Agenda item

The Leader presented the report which outlined the 2020/21 draft budget report for consideration and agreement.  The Leader reminded her Cabinet colleagues that this is the draft budget and wanted to impress on the meeting that the proposals contained in the report will be going out for public consultation prior to finalising the budget at the February 2020 meeting.

Due to the late publication of the draft revenue grant settlement, the report had been compiled on planning assumptions since the report had to be published prior to the announcement of the settlement figure.  The report confirmed the planning assumptions were:

-          That Newport City Council would get a 1% increase in its revenue grant settlement and growing tax base – approximately £2.1m;

-          That the Council would also get a further £5.7m of either permanent or continuation of specific grants to cover the costs of teachers’ pay/pensions and social services sustainability (funding which the Council is currently receiving this year as one-off grants).

The draft settlement confirmed the Council will receive more than envisaged – in total further funding of £7.1m. This allows some flexibility to either:

(i)            invest in more budget investments and priorities and/or;

(ii)           reduce/take out some of the budget saving proposals identified in the report.

The Council’s revenue support grant, in cash terms, will increase by approximately £14m; to £228m in total.  After taking account of current specific grants transferred into it, mainly related to the teachers’ pay/pensions grant mentioned above, the increase is c£9m. 

Newport had the highest increase of any Welsh Council – the first time this has happened.  All councils will be receiving relatively high cash increases in their grant funding next year. There are particular reasons for this:

-          The substantial increase in the overall Welsh Government Budget has meant it has been able to continue to invest in the NHS but not at the expense, this year, of other parts of the public sector.  Therefore, Welsh Government were able to increase the overall revenue grant settlement budget by about £200m for 2020/21- to a total of nearly £4.5bn.  This has benefited all Councils in Wales who receive a share of this. This kind of increase has not happened for many years and is very welcome.  The Leader expressed Cabinet’s thanks to Welsh Government for taking Newport’s situation into account and making this increased allocation.

-          Newport has received a better settlement this year as funding, like all councils, is determined by a complex formula which distributes that total revenue grant settlement of £4.5bn to every council.  Key ‘needs based’ data drives that and includes things such as population numbers, the number of school aged children, older people numbers, etc.  This year, the Welsh Government took account of some significant changes in population estimates which confirmed that in previous years Newport’s population estimates were too low and some others too high.  The update and re-basing of this, alongside the continued increase in pupil numbers, ‘shifted’ more of the available funding to Newport. 

The Leader gave some context to the budget proposals: 

Councils continue to be under significant financial challenges, coming from increased demand for services, in particular adult social care and increasingly, children’s social care.  This demand comes from societal issues and affects all parts of Wales and indeed, the UK; Newport in particular also has a growing demand arising from the growth of the city.  This generates real pressure in Newport’s school capacity and the cost of increasing that to meet demand for places.  There is no doubt that local councils have been at the sharp end of financial austerity over many years.  Together this ‘perfect storm’ has been incredibly challenging.

This is the context within which the administration continues to plan its medium term projections and the annual budget for next year.

The report confirmed the cost of unavoidable pay and inflationary cost increases which are, including schools, nearly £7m.  This is a large figure but is, in reality, a standstill position.  Consideration has to be given to the need to consider the increased costs of demand in order to set a realistic budget, these amount to approximately £6m; of which social care makes up about £2.2m and the cost of expanding our school places is £1.9m.   In total, cost pressures amount to approximately £13m, of which schools’ pressures are £4.38m.  

The Leader was pleased to confirm that schools are not being asked to find any additional savings from this budget and the £4.3m is the full amount of their calculated cost increases next year.  School budgets are under considerable strain (as they are across Wales, indeed, the whole of the UK), and they will need to continue to deal with their current levels of overspending and good progress is being made on that.  Crucially this budget will not add to the challenge that schools face.  Indeed, alongside some significant increases in Welsh Government specific grants that schools receive, such as the ‘Pupil Deprivation Grant’, we can expect even further increases in school funding next year. 

