Agenda item

Report of the Director of Finance and Resources (Section 151 Officer)

Cabinet considered a report of the Director of Finance and Resources (Section 151 Officer), which would also be considered at the meeting of Council on 25^th February 2025, that followed on from the Pre-Budget Report approved by Cabinet on 10th December 2024 (minute 44/24 referred) which had since been subject to a period of public consultation. The proposals within the report would now form the basis of the Council's final revenue and capital budget for 2025/26 incorporating the following details:

•  Gross budgeted spend of £961.9m (£94.0m or 11% higher than 2024/25).

•  Net budgeted spend of £296.7m (£19.3m or 7% higher than 2024/25) funded from Council Tax and Business Rates less a tariff payment of £22.2m due to the Government.

•  A Council Tax Requirement of £189.5m (£13.6m or 8% higher than 2024/25), reflecting a City Council Tax increase of 4.9% detailed in the separate Council Tax Setting report on today’s agenda.

•  A number of new expenditure pressures, policy proposals and technical savings proposals.

•  A Capital Strategy including a Capital Programme of £171.6m including expenditure funded by Prudential Borrowing of £55.3m.

•  An updated Treasury Management Strategy, Capital Strategy, and a Commercial Investments Strategy.

The financial position in this Budget Report was based on the Final 2025/26 Local Government Finance Settlement published on 3rd February 2025. This settlement still only provided a one-year focus for 2025-26 with no detail for local government finances beyond this. However, in response to significant lobbying by Local Government, it was now being recognised that the current methodology and much of the data that fed into it was out of date and therefore, the Government have begun a consultation process into Local Authority Funding Reform, with the intention that a new system, intended to reflect need, could be implemented from 2026/27.

In advance of this reform the 2025/26 Local Government Finance Settlement had addressed some of the disparity in the current system with new grants including the new one-off Recovery Grant (£9.6m), targeted towards areas with greater need and demand for services, and the new Childrens Social Care Prevention Grant (£2.2m), distributed through a new children’s needs-based formula which estimated the need for Childrens Social Care Services. Coventry also received an additional £6.2m Social Care Grant. Compared to the assumptions within the pre-budget report, this represented an additional £10.5m of resources in the settlement.

With the promise of funding reform, it was difficult to provide a robust medium term financial forecast at this stage and the Council had instead made some planning estimates for future years. Initial assumptions recognise the likelihood that gaps would remain for the periods following 2025/26. The view of the Director of Finance and Resources (Section 151 Officer) was that the Council should be planning for such a position.

The Pre-Budget Report was based on an increase in Council Tax of 4.9% and this position had been maintained for the final proposals in this report. This incorporated an increase of 2.9%, which was within the Government’s limit of 3% above which a referendum would need to be held plus a further 2% Adult Social Care (ASC) Precept in line with Government expectations. The precept was essential to enable councils including Coventry to manage increases in the costs of care. In total, the rise in Council Tax bills would be the equivalent of around £1.72 a week for a typical Coventry household including the expected rises in the precepts for Police and Fire.

The Council had closed the significant financial gap for 2025/26 which it had at the start of the Budget process. Measures to achieving this included the identification of additional Council Tax resources, a range of technical adjustments and newly identified cost savings or income streams.  All these proposals were set out in detail in Appendix 2 to the report. Where these were different to the proposals that were included in the Pre-Budget Report, this had been indicated within Appendix 2 to the report and shown in tables 2 and 3 within section 2.2 of this report. Due to the additional resources received within the final settlement on 3rd February 2025, several savings options had been removed from the final budget proposals in response to consultation engagement and petitions heard by Members.

The proposals did not provide the Council with a balanced budget beyond 2025/26. The Council’s current medium term bottom line incorporated a combination of future inflationary and service pressures and the fall-out of uncertain specific grant resources. Some of the future funding assumptions were speculative at this stage and would be revised towards the end of 2025 as any changes to local government finance resulting from the Local Authority Funding Reform consultation and 2026/27 Settlement were made known. The initial approach would however be dictated by an intention to review and update technical information as it became available to the Council and to identify further efficiencies from, or generate further income within, Council services. Through 2025, the Council would continue to refine and implement a programme of activity designed to review how best to deliver its services, improve integration between some of them and optimise the effectiveness of others. 

The Council’s Medium Term Financial Strategy (MTFS) included as Appendix 1 to the report, set out the financial planning foundations that supported the setting of the Council’s revenue and capital budgets, including the policy assumptions and financial management framework that underpinned the strategy. The purpose of the MTFS was to describe the environment within which the Council operated and bring together resource and cost projections to explain how the Council planned to address its funding gap, whilst retaining focus on its strategic priorities.

The recommended Capital Programme proposals were a key part of the Council’s approach and amounts to £171.6m in 2025/26. The proposals reflected the Council’s ambitions for the city and included: extensive highways infrastructure works including specific schemes relating to continued delivery of the City Region Sustainable Transport Settlement (CRSTS) Programme that included transport packages for the Foleshill and London Road corridor; construction and operation of a 220m long single track demonstrator known as the Live Environment Construction Test (LECT); the continuation of City Centre Cultural Gateway; progressing the City Centre South redevelopment; and the delivery of the Woodlands School Project. Over the next 5 years the Capital Programme was estimated at a total of £510m as part of on-going investment delivered by and through the City Council.

This report detailed the annual Treasury Management Strategy, incorporating the Minimum Revenue Provision policy and the Commercial Investment Strategy. These covered the management of the Council’s treasury and wider commercial investments, cash balances and borrowing requirements. These strategies and other relevant sections of this report reflected the requirements of the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Treasury Management Code and Prudential Code for Capital Finance, as well as statutory guidance on Minimum Revenue Provision (MRP) and Investments.

RESOLVED that Cabinet recommends to Council the approval of recommendations (1) to (7) below, to:

(1)  Approve the Medium-Term Financial Strategy in Appendix 1 to the report, as the basis of its medium-term financial planning process.

(2)  Approve the Budget proposals in Appendix 2 to the report, after due consideration of the consultation responses set out in Appendix 7 and Appendix 8 to the report and the Equality Impact Assessment set out in Appendix 10 to 15.

(3)  Approve the total gross 2025/26 revenue budget of £962m in Table 1 of the report and Appendix 3 to the report, established in line with a 4.9% City Council Tax increase and the Council Tax Requirement recommended in the Council Tax Setting Report considered on today's agenda.

(4)  Note the Director of Finance and Resources (Section 151 Officer) comments confirming the adequacy of reserves and robustness of the budget in Section 5.1.2 and 5.1.3 of the report.

(5)  Approve the Capital Strategy incorporating the Capital Programme of £171.6m for 2025/26 and the forward commitments arising from this programme totalling £510m between 2025/26 to 2029/30 detailed in Section 2.3 of the report and Appendix 4 to the report.

(6)  Approve the addition to the capital programme of up to £1.1m grant funding from Arts Council England to contribute towards delivery of the City Centre Cultural Gateway scheme detailed in Section 2.3.4 of the report and Appendix 4 to the report.

(7)  Approve the Council’s Treasury Management Strategy and Minimum Revenue Provision Statement for 2025/26 in Section 2.4 of the report and the Prudential Indicators and limits described and detailed in Appendix 6 to the report, the Commercial Investment Strategy for 2025/26 in Section 2.5 of the report and Appendix 5 to the report and the Commercial Investment Indicators detailed in Appendix 6 to the report.