Subject:
General Fund Revenue Budget, Capital & Treasury Management
Strategy 2026/27
Date of
meeting: Cabinet:
12 February 2026
Budget
Council: 26 February 2026
Report
of:
Cabinet Member for Finance and City
Regeneration
Lead
Officer:
Name: Chief Finance Officer
Contact
Officers: Name: John Hooton, Haley
Woollard
Email: john.hooton@brighton-hove.gov.uk
haley.woollard@brighton-hove.gov.uk
Ward(s)
affected: All Wards
Key Decision:
Yes
Reason(s) Key: Expenditure which is, or the making of savings which are,
significant having regard to the expenditure of the City
Council’s budget, namely above £1,000,000 and Is
significant in terms of its effects on communities living or
working in an area comprising two or more electoral divisions
(wards).
For general
release
1
Purpose of Report & Policy Context
1.1
This report includes the proposed General Fund Revenue and
Capital Budget 2026/27 together with a Medium-Term Financial
Strategy (MTFS) covering the 4-year period 2026/27 to
2029/30.
1.2
The council aims to align all spending, ringfenced and
un-ringfenced, to support the achievement of Council Plan outcomes
and priorities. The General Fund budget in particular is an
expression of the Council Plan in financial terms and aims to
ensure that revenue and capital budgets and investment plans are
aligned to achieving the outcomes of the Council Plan for a
‘better Brighton and Hove for all’.
2
Recommendations:
That Cabinet
recommends to Council the following:
2.1
That Council approves the
Administration’s proposed General Fund revenue and capital
budget and Council Tax increase on the Brighton and Hove element of
the council tax for 2026/27, comprising:
i)
A general Council Tax increase
of 2.99%;
ii)
An Adult Social Care Precept
increase of 2.00%;
iii)
The council’s net General
Fund budget requirement for 2026/27 of £341.476m;
iv)
The 2026/27 budget allocations
to services as set out in Appendix 1 incorporating budget savings
proposals detailed at Appendix 2;
v)
The one-off resource
allocations as set out in the table at paragraph 6.8;
vi)
A recommended working balance
of between £12.000m to £15.000m (approximately 4% of
the net budget) to be maintained over the period of the Medium Term
Financial Strategy.
2.2
That Council approves the
changes to Fees & Charges set out in Appendix 3 that relate to
any non-executive functions which have not already been
approved.
2.3
That Council notes that
Exceptional Financial Support of £15.000m has been requested
from the Ministry of Housing, Communities and Local Government to
assist with the setting of a legally balanced budget in
2026/27;
2.4
That Council notes the plans to
address future projected budget shortfalls set out in the 4-Year
Medium Term Financial Strategy at Appendix 4.
2.5
That Council approves the
Capital Strategy for 2026/27 at Appendix 5 comprising:
i)
Funding for investment in
transformation and change, supported by the flexible use of capital
receipts as set out in paragraph 11.2;
ii)
The capital resources and
proposed borrowing included at Annex A of the Capital
Strategy;
iii) The Capital Investment Programme for 2026/27 of
£239.816m included at Appendix 5 incorporating allocations to
strategic funds.
2.6
That Council approves the
Treasury Management Strategy Statement as set out in Appendix 6
comprising:
i)
The Annual Investment
Strategy;
ii)
The Prudential and Treasury
Indicators;
iii) The Minimum Revenue Provision policy;
iv)
The
authorised borrowing limit for the year commencing 1 April
2026.
2.7
That Council notes and
considers the Equalities Impact Assessments to cover all relevant
budget proposals as set out in Appendix 7.
2.8
That Council approves serviced
accommodation to be an exception to the council tax premium
determination for second homes as described in Section 16 and
Appendix 8.
2.9
That Council further notes that
approval of the budget is an indicative resourcing decision to be
taken in the context of the explanation given in the Legal
Implications in Section 20.
2.10
That Council notes that
supplementary information needed to set the overall council tax,
including a detailed Budget Book, will be provided for the Budget
Council meeting as listed in paragraph 14.1.
That Cabinet agrees the following:
2.11
The changes to Fees &
Charges set out in Appendix 3 that relate to executive
functions
2.12
That the council’s S151
Chief Financial Officer be authorised to make any necessary
technical, presentational or consequential amendments to this
report before submission to Budget Council.
3
Context and Background Information
Overview
3.1
As reported to Cabinet on 11
December 2025, the context for budget setting remains very
challenging. There are significant budget pressures arising from
increases in demand from statutory services, most significantly in
emergency and temporary accommodation, but also in respect of
adults and children’s placements, and home to school
transport. In addition, there are various other pressures across
the council in terms of demand, pressures on income sources and the
cost of providing services over and above inflation. These
pressures are the key drivers of the budget shortfalls over the
Medium Term Financial Strategy (MTFS), as the anticipated increase
in resources is largely expected to fund the inflationary increase
in the cost of delivery services over the period not the additional
demand pressures noted above.
3.2
Compounding this, the
government’s review of the allocation of local government
resources under the Fair Funding Review, coupled with the Business
Rates Reset, has resulted in the Council’s core spending
power increasing much more slowly than the assumptions within the
MTFS, resulting in lower resources to be able to fund services
across the Council. Consequently, the December report estimated an
expected budget gap of nearly £25 million in 2026/27 and more
than £87 million over the 4-year MTFS period.
3.3
The council’s financial
sustainability is also impacted by the low level of reserves held
compared to other similar sized authorities. Brighton and Hove City
Council has one of the lowest levels of reserves of any unitary
authority, and has done for some considerable time, and is
therefore unable to withstand significant financial shocks at a
time where financial risks to councils are arguably greater than
they have ever been. The external auditors, Grant Thornton, have
raised a significant weakness in respect of financial
sustainability over recent years, and the Council’s financial
sustainability was the top recommendation in the Local Government
Association’s corporate peer challenge in April
2025.
3.4
The December report described the substantial amount of work undertaken on the
Council’s budget position, particularly in terms of working
to reduce/mitigate pressures. Savings proposals of £12.446m
were identified, which left a remaining gap of £12.480m
towards which officers have been working to develop further
proposals and transformation. The December report made it clear
that the failure to find sufficient proposals would result in the
authority requiring to request Exceptional Financial Support from
the government.
