Report of the Deputy Chief Executive and City Treasurer.

This report sets out the latest forecast revenue budget position, and the next steps. It also provides a high-level overview of the updated budget position. Following the provisional finance settlement announced on 18 December 2023, the Council is forecasting an estimated budget shortfall of £38m in 2024/25, £79m in 2025/26, and £90m 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, the budget is balanced for 2024/25 and the remaining gap reduce to £29m in 2025/26 and £41m by 2026/27. This position assumes that savings of £21.4m are delivered next year.

The committee considered a report of the Deputy Chief Executive and City Treasurer which set out the latest forecast revenue budget position and the next steps and provided a high-level overview of the updated budget position. 

Key points and themes within the report included: 

·        After the application of approved and planned savings and the use of c.£17m smoothing reserves in each of the three years, the budget is balanced for 2024/25 and the remaining gap reduced to £29m in 2025/26 and £41m by 2026/27, assuming that savings of £21.4m are delivered next year; 

·        An overview of financial challenges facing the Council;  

·        Changes to the budget position following the Autumn Statement and Provisional Local Government Finance Settlement; 

·        The updated Medium-Term Financial Plan; 

·        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;? 

·        Support for residents; 

·        ICT investment;  

·        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; 

·        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 

Some of the key points and queries that arose from the committee’s discussion included: 

·        Commending staff for their work in developing a balanced budget for 2024/25;  

·        Emphasising the importance of the Household Support Fund (HSF) being continued, despite a lack of confirmation from government;  

·        Noting that the Council cannot add to its reserves;  

·        Noting the cumulative loss of budget cuts since 2010; 

·        How many children on free school meals would be impacted by the end of HSF; 

·        Recognising the lateness of government finance settlements and the uncertainty that this affords the Council;  

·        The importance of income generation;  

·        Requesting further information on the financial position of the airport; and 

·        How confident the Director of ICT was in being able to recruit to the service. 

The Executive Member for Finance and Resources introduced the item and stated that the Government’s approach to the Local Government Finance Settlement had been chaotic and only announced just before Christmas. He said the final announcement when announced had resulted in a cut of 84% in the Services Grant and this equated to a £6.1m loss for Manchester. He stated that this had resulted in an outcry from local authorities and MPs from all political parties. He stated that this situation needed to be understood in the context of fourteen years of austerity and Government funding cuts and unfunded pressures such as inflation and population growth. ? 

The Executive Member for Finance and Resources added that the Government then swiftly announced an additional £500m for Social Care, however Local Authorities were still facing a £4bn budget gap nationally, resulting in a number of Local Authorities serving a Section 114 notice and it was anticipated that more would follow. He commented that despite this, Manchester had set a balanced budget and this had been achieved through diligent planning and management that had witnessed the strategic investment in preventative initiatives; using financial reserves prudently and investment in activities that were important for Manchester residents.  

The Executive Member for Finance and Resources stated that although Manchester had been able to deliver a balanced budget this year, the Council’s financial position is expected to become even more challenging. The projected budget gap, even after using reserves for 25/26 was £29m in 2025/26 and rising to £41m by 2026/27. 

The Executive Member for Finance and Resources concluded by stating that the Government had continually failed to listen to Local Authorities. 

The Deputy Chief Executive and City Treasurer confirmed that Key Decisions relating to the collection fund had been made and that the final Finance Settlement has been received from government, meaning that the overall budget position was confirmed.?? 

She explained that the Finance Settlement contained a £1.5m return of the Council’s share of the business rates levy relating to 2023/24 and would be reported in the Global Monitoring report.?There was also a slightly higher than expected increase in public health grant of £1.265m which would be passported to Public Health and £5.5m from the Social Care Grant, which would be used to fund growing pressures across social care and to ensure the right preventative measures were in place.  

She stated that, since November, in the absence of any additional Government funding being available, the Council had to identify an additional £10m from reserves and one-off funding since to meet the rising costs of social care.?? She stated that whilst the extra £5.5m grant was helpful, it was not sufficient to meet those additional costs but would reduce the overall drawdown on reserves which would be required to support the gap in 2025/26 and beyond.??It was stated that there was no guarantee that this additional grant would continue beyond 2024/25 and the Council needed to plan beyond then and would continue to press for a more sustainable funding solution for children's and adult’s social care.? 

? 

It was also confirmed that the £110k increase in the services grant would be used to support the inflation provision.? 

? 

The Deputy Chief Executive and City Treasurer confirmed that the Council would set a balanced budget for 2024/25 but stated that she, like many in local government, remained very concerned about the position for 2025/26 and beyond.? 

In response to queries regarding the Household Support Fund (HSF), the Executive Member for Finance and Resources echoed comments and stated that the government failed to recognised that the cost-of-living crisis was ongoing for many residents. He stated that the Council would use some of its own funds to mitigate the loss of HSF but it would be unable to continue providing free school meals for children. The Directorate Head of Finance confirmed that this would affect around 40,000 children.  

The Executive Member for Finance and Resources confirmed that the Council’s general reserve fund could not decrease lower than £25m and reiterated the need to be financially prudent. He echoed comments regarding the cumulative impact of budget cuts since 2010 and commented on the impact of this on residents, citing pressures on home-to-school transport as an example of this.  

In response to a member’s point regarding the need to begin work on the budget process sooner as a result of government’s failure to provide settlements in a timely manner, the Deputy Chief Executive and City Treasurer explained that officers took a long-term approach to devising the budget and that work for next year’s budget would begin in April 2024. The Executive Member for Finance and Resources also called for multi-year finance settlements from central government. 

The Deputy City Treasurer explained that the Council received £120m from sales, fees and charges and stated that the Council tried to keep fees incurred directly by residents’ low. He highlighted that these fees and charges were used to support frontline services.  

In response to a question regarding the return on investment in Manchester Airport, the Deputy Chief Executive and City Treasurer stated that she could not comment on this given the sensitive nature of regulated business. She explained that the Medium-Term Financial Plan did not account for this return.  

The Director of ICT recognised challenges in recruiting to the service and explained that significant work had been undertaken to recruit and retain staff, including amending job descriptions; advertising more widely; and ensuring opportunities for progression. 

Decision:  

That the report be noted.