Resources Updates and Assumptions
2024/25
General Fund Budget
Local Government Financial
Settlement (LGFS)
1.1
The government’s Autumn Statement announced on the 17
November 2022 covered the 2-year period 2023/24 and 2024/25. This
was followed by a Local government Finance Policy Statement on the
12 December 2022 covering the 2 years. The Policy Statement
included a disconcerting statement suggesting that local
authorities’ reserves be used to balance budgets in the short
term, which is counter to sustainable financial planning. For
2024/25 information was provided at a high level, particularly for
social care funding and assumptions on allocations are based on the
current methodology.
1.2
The provisional LGFS for 2024/25 would normally be expected in
December 2023, including confirmation of the council tax
‘excessive increase’ threshold above which a local
referendum would be required. The government has already announced
that councils with social care responsibilities can increase
council tax by a core 2.99% and an additional 2% for social care
precept. Therefore the maximum council tax increase for 2024/25 is
assumed to be 4.99%.
Government Grants and
Precepts
Revenue
Support Grant (RSG)
1.3
For 2024/25 the government has confirmed it will increase RSG by
September 2023 CPI. The Office for Budget Responsibility (OBR) is
currently (Apr 2023) projecting 5.4% by the end of quarter 3 2023
and therefore the assumed RSG will be £8.355m, an increase of
£0.428m. For 2023/24, the increase in RSG was funded by
reducing the Services Grant and this is assumed to continue in
2024/25 and therefore there is no net increase in resources.
Services
Grant
1.4
Services Grant is an unringfenced grant provided by government. The
Council received £2.392m in 2023/24 and it is forecast to
reduce by the £0.428m to fund the RSG increase.
Adult Social Care precepts and Better Care Funding
1.5
The Autumn Budget Statement 2022 announced additional funding for
social care for both 2023/24 and 2024/25. The majority of this
funding was through delaying the roll out of the social care
charging reforms from October 2023 to October 2025 and releasing
funds to support the pressures in social care. For 2024/25 the step
increase in national funding to councils is £1.095bn and the
estimated increase in resources for this council is £5.390m
which is reflected in the table below.
1.6
The government also confirmed a further 2% Adult Social Care
precept for 2024/25.
|
Table 1: Social Care Resources
|
2022/23
|
2023/24
|
2024/25
|
|
ASC Precepting
|
1%
£1.588m
|
2%
£3.295m
|
2%
£3.471m
Assumption
|
|
Improved BCF
|
£9.459m
|
£9.459m
|
£9.459m
|
|
Social Care Grant
|
£10.815m
|
£17.856m
|
£20.956m
Assumption
|
|
ASC Discharge Grant
|
|
£1.326m
|
£2.216m
Assumption
|
|
ASC Market Sustainability and Improvement Fund
|
|
£2.877m
|
£4.277m
Assumption
|
New Homes Bonus
(NHB)
1.7
The government provided a one-year extension to the NHB scheme for
2023/24 and has stated the future of NHB will be set out ahead of
the 2024/25 LGFS. There has been no consultation about the future
of NHB to date. The council received £0.241m in 2023/24.
Business Rates
Business Rates estimate for 2024/25
1.8
For 2024/25 the projections are based on 1.0% growth compared to
2023/24. This reflects the completion of a number of business space
developments across the city net of further anticipated impacts on
the retail sector.
1.9
Business rates are planned to increase by September 2023 CPI which
is forecast to be 5.4% (based on OBR April 2023 forecast). In
recent years the government has either frozen or capped the
increase in Business Rates to protect businesses, with local
government being compensated for any loss in resources through
Section 31 grant. It is assumed the government would continue this
policy.
1.10
Business rates were revalued with a new 2023 rating list in place
from April 2023. Revaluation can cause fluctuations in the level of
resources retained by the council. The government has stated it is
committed to ensure, as far as practicable, that retained income is
unaffected from this change but the actual impact on resources will
not be known until at least Autumn 2023.