3.5
The Provisional Local
Government Finance Settlement was announced on 17 December 2025,
which resulted in the council receiving £27.416m less
resources over the multi-year settlement period of 2026/27 to
2028/29 compared to the prevailing MTFS assumptions. £19.283m
has already been assumed in the December report, and therefore the
position has deteriorated by a further £8.133m, of which
£1.731m is an additional impact in 2026/27. More information
is included in section 4.
3.6
The below table shows how the
2026/27 budget gap has moved since reported to Cabinet in
December:
|
Table
1: 2026/27 Budget Gap
|
£m
|
|
Budget Gap per
December Cabinet Report
|
24.926
|
|
Funding Update
from Provisional LGFS
|
1.731
|
|
Council Tax Base
update (reported to Cabinet on 22 January 2026)
|
(0.708)
|
|
Other grant
funding changes
|
(1.097)
|
|
Business Rates
changes for BHCC owned properties
|
0.218
|
|
Review of
pressures and commitments
|
0.152
|
|
Deferral of
Planned Reserves Contribution
|
(1.125)
|
|
Creation of a one
off revenue risk provision
|
1.125
|
|
Budget
Gap before Savings Proposals
|
25.222
|
|
Draft Saving
Proposals within December report
|
(12.446)
|
|
Remaining
Budget Gap
|
12.776
|
3.7
The Council has developed a
comprehensive portfolio of transformation programmes to address
both the demands the authority is facing and to exploit
opportunities to address the Council’s financial
sustainability in the medium term. Appendix 4 provides more
detailed information about these programmes, but in summary, the
activity includes:
·
Workstreams to reduce demand
and cost of statutory services in Homelessness, Temporary &
Emergency Accommodation, Adult Social Care and Children’s
services. This includes, for example, reducing the high cost of
spot purchased temporary accommodation by developing long term
contractual arrangements for accommodation, increasing Council
owned housing supply, as well as increasing preventative work to
reduce demand on the homelessness service.
·
Workstreams that act as
financial levers to the council, such as to increase income through
greater commercialisation, rationalise the operational property
estate, saving money through better procurement and contract
management
·
Workstreams to ensure the
council is geared up to deliver significant change through
investing in digital technology and an organisational change
programme.
The transformation portfolio feeds into the medium
term financial plan, and, as set out in Appendix 4, enable the
Council to get to a balanced position over the 4 year period from
2026 to 2030.
3.8
The level of pressures,
particularly in emergency and temporary accommodation, means that
it has been incredibly challenging to balance the 2026/27 budget
without impacting on the Council’s financial resilience to an
unacceptable level. Further savings have been identified to reduce
the gap, but given the exceptional demand pressures on emergency
and temporary accommodation and social care, alongside very low
levels of reserves, the Council has requested Exceptional Financial
Support (EFS) of £15 million from the government. This is
part of a strategy to fully fund service pressures going into
2026/27, protect and increase levels of reserves, and provide
sufficient time for savings to be delivered through the
transformation portfolio.
3.9
It is important to note that
EFS is not additional money from the government; it is a
flexibility that enables the Council to capitalise revenue
expenditure on a one off basis and spread this cost over a longer
period of time (typically 20 years). Should the Council’s
application for EFS be approved, it must be seen as one off support
for 2026/27. The cost of undertaking EFS for 2026/27 is reflected
in the MTFS, and MTFS is balanced over a 4 year period. The
delivery of the Council’s transformation programmes must be
seen as a top priority to ensure that this approach to long term
financial sustainability can be turned into reality. The use of EFS
is described further in Section 8.
National Context
3.10
The Local Government Finance
Policy Statement (policy statement) was published by the government
on 20 November 2025, outlining the government’s approach to
funding local government over the multi-year settlement period of
2026/27 to 2028/29. In addition, the government also published its
outcome responses to both the Fair Funding Review 2.0 (FFR)
consultation and the Business Rates Reset (BRR) consultation; both
of which were consulted upon earlier in 2025.
3.11
The Provisional Local Government Finance Settlement (Provisional
LGFS) was published on 17 December 2025. This largely confirmed the
Council’s assumptions that funding would be significantly
reduced compared to the assumptions in the 2025/26 budget and
medium term financial strategy. The announcement is the first
multi-year settlement since 2016, providing certainty for the
council as to its level of resources over the three-year period to
2028/29. This will in turn facilitate planning and provide
certainty over the extent of the transformation activity required
over the next three years.
3.12
The policy statement set out that an additional £3.4 billion
new grant funding would be delivered through the multi-year
settlement. Taken together with the 2.99% core council tax and 2.0%
ASC precept, this will result in a 2.6% real terms increase in core
spending power across the multi-year period across the whole of
local government, however there are significant variations within
this overall average figure. The FFR and BRR will ultimately
redistribute funding across all local authorities, and therefore
actual changes in core spending power will be very different across
local authorities.
3.13
The government published its
Autumn Budget on 26 November 2025, which announced several changes
that will impact on Local Authorities going forwards. Most notably,
the budget confirmed that the government’s plans for Special
Educational Needs & Disabilities (SEND) reforms will be
announced early in the new year, including the announcement that
the current statutory override will be extended for a year.
Additionally, the government will not be expecting local
authorities to meet future funding implications for SEND within the
general fund once the override ends at the end of
2027/28.
Local Financial Planning
Context
3.14
The Targeted Budget Management (TBM) Month 9 report (elsewhere on
this agenda) shows a forecast overspend of £4.861m for
2025/26. The most significant two drivers of the overspend are
emergency and temporary accommodation pressures, as well as a
provision for a pressure from housing benefit subsidy. The Council
also has pressures on adult social care placement costs, and to a
lesser extent, children’s social care placement costs. These
are the same key drivers of the council’s service pressures
across the MTFS. Strict and significant recruitment and spending
controls alongside other financial management actions have been in
place throughout the year in order to bring the Council’s
financial position towards balance. TBM2 at the beginning of the
year set out a projected overspend of £15.486m in 2025/26,
and subsequent to that additional pressures have emerged, for
example in respect of housing benefit subsidy loss (£4.775m)
and a planning legal challenge. The current overspend at TBM9 is a
considerable improvement against over £20m of pressures,
however clearly more work is needed to bring the position into
balance.
