position for 2024/25, expected to rise to £5.3m in 2025/26. At the same time the in-year budget position for the Council was worsening meaning that the budget needed to allow for topping up the General Fund reserve by at least £1m to maintain the reserve at a reasonable level to enable the overspend to be funded.

 

In addition to the settlement announcement, Manchester continued to face growing pressures in social care and homelessness.  In the last two months there had been an increase in children's placement numbers and costs, further significant pressures across ASC budgets and some worrying trends in asylum seekers/migrant policy/homelessness.  This was in line with national trends and core cities and other GM authorities were all reporting similar issues.

 

Work throughout January quantified the full year effect of the increased numbers of residents requiring care and support, which came to £18.4m.  After demand management and proactive mitigations of £8.4m this had been reduced to an additional budget requirement of £10m in 2024/25.   Whilst extremely challenging it was important that a realistic and deliverable budget was set which recognised these additional pressures and allowed a realistic budget to be set.  As such the following mitigations had been proposed to finalise the revenue budget:-

 

·                A £5.5m Greater Manchester Combined Authority waste levy rebate

·                £0.6m final GMCA levy announcements

·                £3.93m through improved Council Tax and Business Rates collection,

·                including the introduction of a 100% Council Tax premium on

·                unfurnished empty homes.

·                £1.5m through extra income from buildings owned by the Council –

·                through increased rental charges and the renting out of vacant units

·                £1.2m through interest on airport loans and investments

·                £1m through energy savings due to reductions in wholesale prices

·                £0.5m through the rephasing of ICT investments

·                £0.5m through the rephasing of Growth & Development investments

·                £0.3m through in-year underspends in back office budgets and

·                reduced travel costs

 

It was important to note that £8.53m of the measures proposed to close the £15m gap are non-recurrent, meaning more permanent proposals would need to be found for 2025/26 and beyond as illustrated below:-

 

	2024 / 25	2025 / 26	2026 / 27
	£'000	£'000	£'000
Position reported to Executive February 2023 MTFS	0	40,392	54,164
Directorate Pressures	25,325	32,589	38,653
Other changes including confirmation of 100% business rates retention	(21,170)	(40,636)	(41,327)
Directorate Savings	(2,500)	(2,500)	(2,500)
Position reported to Resources and Governance 9 Nov 2023	1,655	29,845	48,990
Provisional Settlement changes	2,374	6,403	6,394
Increase General Fund to reflect worsening overspend	1,000	0	0
Revised Shortfall / (surplus) after settlement reported to Resources and Governance 11 Jan 2024	5,029	36,248	55,384
Full year impact of increased Social Care pressures	10,000	10,000	10,000
Mitigations identified January 2024	(15,029)	(17,448)	(24,619)
Shortfall / (surplus)	0	28,800	40,765

 

As such, Savings options had been developed consisting of £21.3m for 2024/25 and £10.1 for 2025/26:-

 

	Amount of Saving				Indicative FTE Impact
Service Area	2024/25	2025/26	2026/27	Total
	£’000	£’000	£’000	£’000
Adults Services	7,855	2,200	0	10,055	0
Public Health	15	0	0	15	0
Childrens Services	6,142	3,394	0	9,536	0
Neighborhoods	4,211	3,104	0	7,315	3
Corporate Core	1,359	1,089	0	2,448	37
Growth and Development	1,460	315	0	1,775	1
Cross Cutting	332	0	0	332	0
Total Savings	21,374	10,102	0	31,476	41

 

Taking into account the above changes to the financial assumptions; the impact of the Autumn Statement and final Finance Settlement; the setting of the Council Tax and Business Rates base and Collection Fund surplus and the changes to savings and investment proposals, the forecast budget position was:-

 

