To present the draft 2026/27 revenue budget, Medium Term Financial Strategy and the Treasury Management Strategy. 

Councillor Stoddart, cabinet member for finance and corporate services introduced the report.  It was noted that the budget had been developed during a time of significant financial pressure, particularly due to changes in Government funding for rural areas. Despite these challenges, the council was proposing a balanced budget that protected essential services whilst investing in the county’s future.

Recent changes to the national Fair Funding Review meant that Herefordshire will see a £17.3m reduction in Government funding over the next three years. The new funding formula gives greater weight to urban pressures and does not fully recognise the higher cost of delivering services in rural areas. By 2028/29, Herefordshire’s Government funding per person is expected to be 40% lower than that received by urban councils.

To help protect services, the council proposed a 4.99% council tax increase made up of 2.99% core council tax and 2% adult social care precept. For a Band D property, this would mean a rise to £2,067.63, an increase of about £1.89 per week.

To balance the budget for 2026/27, the council proposed £20m in savings across all service areas, a new Contract Inflation Fund to manage rising costs and £3.2m from the Business Rates Risk Reserve to offset reduced Government funding.

Despite the financial challenges, the council would continue to support vulnerable adults and older people, improve children’s services following recent progress and a ‘Good’ Ofsted rating, deliver major projects and invest in the local economy, manage increasing pressure in waste services and home-to-school transport.

From April 2026, the council will introduce 30 minutes of free parking in all council-operated car parks, supporting shoppers, residents and local businesses. Parking tariffs will be adjusted by an average of 8–10% to help maintain car parks and transport infrastructure. Even with this change, prices remain below where they would have been had charges risen with inflation since 2023.

Every ward councillor will also receive £1,000 to support local community projects aligned with the Council Plan.

The Medium-Term Financial Strategy (MTFS) highlights further pressures ahead, including an estimated funding gap of £20m in 2027/28 and £83m over the full period to 2029/30.

The council will begin work immediately on its Future Financial Strategy to address these gaps.

External auditors have confirmed that the council has robust financial management and effective arrangements in place to identify and manage risks.

Lastly, it was noted that the Fair Funding Review had resulted in a substantial reduction in Government support for Herefordshire, creating a £30m funding gap. This shortfall was attributed to decreased national investment in rural areas rather than local financial mismanagement. Members were advised that the county now receives around 40% less funding per resident compared with urban authorities, and that the reduction in the Government’s contribution to core spending power has increased pressure on local taxpayers and businesses.

Despite these challenges, it was highlighted that the Conservative?led council had set a balanced budget for the year, prioritising the protection of vulnerable residents, the maintenance of essential services, and continued investment in Herefordshire’s future.

Comments from cabinet members:

Members raised several points in relation to the draft budget:

·       Thanks were extended to Rachael Sanders and the Finance Team for their work in achieving a balanced budget.

·       Concerns regarding the future of the DSG override were noted and the uncertainty beyond 2028 which could have a serious national impact on councils. The need to continue raising this with Government at every opportunity was highlighted.

·       It was noted that The Fair Funding Review did not represent a genuinely fair allocation for Herefordshire.

·       A correction in the report was highlighted, stating that one reference should be to the ‘garden waste service’, not food waste (which was referenced twice) on page 78 of the bundle. 

·       The Pop and Shop scheme was welcomed, emphasising its intention to boost town?centre footfall by reducing barriers to short?stay parking.

·       It was highlighted that the flood risk team had now been made a permanent part of the base budget following its temporary expansion after last year's flooding incidents.

·       There was ongoing work with parish councils on drainage, public rights of way and the Lengthsman Scheme which will continue, with sufficient funding secured for all schemes for the year ahead.  It was noted that these parish?led schemes remain cost?effective and contribute significantly to improved highway conditions.

·       Funding of £50,000 had been identified to support a county?wide litter strategy, developed collaboratively with members of the Green Group.

Group Leaders were invited to offer their views:

The Green Group outlined their views and noted that:

• Thanks were extended to the Chief Finance Officer and Cllr Stoddart for their work.
• Strong concerns about the impact of significant funding cuts were noted, as rural areas like Herefordshire were already facing high levels of deprivation.
• The need for continued pressure on Government to address the unfair funding position was stressed.
• The lack of detailed information available before scrutiny was highlighted and more clarity on spending and delivery targets were requested.
• Concerns were raised about the Talk Community reshape, particularly the risk of reduced support for young people and youth services.
• Assurance was sought that the 16–19 bus pass pilot, previously approved by Council, would have a clear budget line.
• It was queried whether partnership working and savings proposals, particularly relating to Hoople, were realistic and deliverable.

The Independents for Herefordshire outlined their views and noted that:

• The administration’s difficult financial situation was acknowledged, attributing it to the unfair outcomes of the Government’s Fair Funding Review and the loss of rural?supporting grants. It was noted that producing a balanced budget without exceptional Government support was challenging and acknowledged the efforts of officers and Cabinet members.
• Concerns were raised about the deliverability of the proposed savings, citing the lack of detailed delivery plans, late publication of equality impact assessments, and limited evidence of partner engagement.
• The increase in the council’s projected financial gap over the three?year period was highlighted and it was raised that the current plans did not credibly address the £80m shortfall. The need for improved transformation, better partnership working, stronger commercial skills, and more effective communication were raised.

The Liberal Democrat Group outlined their views and noted that:

• Savings often take too long to deliver or prove unachievable.
• It was stressed that, following the Council Tax meeting in February, focus must be placed on how the required savings can be achieved without causing significant difficulty for residents.

The True Independents had left the meeting. 

In responding to the comments raised, the Cabinet Members noted that:

• Whilst some statements carried early?December dates, this did not reflect the true timeline of the work undertaken. It was highlighted that the finance team had acted promptly, noting that the Government’s draft settlement was only released on 17 December 2025 and if more review time were required, the Government should provide it.
• It was noted that the proposed savings within Community Wellbeing formed part of a wider consultation. It was stressed that members would have the opportunity to participate in the consultation, after which the results would be reviewed and decisions made, with all options remaining open at this stage.

The Leader of the Council concluded the discussions by proposing and invited a seconder for the decision before them which is that Cabinet:

a)    approves the 2026/27 draft revenue budget, which includes the key pressures for each Directorate and savings proposals, for consultation with Members, the council’s relevant scrutiny committees, business rate payers and the public; and

b)    acknowledges that the funding assumed in this draft budget is an estimate of expected funding; to be confirmed following publication of the Final Local Government Finance Settlement for 2026/27 expected in February 2026

The recommendations were unanimously approved.