3.15
The Council’s reserves
are at a critically low level, and one of the lowest levels in the
country across unitary authorities. This creates significant issues
in terms of the Council’s inability to withstand financial
shocks (for example unexpected costs or increases in demand for
statutory services). The target level of un-ringfenced General Fund
reserves (i.e. General Fund working balance and General risk
reserve) over the MTFS period is £12-15 million. Given the
current overspend position at TBM9, the Council’s Chief
Finance Officer has applied the general risk provision agreed as
part of the December Update in order to mitigate the in-year
overspend position.
3.16
The Council has received a
number of recommendations in respect of its level of reserves and
lack of financial sustainability. The external auditors have raised
a significant weakness in respect of financial sustainability, and
the LGA Corporate Peer Challenge highlighted financial
sustainability as the Councils top issue, noting that it needed to
prioritise a plan to increase its level of reserves at pace. The
approach set out in paragraphs 3.1 to 3.8 will enable the Council
to protect and enhance general and specific risk reserves, as well
as move to longer term financial sustainability over the next 4
years through the delivery of its transformation
programme.
4
Resources and Planning Assumptions 2026/27
Provisional Local Government Finance Settlement (LGFS)
4.1
The provisional LGFS was announced on 17 December 2025. Local
Government funding allocations from 2026/27 onwards have undergone
considerable change with the implementation of the Fair Funding
Review (FFR) and a full Business Rates Reset (BRR). The changes are significant and
complex.
4.2
The provisional LGFS provided detailed allocations for all local
authorities for the period of 2026/27 to 2028/29. A number of
changes were made to the allocation methodology (compared to what
was indicated in the consultation), some of which benefited and
others which have negatively impacted the Council.
4.3
The Council will receive
£27.416m less resources over the multi-year settlement period
of 2026/27 to 2028/29 compared to the prevailing MTFS assumptions.
£19.283m has already been assumed in the December report, and
therefore the position has deteriorated by a further £8.133m
between 2026/27 and 2028/29. The key drivers are as
follows:
·
New
funding floors were introduced for authorities that will suffer the
highest reductions in funding, and the government announced they
will maintain the Recovery Grant, introduced in 2025/26. The
Council will not be in receipt of either of these. This means that
the increase in overall funding will be lower than previously
modelled as some of the increase will be required to fund these
elements that the Council will not receive.
·
Newer
data on deprivation indices and population will be used to
calculate funding needs, the combination of which result in a lower
allocation for the Council.
·
The
MTFS had assumed an additional allocation for food waste funding.
However, it appears as though the funding is integrated into the
provisional LGFS within the overall envelope already
announced.
4.4
Allocations will be
transitioned over the settlement period, and therefore whilst
overall resources will increase each year, the council’s
Revenue Support Grant will reduce each year to reflect the
transition to the Councils new funding allocation. The net
reduction for 2026/27 compared to assumptions within the Budget
Update in December is £1.731m.
4.5
The Final LGFS is expected to be announced on 9 February 2026,
after this paper are published. Any changes to the Council’s
allocation will therefore be reported as part of the Budget Report
to Budget Council on 26 February 2026.
Government Grants
4.6
One key priority for the government within the FFR was the
simplification of grant allocation. This has been achieved as
follows:
·
Sixteen separate
grant streams consolidated into the Revenue Support
Grant.
·
Four
new consolidated grants which have specific conditions against
them:
o
Homelessness,
Rough Sleeping and Domestic Abuse Grant
o
Children, Families and Youth Grant
o
Public Health
Grant
o
Crisis and Resilience Fund
Revenue Support Grant (RSG) and Better Care Fund
(BCF)
4.7
The government has rolled in a
number of grants to the RSG. Future RSG allocations are now
informed by a new needs assessment formula which was consulted on
during the summer of 2025.
4.8
The main grants for the council
that have been rolled in are:
·
Social Care Grant
·
ASC Market Sustainability & Improvement Fund
·
Employer National Insurance Contribution (NIC)
Grant
·
New Homes Bonus
·
The Temporary Accommodation element of the Homelessness
Prevention Grant
4.9
After the roll in of grants,
the Council’s RSG for 2026/27 is £75.522m which is a
reduction of £1.252m when comparing the 2025/26 RSG and
rolled in grant allocations. The RSG allocation will reduce by a
further £9.042m in 2027/28 and £8.889m in
2028/29.
4.10
The BCF is a legal requirement
for Local Authorities to pool funds with the NHS. The 2026/27
allocation has been maintained at the same level as 2025/26
(£11.669m). The government’s 10 Year Health Plan
announced reform to the BCF to focus on integrated services. The
government have not announced allocations for the BCF in 2027/28
and 2028/29, but instead have presented them within RSG within
these years. However, for the purposes of budgeting, the Council
has assumed its share of BCF will be maintained at the same value
for 2027/28 and 2028/29, and have reduced the published RSG by the
same amount.
Children’s Families & Youth Grant
4.11
The Children’s, Families
and Youth Grant will consist of the Families First Partnership
(FFP) programme, which will bring together existing streams for
Children’s Social Care Prevention Grant and the Supporting
Families element of the Children & Families Grant. In addition,
the government announced £866 million of new funding to
support children’s social care reform, of which the Council
will receive £1.102m in 2026/27.
Homelessness, Rough Sleeping and Domestic Abuse
4.12
The government has bought
together the Rough Sleeping grant, the Domestic Abuse Accommodation
Support grant and the prevention and relief element of the
Homelessness Prevention Grant (HPG) so that all elements of revenue
grant for homelessness prevention are within one grant stream. The
remainder of the HPG (relating to temporary accommodation) has been
rolled into RSG.
4.13
The government consulted
separately on the methodology for funding allocations of the HPG
from 2026/27 onwards, which indicated the Council would see a
significant reduction in funding due to the change in assessing the
proportion of the population at risk of homelessness.
4.14
The Council’s total
allocation for this grant will be £9.353m for 2026/27 (a
reduction of £1.373m compared to 2025/26), £8.924m for
2027/28 and £8.068m in 2028/29.
Public Health Grant (PH)
4.15
The PH grant has been
consolidated with the separate Smoking Cessation grant, the Drugs
and Alcohol Treatment and Recovery Improvement Grant and the
Individual Placement & Support Grant. The Council’s
allocation for these grants in 2025/26 is £29.375m. The
provisional allocations over settlement period are £29.751m
in 2026/27, £30.006m in 2027/28 and £30.288m in
2028/29.
