To report the provisional financial outturn position for 2025/26 for revenue and capital budgets, subject to external audit.  The results for 2025/26 report a balanced revenue outturn position after the use of reserves and implementation of recovery plan actions.

 

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

 

It was noted that Herefordshire Council achieved a balanced revenue outturn for 2025/26 despite a challenging financial environment and initial forecast overspends. This was attributed to strong financial management, effective expenditure controls, prudent use of reserves, and delivery of recovery plan actions.

 

It was highlighted that previous years’ forecast overspends had also been successfully managed, demonstrating consistent financial discipline. Key achievements included reduced reliance on the Budget Resilience Reserve, early repayment of reserve contributions from the Children & Young People Directorate, and strengthened reserves to manage future risks, including inflation and rising costs.

 

It was noted ongoing financial pressures arising from demographic and service demand factors, including adult social care, temporary accommodation, and SEND and home-to-school transport costs. Plans to address these pressures included continued demand management, cost control measures, and service transformation within the Community Wellbeing Directorate.

 

The central budget outturn reported a net underspend, primarily due to higher treasury management income, additional business rate income, and investment returns. It was recommended that a portion of this would be allocated to bad debt provision and reserves, with the remainder offsetting directorate overspends.

 

It was noted that savings delivery was strong, with £13.2m achieved (84% of target), although some savings would be carried forward. The Dedicated Schools Grant deficit increased but remained subject to a management plan, with anticipated government support expected to significantly reduce the Council’s long-term liability.

 

The capital programme recorded its highest ever annual expenditure, with £86m delivered. Variances were largely due to project reprofiling and timing differences, with robust monitoring arrangements in place to manage risks including inflation, delivery delays, and grant compliance.

It was further noted that draft accounts would be published ahead of the statutory deadline, with external audit planned for early summer.

 

Overall, it was highlighted that the outturn demonstrated strong financial stewardship, supporting service delivery and maintaining the Council’s financial resilience.

 

Comments from cabinet members:

 

Congratulations and thanks were extended to Cllr Stoddart and the team. 

 

Thanks, were also extended to Tina Russell for their work in Children’s Services. The positive outcome of the Ofsted inspection was noted, with Children’s Services rated good with outstanding leadership.

 

It was emphasised that, alongside financial performance, feedback from families through surveys and follow-up activity provided an important measure of service quality and demonstrated clear improvement. It was highlighted that the Council had achieved financial stability while continuing to improve service delivery, which was considered a significant achievement. Appreciation was extended to all officers involved.

 

The Council’s financial position in the context of neighbouring authorities was noted. It was highlighted that nearby councils, including Worcestershire, were facing significant overspends of approximately £50m, and that this comparison emphasised the strength of Herefordshire’s financial management.

 

Group Leaders were invited to offer their views:

 

The representative for Independents for Herefordshire outlined the views of their group and argued that:

 

It was raised that delivering a balanced budget was a statutory requirement and, while not an achievement in itself, the manner in which it was achieved was notable. Particular recognition was given to the ongoing improvement in Children’s Services, which continued to deliver better outcomes while operating within budget. In contrast, pressures within Adult Services were acknowledged, with increasing demand requiring difficult decisions and a focus on service transformation, workforce development, and managing expectations.

 

It was noted that the outturn had been supported by the prudent use of reserves and additional income streams, including treasury management and investment income. However, concerns were raised regarding transparency, particularly in relation to significant income items and the use of reserves, where more detailed explanation was requested.

 

With regard to the capital programme, members highlighted a lack of clarity in reporting on major projects, including those funded through the Stronger Towns Fund, and requested further information on progress and delays. Questions were also raised about significant variances between Quarter 3 forecasts and final outturn figures, with concerns expressed about the robustness of forecasting and project management.

 

Additional queries were raised in relation to specific schemes, including wetlands and property transactions, as well as coordination across departments. It was noted that reduced capital expenditure had resulted in savings but also meant that some expected projects had not been delivered within the anticipated timeframe.

 

The True Independents Leader outlined the views of their group and argued that:

 

The strength of the budget was recognised in the context of ongoing financial challenges, particularly the increasing demand for services supporting vulnerable adults and children. It was noted that balancing these pressures was significant, and appreciation was expressed for the work undertaken.  Congratulations were extended to all those involved in delivering the budget.

