Members gave consideration to the report of the Chief Finance Officer on the draft Revenue Budget, which outlined the likely financial position and key issues that Members needed to consider as part of the budget setting process.  The Committee had been requested to consider the draft budget and make recommendations to Cabinet, to be considered at its meeting on 6 February 2023.

The following assumptions had been made in calculating the draft Revenue Budget:

•     inflation of 4.57% applied to non-pay budgets except for contracts where specific indices were applied;

•     with effect from September 2023 salaries had been increased by 3% and an allowance of 1% assumed for staff turnover;

•     the use of transfers between existing budgets had been applied enabling funding to be re-directed into priority areas;

•     where applicable, income budgets have been increased in line with the fees and charges approved by Cabinet on the 12 December 2022

•     interest rates of between 3.2% and 4.4% had been used to calculate the financing costs on capital investment schemes;

•     between 0.05% to 4.40% interest rates had been used to calculate investment returns; and

•     an assumed Council Tax collection rate of 98.3% (unchanged from last year and had held up well during the current year).

The following key issues were highlighted: 

•     the draft Local Government Finance Settlement announced by Government in December applied to 2023/24 and 2024/25 only and did not guarantee any future funding streams beyond this two-year period; the Council’s Core Spending Power had been set at £12.3m, an increase of £0.9m from 2022/23;

•     the East Sussex Business Rates Pool for 2023/24 and 2024/25 would be retained;

•     the council tax referendum principle for Rother would allow an increase in council tax of £5 or 3% (1% increase from 2022/23) whichever was the highest; it had been assumed that the Council would increase council tax by the maximum allowed before a referendum was required – for Rother, this was 3% and would raise an additional £30k more than a £5 increase; it was noted that other preceptors had greater flexibility to raise income than Rother District Council;

•     for 2023/24, to ensure the Council remained within the referendum limit, it was assumed that £198.85 would be agreed for an average Band D property;

•     the 2023/24 council tax base had been calculated at 38,520.8 and showed an increase of 293.80 Band D equivalents, mostly due to an increase in chargeable dwellings and eligible discounts, and a reduction in Council Tax Reduction Scheme claimants;

•     new Government funding streams in relation to ‘Extended Producer Responsibility for Packaging’ Schemes were anticipated during 2023/24; details would be announced once received;

•     the Council was expected to receive Government grants of £1,756m as part of the LGFS, (excluding New Burdens funding), which represented an increase of £106,000 from 2022/23;

•     in response to inflationary pressures, the DLUHC would combine the New Homes Bonus legacy payments with the Lower Tier Service Grant; the Council’s allocation would be £473,000;

•     service grants had been reduced to £92,000 for 2023/24;

•     to implement the requirements of the Elections Act 2022, the Council would receive £32,000, as well as an unspecified amount to administer the impact of business rate revaluations (£20,000 had been included within the budget); and

•     £2.217m was proposed to be drawn down from Usable Revenue Reserves with a further drawdown of £186,000 to support capital expenditure; a total drawdown of £2.403m which would reduce reserves to £5.125m by 31 March 2024.  Reserves were forecast to reduce to 33% of Net Revenue Expenditure by the end of 2023/24. 

The cost pressures that might affect the Council’s finances were highlighted within the report and these included contractual inflation, homelessness demands, increased external audit fees, net financing costs, increased staffing costs, non-pay inflation and the recovery of housing benefits overpayments.

In order to give the Council greater budget flexibility and reduce reliance on reserves, it would be essential to deliver the Financial Stability Programme (FSP), including the devolvement of services to some parish and town councils and identify savings from the departmental service planning process.  Heads of Service and Service Managers had been tasked with finding savings to build into the 2024/25 budget, but ultimately it would be a decision for Members as to where the savings were made.

It was noted that the Government was aware that many Councils’ level of reserves had increased over the two years of the pandemic and that they were in favour of reserves being used to maintain service levels, provided that an adequate level of reserves was maintained to support financial sustainability. 

The budget consultation was currently on-going and due to close on 31 January 2023. So far, disappointingly, only 105 responses had been received despite several social media / MyAlerts reminders.  The full response and analysis would be reviewed and reported to Cabinet on 6 February 2023.

During the debate the following points were made:

·         Members were concerned that not all relevant information had been provided to them to enable detailed scrutiny of the budget, including the true costs of the Blackfriars development, the savings identified through the FSP and how and where the £32,000 grant from Government to cover the additional burdens placed on the Council through the Elections Act and Voter ID would be spent; 

·         a Member briefing had already taken place on the Elections Act last year and savings identified through the FSP would be presented to Cabinet on 6 February 2023;

·         Members were keen to ensure that savings were identified to protect staffing levels without the need for redundancies;

·         the impact of Airbnb and holiday lets on collection funds and other areas was an issue for future consideration on the Work Programme;

·         the total costs of the Blackfriars spine road were always in the region of £8m – the information presented in the recent Freedom of Information request responded to a strict interpretation of the question;

·         it was considered that the budget assumption of 3% for staff salary increase from September 2023 was too low; each additional 1% increase would require approximately an additional £120,000 per annum;

·         the Senior Leadership Team would be actively monitoring the costs of homelessness as it represented a big area of spend; it was likely that without a fundamental policy change at a national level, the costs associated with homelessness would become more difficult and challenging;

·         it was agreed that the Council needed to refocus on digital transformation and increased use of Artificial Intelligence to realise savings and improve the customer experience; a soft launch of the Council’s new digital assistant was currently underway, but further work in this field was required.

·         Members were reminded that the report clearly stated an update on the FSP would be reported to Cabinet on the 6 February 2023. Also, the Blackfriars scheme was part of the capital programme and would therefore not necessarily be part of the revenue budget proposals.

It was agreed that the above comments would be submitted to Cabinet.

RESOLVED: That the comments of the Overview and Scrutiny Committee be considered by Cabinet when setting the 2023/24 Draft Revenue Budget at its meeting on 6 February 2023.