4.16
The PH grant continues to be
ringfenced for public health functions.
Crisis & Resilience Fund
4.17
The new Crisis and Resilience
Fund consolidates Household Support Fund (HSF) and Discretionary
Housing Payments (DHP). Until now, both the HSF and DHP have been
announced either six-monthly or annually, so building this into the
full settlement period provides the Council with the ability to
plan the best use of this funding.
4.18
The council’s allocation
for these funding streams in 2025/26 is £4.503m. The Councils
allocations over settlement period are £3.982m in 2026/27,
£3.980m in 2027/28 and £3.841m in 2028/29.
Council Tax
4.19
The Council Tax taxbase report
was agreed by Cabinet at its meeting of 22 January 2026. Assuming a
Council Tax increase of 4.99% is agreed, and taking into account
changes to the tax base, the total projected Council Tax income in
2026/27 is £210.010m. This is an increase of £12.386m
compared with 2025/26.
Business Rates
4.20
The government implemented a
full Business Rates Reset (BRR), alongside the Fair Funding Review
(FFR). This results in the redistribution of all accumulated growth
within the Business Rate system based on the measure of each
authority’s need. Thereby providing a new Baseline Funding
Level (BFL) for business rates for 1 April 2026 with the
opportunity to retain growth until the next reset.
4.21
In 2026/27 there is a 100%
safety net meaning that no authority will receive less than the BFL
set. The Council’s net share of local business rates retained
is assumed to be £58.442m, which is in line with the
council’s BFL set in the provisional LGFS.
4.22
Locally, the actual Business
Rates income will reflect the local economy rather than each
authority’s BFL. This results in each authority having to
make a top up or tariff payment to the government which reflects
the difference between their BFL and business rates income
(otherwise known as the Business Rates Baseline, or BRB). The BRB
for Brighton & Hove is calculated at £80.712m and results
in a tariff payment of £22.270m. This includes a change in
the treatment of mandatory reliefs and funded discretionary reliefs
where the government will take responsibility for funding
these.
4.23
Future years business rates
retained from 2027/28 includes annual growth assumptions of 0.5%
which is inclusive of levy payments that will be due on all
growth.
4.24
The government announced on 27
January 2026 that in 2026/27, eligible pubs and live music venues
will receive a 15% business rates relief, and then a real terms
freeze for a further 2 years. Local Authorities are expected to be
compensated for the cost of this relief.
Other Government
Grants
4.25
The grant allocations for
2026/27 have been included within the summary budget at Appendix 1.
Some grant allocations for next year have not yet been announced
and where these are critical to the setting of the 2026/27 budget,
a rolled-forward estimate has been included.
Fees & Charges
4.26
The council’s Corporate
Fees & Charges Policy requires that all fees and charges are
reviewed at least annually and should normally be increased by a
minimum of either the assumed corporate standard inflation rate,
statutory increases, or actual increases in the costs of providing
a service to reflect cost inflation.
4.27
Over recent years, fees &
charges have become an increasingly important element of the
council’s financial sustainability following real terms
government grant reductions since 2010. Services therefore
benchmark non-statutory fees and charges with other providers and
councils to ensure that charges are comparable and competitive
within the local context and can maximise discretionary income to
protect essential services wherever feasible. However, fees &
charges must normally be set to recover costs, demand (price
elasticity) and, where commercial, market conditions.
5
Revenue Investment to Support
Council Plan Priorities
5.1
The Council Plan 2023 to 2027 (as refreshed in July 2025) sets out
a vision for Brighton & Hove to be a city to be proud of, a
healthy, fair and inclusive city where everyone thrives. To deliver
the vision of a Better Brighton and Hove for All, the council aims
to be a responsive and learning council with well-run services
and will focus on the four key
outcomes of the plan over the next four years as detailed in the
MTFS at Appendix 4.
5.3
In total, there are proposed
ongoing investments of £28.098m to support services that
contribute to Council Plan outcomes. The full list of proposed
investments to support Council Plan priorities and associated
outcomes in 2026/27 is set out in the table below. Investments over the remainder of the
4-year Medium Term Financial Strategy are set out in Appendix
4.
|
Table
2: 2026/27 Investments & service pressures
|
|
Priority
Supported
|
Proposed
Council Plan Investments and service pressures
|
Recurrent
Investment 2026/27
|
|
|
|
£m
|
|
A
City to be Proud of
|
Rental Loss associated with the closure of New England
House
|
1.200
|
|
Tree Disease Management
|
0.300
|
|
Investing in the future of service delivery (including
revenue impact of assets to deliver services)
|
0.600
|
|
All other investments and pressures
|
1.680
|
|
Total
Investments - A City to be Proud of
|
3.780
|
|
|
|
|
|
A
Fair and Inclusive City
|
Housing – Temporary and Emergency
Accommodation
|
11.106
|
|
Loss of Housing Benefit Subsidy
|
2.400
|
|
All other investments and pressures
|
0.365
|
|
Total
Investments - A Fair & Inclusive City
|
13.871
|
|
|
|
|
|
A
Healthy City that helps people to thrive
|
Home to School Transport
|
1.285
|
|
Children’s Agency Placements
|
1.811
|
|
Children’s Disability Placements
|
0.483
|
|
Supporting Adults with Physical Needs
|
0.621
|
|
Supporting Adults with Learning Disability
Needs
|
0.490
|
|
Supporting Adults with Mental Health
Needs
|
0.698
|
|
Supporting children with complex needs
in-house
|
0.301
|
|
Family Hub & preventative children’s
services
|
0.637
|
|
Support for Increased SEN Demand
|
0.366
|
|
Other Educational Services &
Support
|
0.547
|
|
Total
Investments - A Healthy City
|
7.239
|
|
|
|
|
|
A
Responsive and Learning Council with Well-run Services
|
Investment in Emergency Planning
service
|
0.150
|
|
Estimated cost of changes in Digital Innovation
service
|
0.390
|
|
Income pressure within commercial property
portfolio
|
0.201
|
|
Change in Government policy for Councillors in the
Local Government Pension Scheme
|
0.100
|
|
Investment in Cyber Security
|
0.220
|
|
Council owned building Business Rate
changes
|
0.218
|
|
All other pressures & investments
|
1.929
|
|
Total
Investments - Well-Run Services
|
3.208
|
|
|
TOTAL
COUNCIL PLAN INVESTMENTS
|
28.098
|
Commitments
5.4
The budget projections for 2026/27 includes commitments of
(£3.872m), reflecting corporate changes and decisions already
made, as well as changes in presentation of funding due to the
implementation of the Fair Funding Review as at 1 April 2026. The
total commitments are shown in Table 3 below:
|
Table
3: Commitments in the 2026/27 budget:
|
|
|
£m
|
|
Reversal of
2025/26 Risk Provision
|
(1.747)
|
|
Reversal of
2025/26 New Homes Bonus one off allocation
|
1.014
|
|
Reduction in
Crisis & Resilience Fund to support General Fund
Expenditure
|
0.200
|
|
Other budget
changes
|
(0.137)
|
|
Subtotal
included in Table 6
|
(0.670)
|
|
2025/26 Pay Award
above modelled allowance
|
0.827
|
|
Change in
Financing Costs
|
0.913
|
|
Change in
Employers Pension Contribution
|
(6.832)
|
|
Reduction in
Homelessness Funding
|
1.373
|
|
Creation of
2026/27 Risk Provision
|
1.125
|
|
Change in
contribution to reserves
|
(0.608)
|
|
Total
Budget commitment
|
(3.872)
|
6
Reserves Position and One-Off
Funding
Latest Financial
Performance in 2025/26
6.1
Targeted Budget Management
(TBM) is the council’s system of budget monitoring and the
TBM Month 9 (December) report included in the February Cabinet
agenda indicates an improved forecast overspend of £4.861m on
the General Fund.