1.11
Business Rates forecasts continue to be an area of financial risk
which is heightened by the unknown impacts of global financial
events and the impact of current economic conditions on businesses
and therefore these estimates could change significantly.
Council Tax
Council
Tax Reduction Scheme
1.12
The council’s local Council Tax Reduction Scheme (CTRS)
was amended by full Council in February 2022, introducing a revised
scheme based on earnings bandings for working age Universal Credit
claimants. The pension age CTR Scheme remains unchanged as required
by legislation.
The number of working age claimants has been
steadily rising since February 2022 however the average award has
reduced, partially offsetting the overall increase in awards. The
assumption in the projections is that the number of claimants will
continue to rise throughout 2023/24 and then remain constant during
2024/25, however this assumption will be closely monitored
throughout the year.
Council Tax Estimate
2024/25
1.13
The council tax increase for 2024/25 is currently assumed at 2.99%
for planning purposes, plus 2% for the Adult Social Care Precept,
however, both are a matter for local decision. The impact of the
current financial climate on council tax income remains difficult
to predict but new housing developments have been assumed for
2024/25 resulting in a net increase of the tax base of 0.9%. Given
the financial challenges arising from the cost of living crisis,
particularly for households on lower incomes, the collection rate
is assumed to remain at the 2023/24 level of 98.75% rather than
reverting to the pre-pandemic level of 99%.
Corporate Inflation Provisions
Pay
Pensions
1.15
The recent triennial review of the East Sussex Pension Scheme
covered the period 2023/24 to 2025/26 and confirmed the employer
contribution rate of 19.80% across the 3 years.
Prices
1.16
The provision for general price inflation ranges between 1.00% and
3.50% as a base position depending on the type of expenditure. The
largest type of expenditure is Third Party Payments which covers
the majority of non-staffing expenditure within adults and
children’s social care which has an assumed base position
increase of 3.50%. The impact of inflation above these assumed
rates is separately identified within the updated service pressure
assumptions rather than applying generic increases to all service
areas.
Fees and Charges
1.17
Fees and charges budgets for 2024/25 are assumed to increase by a
standard inflation rate of 3.50%. Penalty Charge Notices (parking
fines) are excluded from this increase as the levels of fines are
set by government and cannot be changed independently.
Temporary accommodation income is assumed to increase by 2.00% but
this will ultimately be determined by government changes to the
Local Housing Allowance rates.
Commitments
1.18
The budget projections for 2024/25 include some significant
commitments including over £4.000m relating to the financing
costs of approved capital investments. This is largely driven by
funding elements of the capital investment programme through
borrowing. During 2023/24 a review and
rationalisation of the capital programme will be undertaken to
ensure approved projects are deliverable and affordable. The
financing costs budget is net of investment income from cashflow
surpluses which can fluctuate significantly through changes to the
Bank of England base rate. The results of the capital programme
review and revised investment income projections will be reflected
in an updated financing costs budget for 2024/25. Other substantial
commitments include £1.000m recurrent IT&D resources to
support digital modernisation. This is replacement ongoing funding
rather than new funding as the cost of this activity had previously
been met through the flexible use of capital receipts.
1.19
There is no recurrent funding for risk provisions included within
the financial projections. For planning purposes, any risk
provision would need to be managed by redirecting reserves in the
short term.
Census 2021
1.20
The first data from the Census 2021 was released on 28 June and
indicates a significant reduction in the population of the City
compared to the latest Mid-Year Estimate, showing a 5% reduction
from 292,000 to 277,000 people. This is only 3,800 more people than
the 2011 Census. The census indicates significant falls in some age
demographics, particularly young children and working age
adults.
1.21
Given the weight placed on Census data in determining local
government funding allocations, there is a potential for funding
allocations to this council to be impacted, particularly for any
allocations driven by children or young people population
characteristics. However, adult social care funding should not be
affected. If the census data causes large movements (up or down) in
the national distribution of government grant funding, the
government will normally consider applying damping mechanisms or
transitional protections to avoid destabilising local authority
service provision.
