Agenda item

The Scrutiny & Overview Committee will be provided with an update from the Council’s Section 151 Officer on the progress made with developing the 2024-25 Budget.

The Committee received a presentation from the Corporate Director of Resources & Section 151 Officer, Jane West, on the progress made with setting the 2024-25 budget. This report was included on the agenda as part of the Budget Scrutiny process. A copy of the presentation delivered can be found on the following link: -

https://democracy.croydon.gov.uk/documents/s53260/2024-25%20Budget%20Setting%20Update%20-%20Presentation.pdf

The Cabinet Member for Finance, Councillor Jason Cummings, Section 151 Officer, Jane West, Director of Finance, Allister Bannin and Head of Strategic Procurement, Scott Funnell were in attendance for this item at the meeting.

The Cabinet Member for Finance highlighted to the Committee that there had been advice from the Government to local authorities to use existing reserves to manage any current financial difficulties. However, given the ongoing financial challenges facing the Council from its debt burden, the reserves held would not address the problem, and as such the guidance was not thought to be applicable in Croydon’s circumstances. It was also highlighted that it was unlikely the financial situation for local government would improve dramatically, whoever won the forthcoming general election, as such there was a need to address these challenges across the sector.

The first question on this item asked for more information on the work to close the identified £6m gap in the 2024-25 budget. It was advised that there were several different factors to be resolved before the budget report was produced in early February that may help to address the gap. Final confirmation of the Government settlement was expected on 5 February, the Council Tax and Business Rate base was still being reviewed, there was likely to be a saving on Freedom Passes and it was hoped that capital charges would reduce as interest rates started to come down.

As a follow-up, it was questioned whether the previously indicated 4.99% increase in Council Tax could potentially rise to help meet any remaining gap. It was confirmed that no change to the proposed Council Tax was expected and it was highlighted that the Mayor had given a public commitment to not increasing Council Tax above the referendum rate.

It was noted that £20m savings had been included in the budget for each year from 2025-26 onwards, with the basis of this figure questioned. It was acknowledged that delivering savings of £20m each year would be difficult and it was a reason why the Council was investing in its transformation programme. Given the challenging financial landscape for local government it was essential for councils to modernise and manage demand. There were ongoing discussions with both the Improvement & Assurance Panel and the Government on how far the Council could go in reshaping itself. It was highlighted that even with £20m of savings, the Council would still have a budget shortfall of £38m, that based on current projections would need to be met through capitalisation.

It was questioned whether there would be any further contingency built into the 2024-25 budget to mitigate against the risk of a potential inflationary spike as a result of recent events in the Middle East. In response, it was advised that a contingency fund had been built into the previous year’s budget and at this stage it was thought that this would provide adequate provision for the forthcoming year and it was not expected that any further contingency would be added.

An update on the work to close the outstanding accounts from previous years back to 2019-20 was requested. It was acknowledged that the outstanding accounts would continue to be a risk over the next couple of years as work continued towards closure. There appeared to be less issues being raised by the Council’s External Auditor, but until the accounts were closed the risk remained. The accounts for 2019-20 were almost complete, with one final issue to resolve before they could be taken to the Audit & Governance Committee to sign off.

Regarding the Oracle Project it was noted that a report on the business case was due to be presented to Cabinet in March. The project was included in the capital programme for 2024-25, but until work on the business case had been completed it was not possible to confirm the cost. It was also confirmed that the project to replace Council laptops was progressing and could be met within existing budgets.

Conclusions

Following its discussion of the Budget Setting update, the Committee reached the following conclusions: -

1. The Committee agreed that the financial challenges of the Council would continue to be extremely concerning until a solution could be found to manage its historic £1.3b debt.
2. The Committee was supportive of the Administration’s position that Government advice to local authorities to use reserves to manage budget difficulties was not applicable in the case of Croydon given its severe financial challenge.
3. Although there was a £6m budget gap still to be identified in the 2024-25 budget, the Committee was reassured that both officers and the Cabinet Member for Finance were cognisant of the gap and were exploring options to close it.