6.2
The report describes that one
of the significant drivers of the overspend is the cost of and
demand for emergency and temporary accommodation, alongside the
demand for other statutory services, pressure on income sources,
and a potential increase in the Council’s Housing Benefit
Subsidy loss.
6.3
The report indicates a number
of recovery measures that have been put in place to help improve
the position over the year including strategic financial recovery
measures for temporary accommodation, tightened spending and
recruitment freezes. The position is also supported by the release
of the one off risk provision (£1.747m), deferral of the
planned contribution to the working balance (£1.125m) and
application of previously earmarked reserves and balances
(£1.109m).
6.4
The TBM Month 9 report includes
the forecast of the 2025/26 council tax collection fund and
business rates collection fund positions. The Council’s share
of the council tax collection fund is a forecast deficit of
£1.071m, which is a result primarily due to a lower
collection rate than anticipated. In addition, the Council’s
share of the business rates collection fund is a forecast deficit
of £1.427m, primarily due to the increase in cost of appeals.
Therefore, after allowing for a contribution from the Section 31
timing reserve of £0.730m, the total collection fund deficit
that is required to be funded as part of the 2026/27 budget is
£1.768m.
One-off Resource Liabilities and Proposed Allocations
6.5
The Working Balance is
recommended to be increased to a minimum of £12.000m to meet
general risks applicable to a unitary authority. An overspend in
2022/23 resulted in the working balance being reduced by
£3.374m to £5.626m. A repayment was made in 2024/25,
and an additional contribution was made in 2024/25 from the
underspend within the year to bring the balance to
£7.840m.
6.6
The planned repayment of
£1.125m in 2025/26 has been deferred within TBM Month 9 to
support the in-year financial position. If the TBM outturn improves
significantly, this will be reviewed to ascertain whether some or
all of the planned 2025/26 repayment can be made. However, there is
some way to go for the position to improve, and therefore the
current assumption is that the working balance will remain at
£7.840m on 31 March 2026.
6.8
There is a risk that the TBM
position will not improve as much as anticipated, or that the
council cannot increase its application of Flexible Use of Capital
Receipts by the value anticipated. This risks further drawdown from
the Working Balance in 2025/26. Any change to the TBM position by
the end of the financial year will be reflected in the 2025/26
outturn report to a meeting of the Cabinet, usually in
June.
|
Table
4: Projected One-off Resources
|
£m
|
£m
|
|
Revenue Budget
position 2025/26 (TBM):
|
|
|
|
Forecast outturn
overspend as at TBM Month 9: December
|
-4.861
|
|
|
Potential
amendment of capitalisation of transformation costs using Flexible
Use of Capital Receipts
|
+3.200
|
|
|
Projected further
improvement between Month 9 and Outturn due to spending and
recruitment controls
|
+1.661
|
|
|
Sub-total
Estimated Year-end TBM Outturn
|
|
+0.000
|
|
|
|
|
|
Collection Fund
Position:
|
|
|
|
Estimated 2025/26
Council Tax collection fund net deficit
|
-1.071
|
|
|
Estimated 2025/26
Business Rates Retention collection fund deficit
|
-1.427
|
|
|
Contribution from
Section 31 grant timing reserve
|
0.730
|
|
|
Sub-total
Collection funds net position
|
|
-1.768
|
|
2026/27
Resources:
|
|
|
|
Exceptional
Financial Support
|
|
+1.768
|
|
|
|
|
|
Projected One-off
Resources from 2026/27
|
|
+0.000
|
|
|
|
|
|
One-off
Allocations in 2026/27:
|
|
|
|
None
|
|
-
|
|
|
|
|
|
Total One-off
allocations
|
|
-
|
|
Balance
|
|
0.000
|
7
Savings Proposals
7.1
As noted above, there is a
significant projected budget shortfall next year and for each year
of the 4-year MTFS. To balance the budget therefore requires
substantial annual savings programmes as has been the case since at
least 2010.
7.2
The savings package proposed
totals £20.749m for 2026/27. Savings proposals are provided
at Appendix 2 and are accompanied by Equality Impact Assessments
(EIAs) at Appendix 7 where appropriate. Medium-term transformation
and savings programmes to address future projected budget
shortfalls are included in the Medium Term Financial
Strategy.
8
Exceptional Financial Support
8.1
The council is required to set a legally balanced budget for the
forthcoming financial year. Within the Local Government Finance
Policy Statement, published in November 2025, the government
committed to the continuation of the Exceptional Financial Support
(EFS) framework to provide support for local authorities facing
exceptional pressures. The number of local authorities accessing
EFS has increased in recent years, underlining the exceptional
financial pressures being faced by many local authorities.