Schools
Funding
1.22
The Dedicated Schools Grant (DSG) is a ring-fenced grant paid to
local authorities (LAs) by the Department for Education (DfE) in
support of the Schools’ Budget. Under the DfE funding
arrangements, the DSG is split into four notional
blocks:
•
Schools’ Block.
• Central
Services Schools Block (CSSB).
• High Needs
Block (HNB).
• Early Years
Block (EYB).
1.23
There are a number of factors affecting school budgets at the
current time, the most significant are:
• reducing
pupil numbers, most notably in the primary phase;
• unavoidable
cost pressures linked to higher pay awards;
• general
inflation and increases in cost areas such as energy,
and;
• increasing
numbers of children with Education, Health and Care
Plans.
1.24
At the end of the 2022/23 financial year school balances have
reduced from a net surplus of £8.135m to a net surplus of
£4.540m. This represents a reduction in school balances of
£3.595m, with balances reducing across all phases of
education.
1.25
There are increases to the schools, high needs and early years
funding blocks in 2023/24. The amount of funding being delegated
directly to mainstream schools within the Schools Block has
increased by approximately £1m in comparison to 2022/23.
However, in addition to the core DSG, the government has also
announced an additional mainstream grant estimated at £5.4m
for 2023/24. This is being provided in respect of the additional
cost pressures faced by schools. The Government has also uplifted
funding levels for the high needs block in the DSG. This equates to
an increase of £3.5m and takes the total high needs block
allocation to £37.808m.
1.26
Between 7 June 2022 and 9 September 2022, the Department for
Education (DfE) held a consultation on Implementing the Direct
National Funding Formula (NFF) reforms. This consultation sought
views on the details of how a direct NFF would work in practice.
The Government’s response to the consultation was published
in April 2023. The key aspects of the Government response are
summarised below:
•
In introducing the direct NFF, the Government will allow local
authorities to request funding transfers to high needs budgets, and
that these requests will draw from a short menu of potential
options on how the funding adjustment to mainstream schools should
be made. This follows the positive response to this proposal in the
consultation and, in particular, it was noted that a substantial
majority of local authorities, maintained schools, and academies
agreed with this proposal, with many comments on the importance of
this flexibility to fund high needs appropriately.
•
Government continues to think it would be helpful to identify for
each school an indicative budget as a guide to the resources that
might be needed by a school in supporting its pupils with SEND, and
to reinforce the message that schools’ core budgets are
expected to provide for support to these pupils. It could only ever
act as an indication of what might be needed, because head
teachers, Special Educational Needs Coordinators and other
professionals working in and with the school are best placed to
decide what support each child needs, and a budget calculation at
national level based on proxy measures of need could never
accurately predict the precise level of resources required. An
indicative SEND budget would, however, provide some assurance that
the level of SEND in the school’s pupil population was
reflected in their funding allocation.
•
As we transition to a direct NFF Government remains committed to
the principle of gradual change – allowing local authorities,
schools, and trusts time to adjust to new requirements. Government
acknowledges that some local authorities will have committed growth
funding over a number of future years and so will implement only
minimum requirements for 2024-25 rather than fully determined
national standards.
•
There was widespread support for the removal of the restriction
that falling rolls funding can only be provided to schools judged
“Good” or “Outstanding” by Ofsted.
Government carefully considered this issue and concluded that the
use of robust data on falling rolls (through School Capacity
Survey, SCAP) will ensure that this funding is targeted only at
schools where places will be needed in future. Government intend,
therefore, to remove the Ofsted restriction for 2024-25, and to
require local authorities to use SCAP data in taking decisions and
only provide funding where SCAP data shows that school places will
be required in the subsequent three to five years.
•
Government can confirm that from 2024-25 they will expand the use
of growth and falling rolls funding to allow local authorities to
fund the revenue costs associated with repurposing or reducing
school places. Such funding could support local authorities to
repurpose surplus space to create SEND Units or Resourced Bases in
mainstream schools. Government will provide further guidance in the
Schools Operational Guide and make the relevant changes to the
Regulations.
