To recommend to Council the proposed 2026/27 revenue budget, Medium Term Financial Strategy and the Treasury Management Strategy. 

 

Appendices E, G and H to follow. 

Councillor Stoddart, cabinet member for finance and corporate services introduced the report

 

The Cabinet received an update on the consultation undertaken during the development of the 2026/27 draft revenue budget. Members were advised that extensive briefings had been provided to Group Leaders, political groups, Scrutiny Committees and council employees throughout the process.

 

The public consultation ran from 9 December 2025 to 4 January 2026, generating 359 responses, an increase from 201 in the previous year. Feedback indicated strong opposition to reductions in highways maintenance and street lighting, and significant support for asset development and digital service improvements over service reductions. A majority favoured increased charges for non?statutory services.

 

The Scrutiny Management Board considered the budget proposals at its meeting on 23 January. Cabinet noted the additional assurances provided and the formal responses set out at Appendix G to the report.

 

Cabinet noted the provisional local government settlement published on 19 December, confirming significant reductions arising from the Fair Funding Review. The final settlement was awaited.

 

The draft balanced revenue budget for 2026/27 totals £234.1m and includes a council tax increase of 4.99%, resulting in a Band D charge of £2,067.63. Savings proposals of £20m, use of £3.2m from the Business Rates Risk Reserve, and establishment of a Contract Inflation Fund were included.

 

Cabinet acknowledged that local authorities continue to face significant pressures due to rising demand for statutory services and reductions in central government funding. Analysis indicated a £17.3m reduction to Herefordshire’s allocation following the Fair Funding Review, with rural councils significantly disadvantaged compared with urban authorities.

 

Members noted that although 30 councils received Exceptional Financial Support (EFS) in 2025/26, Herefordshire Council would not seek such support, instead maintaining responsible financial management.

 

The Cabinet considered the proposed base budgets for 2026/27:

Community Wellbeing: £89.667m, reflecting pressures linked to rising complexity of needs, temporary accommodation demand, and inflation.

 

Children & Young People: £58.413m, with continued delivery of multi?year savings and stable workforce arrangements following an underspend in 2024/25.

 

Economy & Environment: £38.291m, supporting major projects, waste contract pressures and the new public realm operating model.

 

Corporate Services: £22.496m, including £1,000 per Ward Member for community projects and £0.6m capital receipts for transformation.

 

Central: £25.253m, driven by increased interest payments and capital programme commitments.

 

Cabinet noted a total of £19.954m in savings proposals across all Directorates, covering cost control, demand management, income generation and efficiencies. It was reported that £6.9m (35%) was expected to be delivered from 1 April 2026.

 

The Cabinet noted that external auditors had identified no significant weaknesses in financial planning arrangements and that all financial planning measures were assessed as green. Herefordshire continued to be one of the first authorities nationally to publish audited accounts.

 

Cabinet received the Medium-Term Financial Strategy (MTFS) for 2026/27 to 2029/30, noting an estimated cumulative funding gap of £83.418m, largely attributable to the Fair Funding Review. Work to address the 2027/28 gap would commence in April 2026.  Key areas of future focus include maximising commercial income, efficiency improvements with specialist partners, review of subsidiary relationships, workforce restructuring, benchmarking and digital investment.

 

Cabinet noted the Treasury Management Strategy, including loan debt of £135.5m and investments totalling £55.74m. Earmarked reserves were forecast at £75.3m as at 31 March 2026.

 

Cabinet noted that a balanced budget had been achieved and that risks and reserves continued to be monitored appropriately. Cabinet resolved to recommend approval of the draft budget, the Medium-Term Financial Strategy, and all associated recommendations, including arrangements for allocating any additional funding received.

 

Comments from cabinet members:

Thanks were reiterated for including funding for parish council schemes. The previous cabinet meeting confirmed the introduction of a “pop and shop” scheme, offering 30 minutes’ free parking in all council?owned car parks. The Leader also confirmed that market towns already benefiting from periods of free parking would be treated fairly, with the pop and shop offer extended to on?street parking. This will be incorporated into the new parking policy starting in April.