8.2
Due to the exceptional pressures being faced by the Council,
particularly in Homelessness, and Emergency and Temporary
Accommodation, the Council has requested EFS to support a balanced
position in 2026/27. The budget report is therefore being
recommended on the basis that the request for EFS is granted.
8.3
When EFS is granted, the government provides a capitalisation
directive to the Council to allow it to capitalise revenue
expenditure on a one-off basis. This has two important
implications:
·
The EFS will need to be funded either by capital receipts, or by
borrowing. As there is already pressure on the council’s
capital receipts, the working assumption is that borrowing will be
required to fund the request. The repayment cost of borrowing
£15 million is approximately £1.250m per year;
·
Any budget gap funded by EFS increases the budget gap in the
following year.
8.4
A total of £15 million has been requested; whilst the budget
shortfall for 2026/27 is £4.473m, the amount requested
recognises that to become financially sustainable, the Council will
need to replenish its reserves and balances to provide a more
generous buffer to meet unexpected future risks and pressures.
8.5
The below table outlines how the EFS is expected to be used. The
final expected application of EFS will be reported as part of the
2025/26 TBM Outturn report.
|
Table
5: Expected application of EFS
|
|
|
£m
|
|
Fund exceptional
revenue pressures for TA and homelessness
|
4.473
|
|
Fund 2025/26 net
Collection Fund deficit (Table 4)
|
1.768
|
|
Replenish planned
General Risk Reserve used in 2025/26
|
1.109
|
|
Increase General
Risk reserve
|
2.790
|
|
Increase working
balance to £12 million
|
4.160
|
|
Top up Earmarked
Reserves
|
0.700
|
|
Total
EFS Requested
|
15.000
|
9
Medium Term Financial Plan 2026/27 to 2029/30
9.1
The Medium Term Financial
Strategy 2026/27 to 2029/30 (MTFS) has been developed to complement
the Council Plan and is an expression of the how the council aims
to support its priorities and invest in transformation and change
in financial terms. The MTFS is provided at Appendix 4.
9.2
The MTFS sets out key financial
planning assumptions over the 4-year period together with high
level information about transformation and savings programmes aimed
at addressing projected future budget shortfalls and achieving
financial sustainability. Key assumptions covered by the MTFS
include:
·
Known
commitments arising from previous approvals;
·
The
revenue implications of financing the council’s Capital
Investment Programme;
·
Council Tax
increases, Adult Social Care precepts and taxbase
forecasts;
·
Business Rate
Retention increases and taxbase forecasts;
·
Fees
& Charges increases;
·
Government Grant
funding projections;
·
Corporate
inflation provisions and assumptions including pay, prices and
pensions;
·
Anticipated
investment requirements to support Council Plan
priorities.
9.3
A summary of the 4-year MTFS is
provided in the table below:
|
Table
6:
Medium
Term Financial Strategy 2026 to 2030
|
2026/27
|
2027/28
|
2028/29
|
2029/30
|
|
£m
|
£m
|
£m
|
£m
|
|
Net Budget
Requirement B/Fwd
|
332.804
|
341.476
|
349.068
|
354.335
|
|
Remove net
one-off short term funding and expenditure
|
0.000
|
0.000
|
0.000
|
0.000
|
|
Adjusted Budget
Requirement B/Fwd
|
332.804
|
341.476
|
349.068
|
354.335
|
|
Standard Pay and
Inflation – Expenditure
|
12.881
|
12.943
|
13.280
|
13.663
|
|
Standard
Inflation – Income
|
(3.213)
|
(3.553)
|
(3.462)
|
(3.559)
|
|
Investment in
priorities across Homes & Adult Social Care services
|
12.915
|
13.744
|
15.242
|
15.970
|
|
Investment in
priorities across Families, Children & Wellbeing
services
|
5.640
|
3.074
|
2.685
|
2.552
|
|
Investment in
priorities across City Operations services
|
3.240
|
0.481
|
0.185
|
0.139
|
|
All other
priority investments
|
6.303
|
1.326
|
1.050
|
1.000
|
|
Changes in Grant
Funding – Homelessness Funding
|
1.373
|
0.428
|
0.857
|
0.000
|
|
Commitment
– change in contribution to/from reserves
|
(0.608)
|
2.498
|
0.000
|
0.000
|
|
Commitment
– Change in Financing Costs (except EFS impact)
|
0.913
|
1.618
|
0.620
|
(0.172)
|
|
Commitment
– 2025/26 Pay Award above 2.75% assumption
|
0.827
|
0.000
|
0.000
|
0.000
|
|
Other Commitment
- Impact of previous decisions made (Detailed further in Table 3
for 2026/27)
|
(0.670)
|
0.817
|
0.826
|
1.598
|
|
Reduction in
Employers Pension Contribution
|
(6.832)
|
0.000
|
0.000
|
0.000
|
|
2026/27 Risk
provision
|
1.125
|
(1.125)
|
0.000
|
0.000
|
|
Subtotal
|
366.698
|
373.727
|
380.351
|
385.526
|
|
Available funding
(below)
|
(341.476)
|
(349.068)
|
(354.335)
|
(369.229)
|
|
Budget
Shortfall
|
25.222
|
24.659
|
26.016
|
16.297
|
|
Plans
to balance shortfalls:
|
|
|
|
|
|
Transformation
and Savings Plans
|
(20.749)
|
(30.382)
|
(26.016)
|
(16.297)
|
|
Exceptional
Financial Support (EFS)
|
(15.000)
|
15.000
|
0.000
|
0.000
|
|
Less:
Contributions to reserves from EFS (working balance, risk reserve
& earmarked reserved)
|
8.759
|
(8.759)
|
0.000
|
0.000
|
|
Less: Funding of
net Collection Fund Balances
|
1.768
|
(1.768)
|
0.000
|
0.000
|
|
Cost of funding
Exceptional Financial Support*
|
0.000
|
1.250
|
0.000
|
0.000
|
|
Budget
Requirement C/Fwd
|
341.476
|
349.068
|
354.335
|
369.229
|
|
|
|
Funding:
|
|
|
|
|
|
Revenue Support
Grant (RSG)
|
75.522
|
66.480
|
57.591
|
57.591
|
|
Locally retained
Business Rates
|
58.442
|
60.193
|
61.833
|
63.491
|
|
Net Collection
Fund position
|
(2.498)
|
0.000
|
0.000
|
0.000
|
|
Council Tax
including Adult Social Care Precepts
|
210.010
|
222.395
|
234.911
|
248.147
|
|
Total
Funding
|
341.476
|
349.068
|
354.335
|
369.229
|
*Year 1 cost of EFS is built into
cashflow forecasts within the Financing Costs budget
9.4
The MTFS indicates that
transformation and savings programmes will need to deliver savings
and efficiencies of £93.444m over the 4-year period to
achieve a balanced and sustainable position.
