To consider and comment on the strategy.

Andrew Vallance, Head of Finance, explained that the Medium Term Financial Strategy (MTFS) had been considered by the Panel at their last meeting in June. Comments from Panel Members had been incorporated into the report, which had since been considered by Cabinet before coming back to the Panel. Cabinet had recommended the MTFS to Full Council, which would be considered in September. The numbers element of the plan was included in the report, this showed an anticipated savings gap of £7 million. There was estimated to be an additional £3 million of costs from the adult social care reforms. Assumptions had been made around inflation and interest rates, these were subject to change. Appendix B considered a sensitivity analysis which showed the effect of changing some of the assumptions, for example a 1% increase in the council tax cap could increase the amount of council tax by £800,000. The draft budget would be considered by Cabinet in November, before two months of consultation which would include scrutiny in December.

The Chairman asked, for the benefit of any residents watching the meeting, why the council needed to provide a balanced budget.

Andrew Vallance said that there was a legal requirement for the council to have a balanced budget. Savings would be made across the five years of the MTFS. Officers were currently asking service areas for income generation or savings, which would be considered by Cabinet Members in the autumn. The budget consultation would then feed into Cabinet at the beginning of February 2023, before going to Full Council for approval at the end of February 2023.

Adele Taylor said that RBWM was in a similar position to many local authorities across the country. This was the start of the budget setting process, a set of assumptions needed to be laid out. The uncertainty at a national level meant that there was a lot of unknown and the financial situation was very volatile. Officers spoke to treasury bodies, other Berkshire colleagues and CIPFA to be as accurate as possible in assumptions that had been made.

Councillor Walters said that he had a lot of confidence in officers to make accurate assumptions and set a balanced budget. RBWM had traditionally had a low council tax level, which was what residents wanted. However, due to the financial position, this might have to change.

Councillor L Jones agreed that officers were doing a good job, there was stable reporting. There were a few challenges which were unique to RBWM. The council had the lowest council tax level outside London, coupled with low reserves and with increased levels of borrowing had made the financial position more challenging. Councillor L Jones noted that £7 million of savings needed to be made, with the potential for a further £3 million needed, she asked how confident officers were that there was sufficient financial resource available to achieve the objectives set out in the corporate plan, including climate change. Councillor L Jones asked if the voluntary sector had the capacity to deliver the council’s objectives. In the report, it was estimated that there would be an increase of £500,000 in council tax and business rates each year, with the development in the borough. Councillor L Jones asked if these estimates could be made more accurate.

Adele Taylor said that the budget needed to be balanced and the objectives in the corporate plan needed to be met. The plan gave officers some prioritisation and framework within which resources should be focused. Work around early intervention was key in helping to deliver the budget as it would help to manage demand. If Adele Taylor did not think that the council could deliver its statutory services, a S114 notice could be issued. RBWM was not in this position now and had not been either in the past few years. Money needed to be prioritised and spent in the right areas, as had been outlined in the corporate plan. On the voluntary sector, there had been a significant amount of work done on trying to build bridges and working differently.

Andrew Vallance answered the question on council tax, a report would be going to Cabinet in November which set out the level of council tax for the following financial year. The government had kept changing its mind on business rates, it was expected that there would be at least one reset over the five years.

Councillor Price said that there had been a few but significant changes to the report which had been considered by the Panel at their last meeting, she asked if any changes could be highlighted in future so that it was clear to Panel Members where changes had been made. Councillor Price asked why the savings for next year had increased by £4.8 million.

Andrew Vallance said that the savings had increased as officers had reconsidered the assumptions which had been made. The interest rate and inflation were the areas where there was an increase since the last budget in February 2022.

Councillor Story asked where the three biggest cost vulnerabilities were. Inflation and care costs seemed to be important factors, he asked if there were any others. On inflation, Councillor Story asked if RBWM inflation was the same as national inflation.

Adele Taylor said that national inflation included things like the cost of food, it was difficult to determine the exact level of inflation which would affect RBWM. Some of the contracts would have wage inflation included, officers had to go for best estimates at the current point in time. The adult social care reform would be coming in October 2023, there was a difference between what the government thought it would cost and what officers believed it would cost the council. The three areas of cost vulnerability for Adele Taylor were inflation, normal demographics and the adult social care reform.

On normal demographics, Councillor Story asked if it was care costs in relation to demography.

Adele Taylor said that demographics had to be dealt with, there was an increasing and ageing population in the borough.

Councillor Walters commented on the new homes bonus, which was assumed not to continue.

Andrew Vallance said that it was assumed not to continue, although the bonus was extended last year and the settlement was likely to be a roll forward. No consultation had been done on what would replace it.

Councillor Walters asked about the provision for paying back debt.

Andrew Vallance said that it was paid back over 50 years, usually 2% to 4% of the capital sum and it was done on the lifetime of assets.

Councillor Bond said that the size of the savings required was particularly significant. It was useful to have the sensitivity analysis. RBWM used Arlingclose, Councillor Bond asked if they agreed with the assumptions made on inflation and interest rates. He asked what would happen if the assumption for interest rates were incorrect.

Adele Taylor confirmed that officers did consult with Arlingclose, their assumptions were very similar to those from the Bank of England. RBWM was continuing to lobby the government about the impact of inflation, it was hoped that this would be considered when any settlement figure was agreed. More detailed work would need to be done around the collection fund, the draft budget would show what had changed.

The Chairman asked when officers would be able to update the material parts of the report.

Adele Taylor said that there was less certainty than usual due to what was happening nationally. Settlements were expected to be similar to previous years, notification would be received in December.

RESOLVED UNANIMOUSLY: That the Panel noted and commented on:

i)             The proposed key themes of the Medium-Term Financial Strategy set out in the report.

ii)            The Medium-Term Financial Plan set out in Appendix A.

As per C25 in Part 2 of the Constitution, the Panel was required to hold a vote on whether to continue the meeting, as the meeting had continued past 9.30pm.

A named vote was taken.

RESOLVED UNANIMOUSLY: That the meeting would continue and the remaining items on the agenda would be considered by the Panel.