 

In respect of the five recommendations:

 

Recommendation 1: It was confirmed that ‘no action required, activity already planned’ referred to that point that there’s no action required as the council was already taking those actions referenced in the recommendation. 

 

Recommendations 2 and 3: It was clarified that instead of full scenario planning, the council carries out sensitivity analysis, assessing the impact of changes—such as 1%, 2% or 3% variations—on key financial measures. Full scenario modelling, such as factoring in an 8% inflation change across all areas, is not commonly undertaken by councils nationally and was considered disproportionate given the effort involved.  Therefore, sensitivity analysis is used to focus on the factors that matter most, and examples of this will be demonstrated to the Scrutiny Management Board at its next meeting. Appreciation was expressed for the constructive scrutiny session, which was described as valuable and an important part of democratic accountability.

It was emphasised that the Medium-Term Financial Strategy was a live, continuously updated document rather than a static, one?off exercise. Officers regularly revised it to ensure it reflected the most up?to?date financial information, and sensitivity testing was carried out throughout the year to understand the impact of changes in key financial factors. While there may be differing views on the use of scenario planning, the council reiterated that the MTFS remains a dynamic assessment tool, not a document that is produced and then set aside.

 

Recommendation 4:  It was confirmed this would be covered in the Ear Marked Reserve report later in the agenda and that any changes would be reported in the quarterly reports.

 

Recommendation 5: It was confirmed the format will be reviewed and the reporting will become more output based.  

 

It was confirmed that the final funding settlement will be announced on 9 February 2026 and the Government would be pressed to reexamine fairer funding for Herefordshire but it was unlikely the Government would make any changes.  It was noted that this is the 15^th consecutive year of cuts from Government, it was austerity for rural authorities not for urban authorities. 

 

Group Leaders were invited to offer their views:

 

Councillor Davies, Group Leader for the True Independents, had left the meeting.

 

The Green Group outlined their views and noted that:

Concern was expressed about the continued impact of the Government’s funding settlement, noting that rural areas such as Herefordshire receive significantly less funding per capita than urban areas and face growing financial pressures, including low wages and increasing service demands. They cautioned that ongoing reductions in reserves are not sustainable and highlighted the risks posed by climate change, which may increase future financial pressures. Thanks were offered for securing £50,000 from Extended Producer Responsibility funding to help address roadside litter, and appreciation was expressed for community volunteers supporting clean?up efforts. Concerns were also raised about the proposed restructure of Talk Community and its potential impact on voluntary sector and youth support, given the need to rebuild strong relationships within the Children and Young People directorate. Finally, clarification was sought on the cost and funding source for extending the “pop and shop” free?parking offer to on?street parking, and whether this had been assessed by the Section 151 Officer.

 

The Independents for Herefordshire outlined their views and noted that:

 

A query was raised regarding the level of public engagement in the budget consultation, noting that participation amounted to less than 0.2% of the county’s population. It was highlighted that nearly 60% of respondents live in properties below Band D and concerns were expressed about the continued reliance on council tax increases within a low?wage economy. It was also noted that the council does not track what proportion of average or disposable income council tax represents for residents. A further question was posed as to when it may no longer be viable for the council to continue applying the maximum council tax increase permitted in order to offset reductions in central government funding.

 

The Liberal Democrat Group outlined their views and noted that:

Concerns were expressed about the introduction of the 30?minute free “pop and shop” parking initiative. It was noted that the scheme had not been included in the previous cabinet papers and was announced only briefly during debate before being publicised through a press release. Questions were raised about who the scheme is intended to benefit, how it will work in practice, and whether it is realistic for many residents, particularly in central Hereford. It was also highlighted that councillors representing the city and market towns, as well as local business groups such as the BID and town and parish councils, had not been consulted. The view was put forward that greater collaboration, openness, and engagement with partners is needed when developing initiatives, and concerns were raised about the potential for further insufficiently considered proposals to be approved as part of the revenue budget.