10.1
An estimate of the posts to be
deleted in relation to the budget proposals has been made and
indicates that approximately 94 full time equivalent (fte) posts
are expected to be deleted from the council’s staffing
structure, approximately 2.6% of total staffing. Many of these
posts will already be held vacant in lieu of savings proposals but
some may initially result in staff being potentially placed at risk
of redundancy. This is difficult to estimate with certainty but
approximately 40 fte staff (not headcount) have been identified as
potentially at risk at this stage of the process. There are no
expected TUPE implications expected as a result of the proposals.
This information has been shared with the council’s
recognised trades unions and the staff affected in advance of the
release of this report.
10.2
The council is continuing to
work on an Organisational Change transformation programme that will
explore potential savings through a number of measures including
use of digital innovation, functional alignment and/or integration
of services and service redesign to identify further potential
savings. A high level estimate of 22 fte post deletions and 11 fte
placed at risk of redundancy are included in the total for
organisational change. Any proposals that arise from these
changes will be subject to consultation, and final proposals may
result in more or less fte changes as and when they come
forward.
10.3
As in previous years, actual
numbers of staff affected will be highly dependent on the detailed
options proposed and on the outcome of formal consultation with
staff and unions which will often lead to changes to the original
proposals. As previously experienced, it is likely that any
reductions in posts will be resolved through normal turnover, or
through redeployment to other vacancies across the council, thereby
minimising the risk of redundancies as far as possible.
10.4
If the proposals do potentially
place any staff at risk of redundancy the council will support them
by:
·
Providing
appropriate support to staff throughout the change process to
enable them to maximise any opportunities available;
·
Controlling
recruitment and ensuring there is a clear business case for any
recruitment activity;
·
Managing
redeployment at a corporate level and maximising the opportunities
for movement across the organisation;
·
Managing the use
of temporary or agency resources via regular reports to Directorate
Leadership Teams (DLT’s);
·
Inviting
applications for voluntary severance where appropriate to staff
affected by budget proposals, subject to viability and approval on
a case by case basis.
10.5
These measures will remain in
place as consultation with trade unions, staff and other
stakeholders is undertaken. Where necessary, a targeted voluntary
approach to releasing staff in areas undergoing change will be
managed to support service redesigns whilst ensuring that the
organisation retains the skills that will be needed for the
future.
11
The Innovation Fund & the Strategic Transformation
Portfolio
11.1
The government extended the
ability of all Local Authorities to use capital receipts to support
the transformation of services to deliver savings and efficiencies
(known as the Flexible Use of Capital Receipts) to March
2030.
11.2
The Innovation Fund was
established for the 2025/26 budget to enable the flexible use
capital receipts to support the delivery of transformation to
achieve a balanced MTFS. There are a number of strands of activity,
but most notably, the Transformation Portfolio which have been
established to deliver a wide range of programmes to underpin the
delivery of the MTFS. These were described in the Budget
Update presented to Cabinet in December, and are included in more
detail in the MTFS at Appendix 4. Table 7 shows the indicative Innovation Fund over the
MTFS.
|
Table
7: Indicative Innovation Fund
|
|
Category of
Investment
|
2026/27
|
2027/28
|
2028/29
|
2029/30
|
|
£m
|
£m
|
£m
|
£m
|
|
Transformation
& Innovation strategic programmes
|
3.400
|
1.900
|
0.600
|
0.600
|
|
Invest-to-Save
business cases
|
0.700
|
0.100
|
0.300
|
0.300
|
|
Digital and AI
Development
|
1.550
|
1.550
|
1.550
|
1.550
|
|
Managing Staffing
Changes (exit packages)
|
1.250
|
0.500
|
0.500
|
0.500
|
|
Enabling
Resources (e.g Project Officers, Workstyles Team, HR
etc)
|
3.326
|
3.326
|
2.326
|
1.326
|
|
Total
|
10.226
|
7.376
|
5.276
|
4.276
|
12
Capital Strategy and Capital
Investment Programme
12.1
The Prudential Framework
requires local authorities to produce a Capital Strategy which is
to be presented and approved by full Council each year. The purpose
of the Capital Strategy is to provide a single place for
transparency and accountability of local authority non-financial
investments and its Capital Investment Programme, including any
commercial investments in property or loans to third
parties.
12.2
The aim of the Capital Strategy
is to ensure members are fully conversant with the risks of capital
investments and are aware of how the risks are proportional to the
council’s core service activity. The document will
include:
·
The
proposed Capital Investment Programme
·
The
Governance & Risk Framework
·
Potential and
pending non-financial
investments
·
An
overview of the council’s risk exposure
12.3
The revised Prudential Code for
Capital Finance issued in 2021 prohibits Public Works Loan Board
(PWLB) lending to local authorities that plan to borrow to buy
commercial assets primarily for yield. The PWLB will still be
available to all local authorities for refinancing. In order to
borrow from the PWLB, local authorities are now required to submit
a summary of their planned capital spending and PWLB borrowing for
the following three years. The Capital Strategy and Treasury
Management Strategy are compliant with the new code and do not
include capital investment activity where the primary purpose is
commercial yield.
12.4
The Capital Strategy forms part
of the General Fund budget report to ensure that the link between
capital and revenue decisions is maintained and to ensure that
budget resourcing decisions are taken in the context of the full
range of proposed revenue and capital budgets, resources,
investments and savings.
Capital
Investment Programme
12.5
As previously, a 5-year capital
programme has been developed and the associated capital financing
implications will be included in the MTFS.
