Agenda item

To receive a report by the Head of Service for Finance and Audit Updating Governance and Audit Committee (copy enclosed) on the Welsh Government’s (WG) Provisional Funding Settlement for Local Government 2025/26 and its implications for setting a balanced budget for 2025/26.

The Head of Finance and Audit (HFA), alongside the Lead Member for Finance, Performance and Strategic Assets, introduced the Update on 2025/26 Revenue Budget Setting report (previously circulated). The report aimed to update the Governance and Audit Committee on the Welsh Government’s (WG) Provisional Funding Settlement for Local Government 2025/26 and its implications for setting a balanced budget for 2025/26.

Regular medium-term financial updates have been reported to the Governance and Audit Committee throughout the year as part of the role of the Governance and Audit Committee in seeking assurance that the Council has effective and robust processes in place for setting balanced budgets. The Council is legally required to set a balanced budget before the start of each financial year and to set the resulting level of Council Tax. At its next meeting on 18th February 2025, the Cabinet would consider a report to set a balanced budget and Council Tax for 2025/26. Council will then consider this report at its meeting on 20th February 2025.

The Council received the Provisional Settlement for 2025/26 on 11th December 2024. The Council’s provisional AEF (Aggregate External Finance, which consists of the Revenue Support Grant [RSG] and our share of the non-domestic rates pool [NDR]) from WG for 2025/26 equates to £215.222m.

WG has produced tables so that funding levels in 2024/25 and 2025/26 can be compared on a like-for-like basis across all Welsh councils. Since its initial publication, WG has slightly amended the restated 2024/25 figure. The council’s 2025/26 funding compares with a restated 2024/25 AEF of £205.729m, a headline increase of £9.493m or 4.6%.

The committee discussed the following points further –

• Members raised the concern that the report seemed more complex and technical than usual. The HFA did agree that the reports were more technical than in previous years; however, to clarify, the settlement was an increase of 7%.
• The National Insurance (NI) contributions were raised, and the Council could set a balanced budget without knowing how much money would be given to accommodate the additional costs. The HFA informed the committee that local governments knew some funding had been allocated for the NI contributions. However, it was unknown when the funding would be allocated and how much would be available. The situation was like that in previous years, where there was an unknown with the increase in teacher pensions. However, this did not stop the setting of a balanced budget.
• Responding to queries about grants transferring in not being allocated directly to services and being broader in scope, the HFA informed the members that previously new areas of responsibility in services were funded by grant.  The grants were now ending but the responsibility would remain with the service, and the funding therefore needed to stay with the relevant service.
• Responding to points raised regarding the impact the budget cuts were having on the most vulnerable in society, the HFA understood the challenges; these were the challenges facing the Council and all other Councils.
• In response to questions regarding paygrades and whether the matter could be resolved as it caused pressure on the budget, the HFA clarified that there was constant dialogue with other local authorities and the WLGA.
• The committee praised all the recent budget workshops held for elected and lay members.
• The committee suggested that the budget pressures within the report be split by statutory and non-statutory savings, making the process easier; the HFA did not believe this would be possible, as it would be hard to gauge accurately.
• Concerns were raised regarding the revenue impact of capital programming. The HFA provided assurance that the discussions that have been ongoing with the Capital Scrutiny Group and Cabinet regarding the impact on revenue of capital decisions this year.
• Fees and charges levied by the council were highlighted, and whether there was work ongoing on the matter, the HFA wanted to continue with this work, and benchmarking was a part of the work. Audit Wales also suggested this in a recent review.
• The committee discussed capacity within the finance service; the budget took the sole attention of the service; therefore, the capacity was not an issue at the moment.
• NDR business rate information was unavailable but would be circulated to members outside the meeting.
• The committee queried whether the service was preparing the budget within the current timescales; there were no concerns with the service's current timescales, and there was ongoing open dialogue on the budget. Schools’ budgets were discussed monthly at cabinet meetings in the finance reports.
• The committee raised the suggestion of a stress test which was raised at the Governance and Audit Committee last year; did the finance service have an idea when the stress test could be conducted, the reset of the medium-term financial strategy for the next three years would be the best option as it would allow the strategy to be based off it. The spending review by the UK Government was ongoing, and a strategy was set before the review was carried out; the plan by the HFA was to conduct the stress test by April 2025.

RESOLVED that the Governance and Audit provided no further feedback to Cabinet before the 2025/26 budget was set.