•
Government plans to allocate split sites funding nationally on the
basis of a formula factor made up of a ‘basic
eligibility’ element and a ‘distance eligibility’
element from 2024-25. This will replace the current local authority
led approach. A national formula will allow the Department to
ensure funding is allocated consistently and fairly across the
country, and that all split site schools receive funding towards
the additional costs they face from operating across multiple,
separate sites. Introducing this new approach for split sites
funding is an important part of developing the NFF in advance of
the final transition to the direct NFF.
•
Government believes that 500 metres, in line with the distance
threshold used by the majority of local authorities, is the right
threshold to bring consistency to the system whilst not causing
undue turbulence to schools. It is acknowledged that a hard
“cut off” would disadvantage schools who were just
below the threshold, so the intention is to include a distance
taper as part of the formula, starting at 100 metres.
•
Government suggests that around 60% of the 2024-25 NFF lump sum is
an appropriate amount for the ‘basic eligibility’
element given that an additional site should cost less to run than
the school’s main site, and funding should be seen as a
contribution to overall costs. The precise level of funding will be
kept under review and DfE plan to publish the split sites factor
value for 2024-25 alongside the July 2023 NFF
announcement.
•
In summary, schools which currently see very generous split sites
funding through their local authority formula will likely see a
reduction in this element of funding. Conversely, other schools,
especially those in local authorities who do not currently use a
split sites factor in their local formula, will attract additional
funding. Importantly, Government has confirmed that schools with
split sites which lose funding, or are no longer eligible, as a
result of the “formularisation” of the split sites
factor will see their funding protected through the minimum funding
guarantee (MFG). This is in line with the DfE position that schools
should be protected from changes in funding resulting from policy
changes as we transition to a direct NFF. In contrast, once the
reform has taken place, schools will not be protected from losses
in split site funding resulting from them ceasing to be a split
site school.
•
Government will use local formulae baselines for the minimum
funding guarantee (MFG) calculation in the year that we transition
to the direct NFF. This will ensure that schools continue to be
protected against year-on-year losses as intended by the MFG. For
academies this will be based on the General Annual Grant (GAG),
rather than the Authority Proforma Tool (APT).
•
The Government will move to a simplified pupil-led funding
protection under the direct NFF. This will simplify the floor
significantly, which will help improve the transparency of the
funding system and make it easier for schools to understand how
their funding levels are calculated.
•
The Government recognises the need to provide early information to
schools and the sector to support budget planning and will continue
to give early information regarding the design of the subsequent
year’s formula in July each year. Given the strong support
for a calculator tool, Government will aim to develop a product
that schools can use to estimate future funding.
•
In circumstances where data collections with regard to school
reorganisations and pupil numbers are required to be provided by
LAs to Government, the intention is to facilitate this by using a
pre-populated form with data from the October census, this would
involve a short turnaround time over the Christmas holiday
period.
•
Regarding de-delegation, Government has confirmed that they will
issue one single data collection in March when the direct NFF is
introduced. This will keep the timeline similar to the current
system, limiting the amount of change in the first
instance.
•
There are no plans to change the actual payment processes for
maintained schools. DfE will pay local authorities, who in turn
will pass the funding on to maintained schools. As such, local
authorities will continue to deduct the funding for de-delegation
before they pass on the funding to maintained schools.
1.27
Government will announce the 2024-25 National Funding Formula for
schools and high needs in July, in line with the usual timetable.
This will also confirm requirements on local authorities to bring
their local funding formulae closer to the NFF in 2024-25,
following the initial transitional steps in 2023-24.
1.28
Government plan to engage with the sector further on funding for
PFI schools, and the determination of indicative SEND budgets. This
will support a smooth transition to the
direct NFF.