	2023 / 24	2024 / 25	2025 / 26	2026 / 27
	£'000	£'000	£'000	£'000
Resources Available:
Business Rates / Settlement Related Funding	376,527	406,999	418,394	425,002
Council Tax	217,968	231,034	249,114	266,520
Grants and other External Funding	130,494	142,907	104,614	104,614
Dividends	0	195	390	390
Use of Reserves	17,087	29,380	32,853	27,982
Total Resources Available	742,076	810,515	805,365	824,508
Resources Required:
Corporate Costs:
Levies / Statutory Charge	70,060	72,463	78,806	78,610
Contingency	600	600	600	600
Capital Financing	43,926	43,926	43,926	43,926
Transfer to Reserves	1,335	8,968	0	0
Sub Total Corporate Costs	115,921	125,957	123,332	123,136
Directorate Costs:
Additional Allowances and other pension costs	8,497	8,497	8,497	8,497
Insurance Costs	2,004	2,004	2,004	2,004
Inflationary Pressures and budgets to be allocated	2,101	17,357	33,492	50,226
Directorate Budgets	613,553	656,700	666,788	681,267
Subtotal Directorate Costs	626,155	684,558	710,781	741,994
Total Resources Required	742,076	810,515	834,113	865,130
Shortfall / (surplus)	0	0	28,748	40,622

 

The report explained that the Council's net revenue budget was funded from five main sources: Business Rates, Council Tax, government grants, dividends, and use of reserves. In recent years the on-going reductions in central government funding had increased the importance of growing and maintaining local income and local funding sources, which was now integral to the Council’s financial planning.  The total resources available to support the Council’s net budget position was as follows:-

 

	Revised 2022 / 23	2023 / 24	2024 / 25	2025 / 26
	£'000	£'000	£'000	£'000
Resources Available
Business Rates / Settlement Related Funding	235,553	374,725	380,005	386,872
Council Tax	208,965	217,968	228,087	237,279
Grants and other External Funding	104,559	126,439	127,968	116,055
Dividends	0	0	0	0
Use of Reserves	141,522	17,087	31,861	28,372
Total Resources Available	690,599	736,219	767,921	768,578

 

The assumption in regards Council Tax was that the Council would apply a 2.99% Council Tax increase in the basic amount, and a further 2% increase to provide extra funding for Adult Social Care, equating to a 4.99% Council Tax increase overall.

 

	2023/24 C’Tax	2025/25 C’Tax	Proposed Increase		Increase per week
	£	£	£	%	£
Manchester City Council - Band D	1,969.50	2,068.25	98.75	5.01%	1.90
Manchester City Council - Band A	1,312.99	1,378.83	65.84	5.01%	1.27
Band A receiving CTS at 82.5% plus CTS Fund of £25 in 2023/24, compared to 2024/25 at 85.0%	204.77	206.83	2.05	1.00%	0.04

 

It was also reported that the forecasted council tax collection rate was 96.5% in 2024/25, and an increase in the council tax base of 2.0% was forecasted reflecting housing growth within the city. This would bring an additional £5.6m income 

 

The report examined the future funding uncertainties facing the Council. The Deputy Chief Executive and City Treasurer had examined the major assumptions used within the budget calculations and had carried out sensitivity analysis to ascertain the levels of potential risk in the assumptions being used. The key risks identified to the delivery of a balanced budget and their mitigation were set out in the report.

 

The details of the Business Rate calculations, forecasts and assumptions were set out in the report, as well as the financial changes arising from the business rate related grants and funding the government had provided to support businesses.

 

The report provided a breakdown of the other non-ringfenced grants and contributions included in the budget. The most significant grants and contributions were described in detail in the report.

 

	2023 / 24	2024 / 25	2025 / 26	2026 / 27
	£'000	£'000	£'000	£'000
Better Care Fund (Improved)	31,748	31,748	31,748	31,748
Children's and Adult's Social Care Grant	50,695	65,773	60,218	60,218
Market Sustainability and Fair Cost of Care Fund	10,298	11,664	11,664	11,664
Adult Social Care Discharge Fund	4,451	7,420	7,420	7,420
2022/23 Services Grant	7,230	1,248	0	0
New Homes Bonus Grant	6,637	4,109	0	0
Loan Income from Airport	6,913	7,913	1,000	1,000
Contribution from MHCC	4,000	4,000	4,000	4,000
Education Services Grant	1,055	955	955	955
Housing Benefit Admin Subsidy	2,514	2,514	2,514	2,514
Care Act Grant - Prison only from 16/17	95	95	95	95
Settlement Risk
Proposed share of waste rebate	4,858	5,468	0	0
Settlement risk	0	0	(15,000)	(15,000)
Total Non Ring-fenced Grants	130,494	142,907	104,614	104,614

 