 

The Liberal Democrat Group outlined the views of their group and argued that:

 

The use of the term “balanced budget,” was commented on noting that, in practice, this included reliance on reserves to meet expenditure. Concerns were raised that this could give a misleading impression of financial stability, as drawing on reserves does not represent a sustainable long-term position.

 

While the improved outturn position was welcomed, the need for caution was emphasised, highlighting the significant use of reserves and the uncertainty over whether these could be replenished in future years.

 

The Green Group Leader outlined the views of their group and argued that:

 

The significant efforts of the Chief Financial Officer, finance team, and directorates in delivering a balanced outturn despite challenging circumstances was acknowledged and congratulations were expressed.

 

However, concerns were raised that the position had been achieved through the use of one-off income, including £4.4m of unspecified additional funds, and reserves, alongside reductions in some service areas. The sustainability of this approach was questioned in light of ongoing demand pressures, particularly within Adult Services, and noted that some savings remained outstanding.

 

Concerns were highlighted regarding the capital programme, including substantial variances between approved and delivered expenditure, delays to key projects, and risks of cost inflation or non-delivery. Specific reference was made to limited reporting on major schemes and the perceived impact of delays on residents.

 

It was suggested that stronger project management and oversight were required to ensure delivery of planned outcomes and that greater clarity and accountability should be provided regarding progress and use of resources

 

In response to the comments made:

 

Cabinet members clarified that, while the Council is legally required to set a balanced budget, it is not guaranteed that the outturn will be balanced. Reference was made to a previous year where an overspend was recorded despite the use of reserves.

 

It was noted that, in comparison, the current financial position involved a lower reliance on reserves, and this was contrasted with the higher overspend reported under the previous administration, even after reserve use.

 

Cabinet members referred to the importance of setting a realistic and deliverable budget, noting that the key measure of success was whether the Council had accurately forecast and secured sufficient funding to meet its commitments.

 

It was highlighted that, in contrast to previous budgets set by earlier administrations which resulted in significant overspends and required substantial use of reserves, recent budgets had been delivered in line with expectations.

 

Cabinet members noted the challenging financial context for local government, including reduced central government funding and rising demand for services, particularly for vulnerable residents, as well as pressures faced by other authorities requiring exceptional financial support.

 

Against this backdrop, cabinet members highlighted the scale of delivery achieved, including the Council’s largest ever capital programme in a single year and substantial investment in infrastructure such as road resurfacing. It was concluded that, given these circumstances, the financial and capital delivery represented a significant achievement.

 

Cabinet members emphasised their focus on delivering for the residents of Herefordshire and reaffirmed that processes were transparent and professionally undertaken. It was noted that external auditors had recognised the quality of the Council’s financial reporting. The comment was subsequently withdrawn.

 

Clarification was provided that certain income referred to as “contractual income” was confidential in nature, although assurance was given that it was properly accounted for. It was confirmed that reserves relating to broadband rollout were sufficient to complete delivery to remaining areas, with responsibility now sitting with national programmes and ongoing liaison in place.

 

Cabinet members acknowledged the challenging financial and operational environment but stressed that significant progress and delivery continued to be made. This included major capital works, such as extensive road resurfacing and other infrastructure projects, with further schemes due for completion.

 

While concerns had been raised about delivery, cabinet members maintained that substantial progress had been achieved for the benefit of residents, and expressed frustration at criticism which did not recognise this.

 

Greater clarity on the status of key projects, particularly those under review such as the Library and Learning Centre was requested by Group Leaders and it was acknowledged that this was a fair and constructive point.  It was confirmed that further detail on project status, including cost reviews and delivery considerations, would be provided in future reporting, including within the Quarter 4 performance reports.

 

The Leader of the Council concluded the discussions. Councillor Stoddart proposed the recommendations, with the Leader seconding.  The Leader directed that the decision to be put before Cabinet is:

 

That Cabinet

 

a)    reviews the balanced revenue financial outturn for 2025/26, as set out in the appendices A-D, and identifies any additional actions to be considered to achieve future improvements; and

 

b)    approves the proposed transfers to/from reserves outlined in paragraphs 11 to 13; and

 

c)    notes the capital outturn position for 2025/26 of £86.0 million investment in Council priorities.

 

The recommendations were unanimously approved

 

It was confirmed the next meeting of cabinet was 25 June 2026 at 2:30pm.