To consider the progress of the development of the 2023/24 budget proposals and Term Financial Strategy (MTFS).

The Chairperson set out the reason for the consideration of this item, which was to scrutinise the budget performance and emerging issues and to consider the progress of the development of the 2023/24 budget proposals and Mid Term Financial Strategy (MTFS).This item was part of the scrutiny of the Council’s budget, including the emerging budget priorities, positioning, assumptions and risks informing the development of the budget proposals for 2023-2024.

To assist the committee in the scrutiny of budget performance, the report included the cover reports for end of year budget performance for 2021/22 and Quarter 1 2022/23, the details of which had already been published in the Cabinet papers, to also provide insight into ongoing issues for the development of next year’s budget. 

At its next meeting on 28^th November 2022, the committee was expecting to receive a report on Budget Performance Quarter 2 2022-2023, which would provide an opportunity provide accountability on the delivery of the Council’s budget, as well as further help to inform the recurrent budget issues. 

The Chairperson set out the order in which the budget matters would be considered. First, to invite the Director of Resources and Assurance to present the key issues for the development of the 2023-2024 budget, then to move to questions on the end of year budget performance for 2021/22 and Quarter 1 2022/23, then, questions on the development of the 2023-2024 budget, and then to move to debate and consideration of the conclusions reached by the committee. The Chairperson invited the Director of Resources and Assurance to present the report and slides provided in the agenda papers.

The Director of Resources and Assurance set out the context for the budget setting process.  He explained that the Secretary of State for Levelling Up, Housing and Communities had advised in July that the local government settlement announced in December 2022 would be a flat two year settlement. Inflation was a significant budget pressure, with global events and uncertainty driving up inflation.  It was anticipated that inflation was likely to be over 10% over the medium term. The Bank of England had raised interest rates over summer and further rate increases were expected. In addition, in Herefordshire there was a stated need to invest in children's services.  He said that there was a structural disconnect between rate of increase in funding and costs, costs are increasing at an unprecedented rate.

The Government’s September 2022 fiscal statement, however, did not provide information on local government funding. Residents and local businesses were facing significant cost of living challenges and energy costs. He explained that the funding model for local government made little allowance for the transition to an inflation driven economy. 9.7% of the base budget was funded from Government grants and the current assumption was that this would not increase.

21.6% of the base budget was funded from retained business rates. The current assumption was that this would not increase. 68.2% of the base budget was funded from Council Tax, the  ...  view the full minutes text for item 27