The report also examined the use of resources and the proposed revenue expenditure by the Council in 2024/25. The forecast of levy payments the Council would have to make to other authorities in 2024/245 was:-

 

	2023 / 24	2024 / 25	2025 / 26	2026 / 27
	£'000	£'000	£'000	£'000
GMCA -  Waste Disposal Authority	30,632	31,809	33,059	34,669
Transport Levy	39,076	40,289	41,901	43,577
Statutory Charge to GMCA	0	0	3,481	0
Environment Agency	258	258	258	258
Port Health	94	96	96	96
Net Cost of Levies	70,060	72,452	78,795	78,599

 

The waste disposal levy was paid over to Greater Manchester Combined Authority (GMCA) and this contributed towards their costs of funding Greater Manchester Waste Disposal Authority (GMWDA).  Based on figures provided by GMCA the 2024/25 levy costs were to increase by £1.2m inclusive of changes in costs, recycling rates and market prices for recyclates and energy.   The Transport Levy was to cover the costs of providing the greater Manchester integrated transport system, including the Metrolink and subsidised bus services, as well as transport infrastructure developments. The final amount would be decided as part of the GMCA budget process.  In addition the ten GM authorities had committed to contributing toward the GM Mayors bus franchising policy, and bus reform.  The £3.481m in 2025/26 reflected the council’s contribution for this.

 

The capital financing budget of £43.926m was to cover the costs of borrowing. For 2024/25 the forecast breakdown included:-

 

?    Costs of £91.5m as follows:

·             Interest costs of £51.0m,

·             Minimum Revenue Provision (MRP) of £40.2m, being the provision for the repayment of debt incurred to fund an asset, spread over the useful economic life of the asset,

·             Debt Management Expenses of £0.3m, and

?    Partly offset by:

·            interest receivable of £46.2m; and

·            Contribution from capital financing reserve of £1.4m

 

Allowances of £8.497m had also been made for retired staff and teachers’ pensions to meet the cost of added-years payments awarded to former employees.

 

The report explained the main assumptions that had been made when calculating provision to be made for inflation and other anticipated costs. These could not, at this point in time, be allocated to Directorate or other budgets. They would instead be allocated throughout the coming year. The total provision being proposed was £7.169m for 2024/25, broken down into:-

  

	2023 / 24	2024 / 25	2025 / 26	2026 / 27
	£'000	£'000	£'000	£'000
Non Pay Inflation	1,041	9,497	14,300	19,300
Pay Inflation	0	11,100	22,400	34,100
Apprentice Levy (0.5%)	1,060	1,092	1,124	1,158
Utilities Reductions	0	(4,000)	(4,000)	(4,000)
Cross Cutting Savings	0	(332)	(332)	(332)
Total	2,101	17,357	33,492	50,226
Year on year Impact	2,101	15,256	16,136	16,734

 

The report explained that the Council held a number of reserves, all of which, aside from the General Fund Reserve, had been set aside to meet specific future expenditure or risks. A full review of all the reserves held had been carried out as part of the budget setting process and the planned use of reserves in 2024/25 to support revenue expenditure was as follows:-

 

