Agenda item

The Executive Member for Financial Sustainability submitted a report that set out the revised Medium Term Financial Plan (MTFP). The report also included savings proposals to be put to Members of the Executive.

The Executive Member for Financial Sustainability said that Appendix A was the latest version of the MTFP and the figures were the best estimates when it was published. He said that the current format showed the net budget position for each year at the bottom of the report.

Members were advised that the net budget position for 2024/25 was zero meaning than that the budget was balanced. The Executive Member said that there was an opportunity to consider other ways of allocating funds providing that the budget remained balanced. He drew the attention of Members to the figure of £4,739,000 under capital expenditure charged to a revenue account, and this figure included £3m for Hertford Theatre and included just over £1.5m from the new funding relating to the collection of food waste from 2025.

The Executive Member said that most of the service cost increases in 2024/25 reflected general inflation. He said that the effect of borrowing at the minimum revenue provision on corporate budgets as well as the interest payable on loans. He also mentioned that the cost of servicing had risen by almost £2.5m compared to the budget from 2022/23 and this was only marginally offset by the increase in investment income.

The Executive Member said that the effect of interest rate changes was not going to have a major influence on the council’s financial position. He referred Members to the total savings of £1.2m that had been incorporated into the budget and these savings effects almost entirely cancelled the effects of inflation on the net costs of services.

The Executive Member said that the council had been fortunate to receive an overall increase in funding from government which included the £1.5m of new burdens funding for the food waste collection and the purchase of new containers.

The Executive Member said that the extra money from government for this year should be adequate to cover the increase in debt serving costs and had enabled the setting for balanced budget for 2024/25. He summarised the financial pressures the council would face beyond 2024/25. He referred in particular to the cost of servicing debt, the costs associated with the new refuse contract and the lower level of new homes bonus in 2024/25. He referred Members to the proposals set out in the appendices and said that it was recommended that council tax be increased by 2.99%, the maximum allowed without a referendum.

Councillor Williamson referred to the MTFP in appendix A and asked if there could be more of a breakdown of figures in respect of the net cost of services. He said that were some very significant movements in the figures.

Councillor Williamson asked if the Executive Member could come back to the matter of the transforming East Herts section as it was not clear how this was displayed in the MTFP. He said there were references in the paper in respect of 35% cuts in government funding and this was not reflected in funding and council tax section of MTFP.

The Executive Member said that a lot of the increases were inflationary pressures. He referred to the expansion of the budget in respect of the IT Shared Service. He talked about the transforming East Herts target for bringing the budget into balance and said that the net budget position in terms of savings for 2025/26 was cumulative into future years.

Councillor Nicholls referred to the table at page 37 and the 2025/26 budget and the total savings of £6.4m and what the extra £2.2m was to be spent on. The Executive Member said that an extra £4.7m was being spent on the minimum revenue provision and the interest payable on loans. He made comparisons to the figures in previous budgets and said that the actual cost of services was the same as it was five years ago.

Councillor Nicholls asked what the position of the council would be if there were to be another serious COVID outbreak or similar epidemic. The Executive Member said that the council had very little in the way of reserves and it would be reliant on either borrowing or the government for help.

Councillor Nicholls asked about the outcome for the council following the £600m announced by the government to helped local authorities fund key services. The Executive Member said that the benefit for the council would be in the region of £200,000 per year.

Following several points made by Councillor Deering regarding this £200,000 benefit, the Executive Member said that an increase in the interest or guilts rate could increase borrowing costs very quickly. He said that the council had to be responsible in ensuring the savings target was met.

Councillor Deering said that pausing the ORL project essentially meant that there would be a site where its full value was not being achieved and part of the approach was to fund £170,000 into supporting the URC Hall. The Executive Member said that the URC Hall needed to be brought up to standard and there were a lot of issues in terms of essential maintenance. He said that this would prevent degradation of the building and would allow the venue to continue to operate.

Councillor Jacobs referred to a list of land and building projects and the carried forward expenditure for the ORL Arts Centre Project. The Executive Member said that the project was paused but there will still costs associated with it such as ongoing project management and costs associated with the land.

N Sharman, Independent Person, made a number of observations in respect of uncertainties and options for savings into 2025/26. The Executive Member said that it was important to have a risk register for ongoing monitoring.

Councillor Hart referred to the staffing budget and the considerable amount put by for managing extra costs in the planning department. The Executive Member said that there was an ongoing shortage of planning officers, and the council was in competition with other local authorities and with the private sector, which was in a better financial position.

The Head of Strategic Finance and Property set out the steps being taken to improve recruitment in planning. The Executive Member and the Head of Strategic Finance and Property responded to questions from Councillor Williamson in respect of proposed savings from the disposal of assets and valuations in respect of the Southern Maltings.

Councillor Horner echoed the points that had been made in respect of transparency. He said that it might be useful to have more information within the budget presentation in respect of transforming East Herts.

Councillor Nicholls proposed and Councillor Hart seconded, a motion that the recommendations, as detailed, be approved. After being put to the meeting and a vote taken, the motion was declared CARRIED.

RESOLVED – that (A) Audit and Governance Committee scrutinise the Executive’s proposed budget and make any comments back to the Executive to consider before making their budget recommendation to Full Council;

(B)   Members note that the proposed budget makes use of the flexibility from Government to increase Council Tax by 2.99%, which will increase Council Tax revenue by £366k a year and will result in a Band D Council Tax increase of £5.65 to £195.52 per year;

(C)   Members consider the savings proposals for Member approval and advise Executive of any significant issues you believe may arise;

(D)   Members note that the proposed savings requirements, that will need to be delivered to balance the budget in the medium term, the delivery profile of which without any smoothing is, as follows:

2025/26 £2.243 million

2026/27 £NIL

2027/28 £0.607 million

2028/29 £0.515 million

(E)    Members note the amended Capital Programme which pauses the Old River Lane Arts Centre so as to reduce revenue costs of Minimum Revenue Provision and interest by £1,514k per annum on current interest rates, a total saving of £7.442 million of over the MTFP period and comment on the capital expenditure priorities:

i.      essential property maintenance to meet statutory requirements or to prevent loss or damage to neighbouring properties;

ii.     investment in ICT to continue but that the budget carry forward that has not been used for two years is deleted;

iii.    invest to save initiatives where the business case indicates that the cost of the investment will be recovered in under 10 years;

iv.    to allow pausing of construction of the Arts Centre at Old River Lane until such time as debt levels have fallen sufficiently to make the revenue impacts of new borrowing affordable while at the same time undertaking landscaping works on the arts centre site so that it is an attractive site rather than an undeveloped area blighting the retail and commercial units in the City Heart scheme;

v.     provide up to £170k for essential maintenance works for the URC Church Hall in Bishop’s Stortford;

vi.    completion of Hertford Theatre, at as low a cost as possible, so that the entire venue is opened and run on a strictly commercial basis to maximise income; and

vii.   investment in depot works and waste containers for the new waste and recycling contract.

(F)    Members note that the provisional Local Government Finance Settlement figures confirmed the assumptions made at the December Executive. Note the implication of the Autumn Statement that a further round of austerity is proposed by the Government and that the two major parties seem intent on keeping to the announced expenditure totals which will severely reduce government funding and inevitably require service cuts.