Agenda item

To receive the information, consider the risks arising from the Medium-Term Financial Plan, and scrutinise the Cabinet’s decisions

DECISION:

 

To accept the information and note the situation and relevant risks in relation to the Council's financial position.

 

Note:

Paragraph 2.10 of the Plan. Request to share information / county's population reduction figures

 

The report was submitted by the Cabinet Member for Finance in response to the financial challenges facing the Council. The purpose of the plan was to set out projections for the Council's position over the next three financial years, offering projections as well as proposals to address the financial deficit faced by the Council. It was explained that the document was live and was being updated regularly as information was received and the local and national financial assumptions or projections changed. Any updates would be presented to the Cabinet.

 

The Head of Finance explained that finding cuts to the Council's services and budget was not a new process, as cuts were now introduced annually. Pride was expressed that the Council had managed to sustain services despite the reduction in the departments' budgets, but one part of the work was to identify the financial deficit, which was £40 million over the next three years and further work was underway to try to fill the gap through a factual plan. It was emphasised that the assumptions were based on information of recent years and there would be pressure to spend less, look at increasing income and implement saving plans.

 

In the context of the settlement, it was noted that the lack of clarity from the direction of the government meant that it was difficult to plan beforehand for 2026/27 as a result of mixed messages that there would be an addition to the public sector budget from the Westminster Government, but Welsh Government had warned that could not increase public expenditure under the current economic circumstances. Reference was also made to the possibility that the Welsh Government would be setting a 'rollover budget' for 2026/26, i.e., continuing with this year's budget with only a small addition towards inflation. It was estimated that the average addition would be approximately 1.5% to Gwynedd under the allocation formula. Clarity was expected on the Gwynedd settlement level by November 2025.

 

Matters to be considered:

-        Annual pay inflation for teachers would be 4% in 2026/27 and 3.4% for other staff members - these were salaries that were agreed nationally and there was a need to fund the annual increase

-        There would be an increase in levies

-        There was an increase in the number of properties paying tax, but no figure had been included

-        A reduction to the pension rate was anticipated following a valuation. The pension fund was in a healthy situation and therefore offered an opportunity to reduce contributions - a £3 million saving was anticipated here.

-        Every Department would present a business case for additional funding, with a rationale explaining why the addition was required. Every bid would be analysed in detail, with the fund for this reduced from £8 million to £5 million.

 

Although the time to respond to the situation was scarce (from receiving the settlement to setting a balanced budget), it was confirmed that the hope was to present various options for the next steps for the future.

 

The Senior Executive Officer elaborated that it was difficult to find savings without a further impact and, with uncertainty in the fields of care, additional learning needs and homelessness, there was no need to rush to make cuts. It was reported that briefing sessions would be arranged to provide updates on the situation to all the elected and lay members.

 

Thanks was expressed for the report.

 

In response to a question regarding how the Council could continue to deliver savings and maintain services, it was noted that pockets of efficiency savings were available, suggesting for example, more technology use (although the period of transferring and adapting the way of working was normally longer than the period of delivering the saving). It was elaborated that the challenge was to be innovative, using imagination to work differently, and although the reserves did not fill the gap, it bought time before the plans came into force; some of the plans needed to be refined and developed with information and understanding of how the work would progress.

 

In response to a question regarding the wording of the Local Government (Wales) Measure 2011 requirements, where the Governance and Audit Committee was expected to scrutinise some financial matters, including the authority's financial plans, where appropriate, and who decided on what was appropriate, it was noted that this was the wording of the measure and it was the Committee's role to look at the medium term financial plan as the measure's statutory requirement.

 

Matters arising from the ensuing discussion:

-        Savings had been delivered in the past - this had to be considered as a risk, although it would possibly continue

-        There was a need to consider the suggestion of a roll over budget being a risk to the Council

-        There was a need to acknowledge the May 2026 election as a risk

-        It would be wise to have a reserve fund, but this would need to be used cautiously

 

In response to information regarding why Band D was used and whether there was an intention to re-band due to a reduction in housing prices, it was noted that the Local Government Act 2021 outlined the Band D use as a tax base and the Welsh Government was committed to review the council tax bands although no more details were available. It was noted that Wales' bands had not been amended since 2003.

 

In response to a question regarding unidentified funding and the possibility of receiving additional funding, it was noted that, legally, there was a need to set a budget by 11 March 2026, and therefore there was a need to highlight beforehand where this additional funding would be used.

 

In the context of the Council tax premium and the intention to earmark it for reinvestment in the housing field, a member asked whether it was an option to direct this money to another field, if it was not used. In response, it was noted that this would be the Full Council's decision and although it was not currently being considered, it could not be disregarded as a future option. However, any discussion or recommendation would be transparent.

 

In response to a question regarding the pension reduction and why a decision had been made to take the £3 million saving in one year instead of £1 million over three years, it was noted that the choice was a 1% reduction every year or to take the £3 million saving in full. It was considered that this was the best option with the possibility that there would be more than £3 million as the final figures had not been released.

 

In response to a question regarding the situation should the Welsh Government be unable to pass the budget, it was noted that a statutory mechanism was in place to proceed.

 

In response to a question regarding the significant reduction in the population figures used for the 2024/25 settlement and whether deaths was the reason for this, it was noted that it was not the change in Gwynedd’s population itself that created an impact, but the change to the Gwynedd population in comparison and not to the population of the rest of Wales. It was noted that a reduction in students in Bangor was one of the reasons, which compared with other counties with other colleges and universities in Wales. In terms of the County's population reduction figures, it was noted that information was available, and it could be shared with the Committee.

 

In response to a question regarding using approximately £3.7 million, which was an income from plastic container tax and whether it had to be used for waste infrastructure, it was noted that not all of the funding had to be used for the recycling services, it was possible to use a proportion of the funding on general expenditure.

 

RESOLVED

To accept the information and note the situation and relevant risks in relation to the Council's financial position.

 

Note:

Paragraph 2.10 of the Plan. Request to share information / county's population reduction figures