	2023 / 24	2024 / 25	Spend supported by the reserve
	£'000	£'000
Reserves directly supporting the council wide revenue budget:
Airport Dividend reserve	1,073	13,116	The  balance of £14.2m has been applied to support the MTFP budget in 2023/24 (£1.1m) and 2024/25 (£13.1m).
Budget Smoothing Reserve	0	3,742	Created through underspends in precious years as reported through Executive and from transfers from other reserves following a full review. It has been applied across the next four years to reduce the requirement for savings and smooth the funding cliff edge until the future funding position becomes clearer.
Business Rates Reserve	7,166	0	Business rates relief provided over the pandemic and funded by Government.  Applied to offset Collection Fund deficit in arrears.
Use of St Johns growth reserve to support revenue budget	1,156	830	Growth in business rates income in the St Johns footprint, used to support the budget
Use of reserves to contribute to the cost of Anti Poverty measures	0	2,000	Contribution to the additional £3.5m support which has been provided to support residents through the Cost of Living crisis
Contribution to GMCA relating to bus reform	0	0	£3.5m contribution to GMCA relating to budget reform. Note this is funded from rebates previously received from GMCA.
Use of Smoothing reserve to fund Adult Social Care budget for New Care Models	1,300	1,300	An investment of £1.3m per year 2023-26 will sustain the social work infrastructure and reablement capacity, supporting care models covering Crisis, Discharge to Assess and Manchester Case Management.
Use of  Bus Lane and Parking reserves reserve to support transport levy	6,392	8,392	This includes the continuation of £6.3m a year agreed in previous years, an additional contribution from annual trend growth and £1m from 2024/25 increasing to £2m 2025/26 funded through forecast income from moving Traffic offences.
Sub Total	17,087	29,380
Ring-fenced Reserves outside the General Fund:
HRA Reserves	11,814	25,675	HRA reserves are ringfenced – not available to support Council position. Significant balance to support future capital investment, including Carbon reduction and increased housing provision. The HRA must balance in year, and work is ongoing to identify sufficient savings to ensure this is the case. Much of the reserve will be used during this period.
School Reserves	0	0	Ringfenced – School balances not available to support the Council position.  The expected 22/23 drawdowns are based on returns from schools.
Sub Total	11,814	25,675
Other Earmarked reserves:
Statutory Reserves	8,179	6,597	Can only be used for specific purposes under statute e.g. Bus Lane Enforcement and on street parking income which support costs associated with transport provision and highways / environmental improvements. Some of the reserve funds the free bus from Piccadilly and the Transport levy.
Balances Held for PFI's	65	198	Held to meet costs across the life of the PFI schemes
Managing economic and commercial risks	5,890	7,166	These reserves help manage annual fluctuations in income including planning, investment and licencing. A significant part of the Planning Reserve will be required to support the development of the Local Plan.
Insurance Fund	500	500	Insurance fund reserve to meet uninsured risks, amount required is estimated each year.
Capital Fund Reserve	40,708	14,117	Contribution to schemes which are supporting employment and growth, future carbon reduction investments and high priority strategic development opportunities in the city.
Investment Reserve	1,873	2,047	This reserve is in place to support regeneration projects. The proposed use includes  funding for  staffing posts in Strategic Housing, Major Regeneration, the Investment Estate, and City Centre Regeneration
Manchester International Festival Reserve	2,659	1,000	To fund agreed contributions to Factory International
Eastlands Reserve	4,389	4,050	This reserve reflects the contribution from Manchester City Football Club and will be used for various projects including English Institute of Sport.
Town Hall Reserve	2,103	2,917	The refurbishment of the Town Hall, which is included within the Capital Programme Budget will also have revenue implications such as the cost of financing capital, alternative accommodation costs, and loss of income over a number of years; offset in part by reduced spend on maintenance and utilities
Enterprise Reserve	99	102	Enterprise Zone reserve which will fund EZ Manager post and activities to attract businesses to the zone
Highways Commuted Sum	89	89	Highways Commuted sums contribute towards future maintenance
Other reserves held to support delivery and risk of the Medium Term Financial Plan	7,332	3,534	Includes funding for to drive the delivery of Our Manchester; (for example through providing Voluntary Sector Grants) and Supporting Families reserve  to support the Thriving Families initiative, a whole family, strengths-based approach to child protection.
Reserves held for accounting purposes	6,672	4,069	Relates to grants received - under accounting standards these must be held in a reserve to move between financial years.
Making Manchester Fairer	2,089	900	To provide capacity to fund the kickstarter schemes supporting the Making Manchester Fairer ambition
Adult Social Care Reserve	5,264	2,449	To support Adult and Social Care Improvement Plan
ICT Investment Reserve	1,914	16,866	To support ICT Digital Strategy
Other Specific Reserves	2,562	4,448	Includes Community Safety, Primary School Catering and Social Value Fund
General Fund	6,206	0	Forecast drawdown of General Fund reserve
	127,494	126,103

 

Where reserves were used to support the Council’s overall budget position or corporate expenditure such as levies, these were shown gross as part of the Resources required. The use of these reserves totalled £29m in 2024/25.  Of this £13m is from the airport reserve, £1.3m for New Care Models, £2m to support anti poverty and £8.3m supporting the transport levy.  