Housing Revenue Account
(HRA)
1.29
The HRA contains the income and expenditure relating to the
council’s social landlord duties covering approximately
11,800 rented properties and 2,300 leasehold properties. The
Housing Revenue Account (HRA) is a ring-fenced account within the
General Fund which covers the management and maintenance of council
owned housing stock. This must be in balance, meaning that the
authority must show in its financial planning that HRA income meets
expenditure and that the HRA is consequently viable.
1.30
Although the HRA is not subject to the same funding constraints as
the rest of the General Fund it must still follow the principle of
value for money and equally seeks to drive out inefficiencies and
achieve cost economies wherever possible. Benchmarking of both
service quality and cost with comparator organisations is used
extensively to identify opportunities for better efficiency and
service delivery.
1.31
The HRA Budget aims to balance the priorities of both the council
and council housing residents within the context of the
council’s Housing Strategy, Housing Revenue Account Asset
Management Strategy and the Corporate Plan priorities which set out
the overall direction for Housing in the city over a 4-year
period.
1.32
The current economic environment continues to have an ongoing
effect on the resources available to the HRA during 2023/24, this
includes a loss in rental income and the rising cost of services
driven by inflation. The Housing Income Management Team continues
to work with residents to improve income collection and minimise
the impact of rising costs on households, whilst a project team
remains in place to continue to reduce the number empty properties
held during the financial year. The medium target is to move back
to pre-pandemic empty property levels. Indications are that these
factors will result in short to medium term reductions in revenue
but should not affect the long-term plans and aspirations of the
council in respect of the HRA and associated capital investment
plans.
1.33
The Housing Revenue Account Budget & Capital Investment
Programme 2023/24 and Medium-Term Financial Strategy reported to
Housing Committee in January 2023, anticipated that the investment
required to meet the building safety and fire safety regulations
would be significant and will impact upon capital and revenue
budgets. The 2023/24 HRA budget proposals sought to address this
and prudently included substantial budget provision, both revenue
& capital, in the baseline budget in anticipation of investment
in the areas of compliance and assurance covered by this review.
This includes expected new duties and investment requirements
arising from the new Building Safety Act, Fire Safety Regulations
and Social Housing Regulation Bill.
1.34
Another key area of focus for 2023/24 continues to be catching up
on the delayed delivery of responsive repairs, empty property
refurbishments, planned maintenance and major capital works to
council homes due in part to the pandemic. The HRA has set up
reserves to assist this process.
1.35
The outcome of the social rent consultation which concluded on 6th
October 2022 has provided clarity on the rent uplift allowable for
2023/24. This has allowed the council to set out a plan for the
financial year to continue investing in tenants’ homes,
whilst limiting the increase to individuals’ rents as much as
possible. Beyond 2023/24 the policy for rent setting becomes less
certain for multiple reasons. The first being that it is unclear if
any further alterations to the rent policy will be made for
2024/25; currently it is assumed that the policy will revert to
allow CPI+1%. The second reason is that notwithstanding the cap on
rent increases for 2023/24 the rent policy allows for up to
Consumer Price Index (CPI) at the previous September rate +1% to be
applied to rents over a 5-year period; 2024/25 would be the final
year. Currently, it is unknown what the rent policy will look like
beyond this. Central Government have indicated that further
consultation is likely to happen during 2023/24.
1.36
Rents are not calculated to take into account any service charges
and only include all charges associated with the occupation of a
dwelling, such as maintenance of the building and general housing
management services. Service charges are therefore calculated to
reflect additional services which may not be provided to every
tenant or which may be connected with communal facilities rather
than to a particular occupation of a house or flat. Different
tenants may receive different types of service reflecting their
housing circumstances. All current service charges are
reviewed annually to ensure full cost recovery and also to identify
any service efficiencies which can be offset against inflationary
increases, to keep increases to a minimum. For example,
phased increases for service charges related to utility costs at
15.5% (compared to inflation of between 44% and 45%). Cost recovery
for other service charges ranges between 2% and 13%. The budget for
2024/25 will review any new areas for service charging as
appropriate and consider the impact of suppressing the service
charge increases for utilities in 2023/24.