 

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

It was acknowledged that although the budget consultation received more responses than the previous year, overall engagement remains low. Efforts had been made to increase participation through town?centre engagement events and online activity, and further work will continue to encourage wider involvement. The importance of improving engagement with young people was highlighted, with plans to work with schools and the Cabinet Member for Children and Young People to help younger residents understand local government and the relevance of council tax decisions.

It was noted that while the long?term viability of the council tax base raises important questions, financial planning must focus on what is known and can be reliably forecast within the Medium Term Financial Strategy (MTFS). Reference was made to last year’s position, where the council tax increase had initially been set at 3.99% but had to be revised following the withdrawal of the Rural Services Grant, resulting in a £9m loss. Under the Fair Funding Review, central government has indicated that councils are expected to apply a minimum council tax increase of 4.99% this year, leaving the council with no flexibility on that point. It was also highlighted that even with the proposed Band D charge of just over £2,000, government assessments assume councils should be raising council tax based on a figure of £2,200, limiting the council’s ability to generate income. In response to concerns raised, it was confirmed that support for residents would be addressed further under the Council Tax Reduction Scheme later in the meeting.

It was confirmed that the community development roles previously funded within the Children’s Directorate are being transferred into Children’s Services rather than removed. This follows a review of children’s and young people’s community?based youth provision across the county. Locating these roles within Children’s Services will strengthen alignment with Families First, family help and early help pathways, ensuring continuity of existing relationships and partnership work during the transition. It was noted that Talk Community will continue to focus on prevention, and that all proposals remain subject to consultation. Councillors, service users and members of the public were encouraged to provide feedback.

It was noted that generating new income remains a significant challenge, and a recent cross?party task and finish group had been unable to identify any clear additional income options. The administration welcomed contributions from all councillors, regardless of political group, and emphasised that any constructive ideas to support the council’s financial position would be gratefully received.

Lastly, it was confirmed that the cost of introducing the “pop and shop” 30?minute free?parking offer would be absorbed within the new parking cost model through increased activity and charges. The initiative was described as a positive gesture intended to support local traders by encouraging short visits to shops, similar to the existing free?parking provision offered at Christmas. Despite wider financial pressures and the need to find £20m in savings, Cabinet considered the scheme an important and fair measure to benefit both Hereford and the market towns.

 

The Leader of the Council concluded the discussions. Councillor Stoddart proposed the recommendations and the Leader of the Council seconded for the decision before them which is that Cabinet:

 

That Cabinet recommends to Council for approval:

a)    the council tax base of 74,315.25 Band D equivalents in 2026/27;

b)    an increase in core council tax for 2026/27 of 2.99%;

c)    an additional precept in respect of adult social care costs of 2% applied to council tax in 2026/27 resulting in a total council tax increase of 4.99%, increasing the Band D charge from £1,969.36 to £2,067.63 for Herefordshire Council in 2026/27;

d)    the balanced 2026/27 revenue budget proposal totalling £234.1 million, subject to any amendments approved at the meeting, specifically the net spending limits for each directorate as at appendix C;

e)    delegates to the section 151 officer the power to make necessary changes to the budget arising from any variations in central government funding allocations via general reserves;

f)      the Medium Term Financial Strategy (MTFS) 2026/27 to 2029/30 at appendix A be approved;

g)    the Treasury Management Strategy at appendix D be approved;

h)    the responses to scrutiny committee recommendations at appendix G to be approved; and

i)      that any further additional funding above that assumed in this revenue budget and received in the Final Local Government Finance Settlement for 2026/27, is applied to fund the revenue budget with a corresponding reduction in the reserve funding assumed from the Business Rates Risk Reserve.

 

The recommendations were unanimously approved.