 

The proposals for the Directorates’ cash limit budgets were detailed in the Directorate Budgets 2024/25 reports that were also being considered at the meeting (Minute Exe/24/17 to 24/26 below). The overall position was:-

 

	2023 / 24 Revised		2024 / 25
	Net Budget	Gross Budget	Net Budget	Gross Budget
	£'000	£'000	£'000	£'000
Children Services	143,806	607,129	156,383	631,740
Adults Services	219,666	285,023	247,439	314,972
Public Health	43,266	54,126	45,016	55,684
Corporate Core	109,617	333,586	112,535	333,940
Neighbourhoods (Incl. Highways)	108,593	248,834	108,182	247,543
Growth and Development	(11,395)	37,860	(12,855)	38,236
Total	613,553	1,566,558	656,700	1,622,115

 

The budget assumptions that underpinned 2024/25 to 2026/27 included the commitments made as part of the 2023/24 budget process to fund ongoing demand pressures, as well as provision to meet other known pressures and investments. Whilst this contributed to the scale of the budget gap it was important that a realistic budget was set which reflected ongoing cost and demand pressures.

 

It was the opinion of the Deputy Chief Executive and City Treasurer that any significant budget risks to the General Fund and the Housing Revenue Account had been identified and that suitable proposals were being put in place to mitigate against these risks where possible.  The Council’s budget monitoring procedures were very well embedded and were designed to monitor high level risks and volatile budgets.  An assessment of anticipated business rates income had been carried out based on the information available and provision had been made for outstanding appeals.  This was considered to be a prudent provision.

 

The Deputy Chief Executive and City Treasurer considered that the assumptions on which the budget had been proposed whilst challenging were manageable within the flexibility allowed by the General Fund balance and the smoothing reserve available to support the future budget position. This meant the Deputy Chief Executive and City Treasurer was confident the overall budget position of the Council could be sustained within the overall level of resources available.  However, to the degree that the budget savings were not achieved in a timely manner and reserves were called on to achieve a balanced position, further savings would need to be identified and implemented in order to ensure the Council’s future financial stability was maintained.

 

It was recognised that Manchester continued to lead the way in terms of transformation, delivering efficient services and creating the conditions for all of its communities to benefit from economic growth. The Council had maintained its reputation for innovation and reform through a number of key mechanisms and the proposed budget and business plan was a continuation of commitment to the delivery of the Our Manchester Strategy and how it has been used as a framework for prioritising the deployment of resources. 

 

Decisions

 

The Executive:-

 

(1)      Note the Deputy Chief Executive and City Treasurer’s review of the robustness of the estimates and the adequacy of the reserves.

(2)      Note that the financial position has been based on the final Local Government Finance Settlement announced on 5 February 2024 together with any further announcements at that date.

(3)     Note the anticipated financial position for the Council for the period of 2024/25 which is based on all proposals being agreed.

(4)     Note the resources available are utilised to support the financial position to best effect, including use of reserves and prior years dividends; consideration of the updated Council Tax and Business Rates position; the financing of  capital investment, and the availability and application of grants.

(5)     Note that the Capital Strategy and Budget 2024/25 to 2026/2 has been presented alongside this report

(6)     Recommend to Council to approve, as elements of the budget for 2024/25:-

 

a.      an increase in the basic amount of Council Tax (i.e., the Council’s element of Council Tax) by 2.99% and Adult Social Care precept increase of 2%.

b.      the contingency sum of £0.6m

c.       corporate budget requirements to cover levies/charges of £70.060m, capital financing costs of £43.926m, additional allowances and other pension costs of £8.497m and insurance costs of £2.004m.

d.      the inflationary pressures and budgets to be allocated in the sum of £17.357m; and delegate the final allocations to the Deputy Chief Executive and City Treasurer in consultation with the Executive Member for Finance and Human Resources.

 

(7)     Approve the gross and net Directorate cash limits

(8)     Approve the in-principal contribution to the Adults aligned budget, subject to the extension of the S75 Agreement with Manchester Foundation Trust, which will be considered by Executive in March 2024.

(9)     Delegate authority to the Deputy Chief Executive and City Treasurer and Chief Executive in consultation with the Executive Member for Finance and Human Resources and the Leader of the Council to draft the recommended budget resolution for budget setting Council to provide an itemised council tax bill which, on the face of the bill, informs taxpayers of that part of any increase in council tax which is being used to fund adult social care.

(10)   Recommend that Council approve and adopt the budget for 2024/25