Given these levels of cost increases and pressures, the need to find savings is crucial.  Some savings are being implemented by Heads of Service under delegated authority whilst others, those with policy and service impacts, are for this Cabinet to approve first.  The need for appropriate public consultation has been reviewed for all proposals and where required, that will happen first, irrespective of where the decisions are being taken. 

Just over £5m of new savings are listed in the report, of which about 50% are being implemented by Heads of Service and decided by Cabinet.  In terms of consultation, Appendix 2 lists those proposals for consultation and Appendix 5 has the detail for each of the proposals. 

The Leader asked her Cabinet colleagues to consider approving these for consultation with immediate effect.  Consultation will be done widely, both internally in the Council, through scrutiny committee, schools’ forum, etc., and externally with the public and fairness commission and key stakeholders.  The Leader encouraged the public and all partners to engage in the consultation process.

Clearly, Cabinet has some real choices this year given the better settlement, however, no decision will be taken today, reasons being:  

·         We only received the settlement on Monday and there is still a lot of work to do to ensure we understand all aspects of it, especially the specific grants, which we are still waiting on further details.

·         We need to take a considered and strategic approach, and look forward to the medium term as to how we deal with this.  This requires time and careful thinking.

·         We want to be informed by our key stakeholders, the public in particular and others before we make our final decisions.

We will therefore go to consultation on all the proposals and consider the responses carefully, taking a strategic and long term approach, making final decisions on proposals, including Council Tax, at the February meeting.

The report highlights that a 7.95% increase in Council Tax is being consulted on.  The Leader mentioned a few key facts which provided some important context to this:

-          The percentage increase is not the best way to think about it.  About two thirds of the homes in Newport are in Bands A-C and the increase, in cash terms, is between £1.14 and £1.52 per week.  It’s an increase but in cash terms more modest than the percentage might suggest.

-          Whilst Council Tax makes up a relatively small part of the Council’s overall funding and which gives rise to its own problems, it can’t be ignored either.  Newport’s tax level is relatively low compared to others in Wales and indeed, the UK.  If Newport was at the Welsh average level – the Council would have £10m more funding, for example.  After many years of austerity and increased demand from the growing city, this fact can’t be ignored as options to make further significant cuts in budgets are becoming increasingly challenging in the impacts and the increased risks that would come from them.

-          This increase needs to be looked at in the context of the overall budget.  The budget challenge is not just being solved by increasing council tax. There are savings too and we have sought to find a balance of dealing with the budget challenge through a mixture of council tax and budget savings.

-          The increase is an investment in services.  Careful consideration has to be given to the level of investment in social care and schools. 

-          Council Tax is the Council’s only source of income it has direct control over. 

-          In the distribution of the revenue grant settlement, Welsh Government makes an assumption for a ‘standard level of Council Tax’ when it calculates the standard spending assessment for Councils.  That standard council tax level has increased by just of 7% for 2020/21.  Newport will fall further behind its standard spending assessment than current levels if the council tax increase is lower than this.

-          Lastly, the Leader emphasised that support for paying this bill, through the Council Tax Reduction Scheme, will still be available to help those who are eligible for reductions in their bills.  The Council’s budget for this will increase in line with the Council Tax increase and accommodate the same level of support that is already in place.      

Whilst the better settlement allows for some choices, the Leader hoped residents will see the Council Tax increase in perspective and take that wider and longer term view.  Newport will still have one of the lowest Council Tax levels in Wales and the UK.

The Leader welcomed comments from her Cabinet colleagues and commended the draft budget for further consultation in the knowledge that there are some flexibilities which need to be considered very carefully.

Cabinet colleagues reiterated the Leader’s comments and encouraged the public, stakeholders and partners to engage with the budget consultation process.

Decision:

Cabinet agreed the draft proposals contained in the report which will now be subject to public consultation prior to finalising the budget in February 2020.