12.6
The capital expenditure
estimates incorporate planned rolling investment programmes
alongside major infrastructure projects. The key rolling
programmes, including those re-focused to support Council Plan
priorities, are as follows:
·
Investment in
Housing Stock and acquisition through the Housing Revenue
Account;
·
The
Education Capital programme, which provides investment from central
government for Education Capital Maintenance, High Needs provision
and Devolved Formula Capital for schools;
·
Disabled
Facilities Grants to help maintain people in their
homes;
·
The
Local Transport Plan (LTP) to support sustainable transport and
transport infrastructure;
·
The
Digital, Data and Technology Strategy (DDaT) and other IT&D
investments including the Corporate Systems Improvement programme
for HR, Finance, Payroll and Procurement systems, to ensure the
council is able to continue to improve its on-line services,
improve the capture and use of data, and make use of emerging
technologies and AI to improve automation and
efficiency;
·
The
Asset Management Fund (AMF) to ensure the strategic elements of the
Asset Management Plan can be supported;
·
The
Commercial Asset Investment Fund (CAIF) to protect and enhance the
income generated from the existing commercial and farmland property
portfolios;
·
Corporate Planned
Maintenance (PMB) to ensure the operational elements of the Asset
Management Plan are supported and that backlog maintenance does not
build up unduly;
·
The
Strategic Investment Fund (SIF) to support the advancement of major
regeneration schemes and initiatives, and;
·
The
Vehicle Fleet and plant replacement annual programme.
12.7
Capital receipts from the sale
of surplus land and buildings support the capital programme and the
projections are regularly reviewed. The Capital Strategy allows for
an assessment of the potential social value of surplus or
underperforming assets against the potential disposal value and
where possible will aim to maximise the use of assets to enhance
social value across a 4-year Asset Management Plan. Assets for
disposal are also considered for suitability as council housing
sites and for potential appropriation to the Housing Revenue
Account (HRA) but this must comply with the duty of obtaining best
consideration.
12.8
The detailed capital programme
is set out in Appendix 5 (and will be included in the
council’s Budget Book) and shows the approved and proposed
capital investments for each corporate directorate.
12.9
The overall Capital Investment
Programme for 2026/27 is £239.816m. The proposed investments
are summarised as follows:
|
Table
8: Capital Investment Programme 2026/27
|
£m
|
|
Housing
including New
Homes for Neighbourhoods, the Home Purchase scheme, the Eastergate
Road housing project, the Moulsecoomb Hub project, the Housing
Joint Venture, and conversions within the Housing Revenue Account
(HRA)
|
112.987
|
|
Net Zero
Programme including Carbon
Neutral and Net Zero investment, Seafront Heritage Lighting
programme, Zero Emission buses, Communal Bin Infrastructure and
carbon reduction measures to operational buildings
|
4.695
|
|
Parks & Open
Spaces including parks
infrastructure, Stanmer Pond restoration and Stanmer Park
security
|
1.402
|
|
Sport &
Recreation including works
to the Prince Regent leisure centre and improvements to Seafront
facilities
|
0.563
|
|
Transport &
Highways reflecting the
Local Transport Grant (LTG) and Maintenance grant allocations for
2026/27, Active Travel programme for the A259, and upgrades to the
CCTV programme
|
10.450
|
|
Schools
Investment to provide
educational places for pupils based on demographic changes in the
city
|
1.419
|
|
Regeneration
including Madeira
Terraces, King Alfred Leisure Centre, Valley Gardens Phase 3, The
Royal Pavilion Estate, New England House and Brighton Marina to
River Adur Coast protection works
|
55.423
|
|
Tackling
Inequality including
Temporary Accommodation purchase, Better Care/Disabled Facilities
Grant (DFG) projects, Universal Free School Meals and the Knoll
House redevelopment
|
12.632
|
|
Building
Maintenance including Planned
Maintenance, Education and Social Care Buildings Maintenance, the
Asset Management Fund, Brighton Centre essential maintenance,
Public Conveniences, Seafront Railings upgrade, and structural
repairs within the HRA
|
23.626
|
|
IT&D &
Innovation including The
Innovation Fund, the Digital Transformation programme, the
Corporate Systems Improvement Programme, investment in digital
services for customers, and ongoing investment in the IT&D
infrastructure and Digital Data & Technology (DDaT)
project
|
14.119
|
|
Vehicles &
Equipment for the
council’s vehicle fleet replacement programme
|
2.500
|
|
TOTAL
CAPITAL INVESTMENT PROGRAMME 2026/27
|
239.816
|
12.10
The Capital Strategy at
Appendix 5 also sets out the expected profile of investments over
the 5-year period and indicates how the programme will be funded
from a combination of government capital grants, capital receipts,
capital reserves, HRA direct revenue funding, external
contributions and prudential borrowing.
13.1
The Treasury Management
Strategy Statement (TMSS) and Annual Investment Strategy (AIS) are
now incorporated in the budget report to ensure that inter-related
financial decisions and strategies can be considered together. The
council is required to operate a balanced budget, which broadly
means that cash raised during the year will meet cash expenditure.
Part of the Treasury Management operation is to ensure that this
cash flow is adequately planned, with cash being available when it
is needed (liquidity) and that surplus monies are only invested
into counterparties and instruments commensurate with the
council’s risk appetite.
13.2
Another important function of
the Treasury Management service is the funding of the
council’s capital plans. The capital plans provide a guide to
the council’s borrowing need, which is essentially the longer
term cash flow plan, to ensure the council can meet its approved
capital spending obligations.
13.3
The strategy reflects best
practice as set out in the CIPFA Prudential code and the CIPFA
Treasury management Code of Practice. The Treasury Management
Practices and schedules identify the practices and procedures that
will be followed to achieve the aims of the TMSS and that underpin
the council’s Treasury Management function.
13.4
An important change from the
TMSS from previous years is that the strategy includes the effect
of exceptional financial support on the Council’s Capital
Financing Requirement and TMSS, on the assumption that the
Council’s application to the government will be
granted.
13.5
The AIS for 2026/27 is also
incorporated within Appendix 6 to this report. The AIS gives
priority to security and liquidity.
13.6
Security is achieved
by:
·
selecting only
those institutions that meet stringent credit rating criteria or,
in the case of non-rated UK building societies, have a substantial
asset base; and
·
limiting exposure
risk by limiting the amount invested with any one
institution.
13.7
Liquidity is achieved by
limiting the maximum period for investment and matching investment
periods to cash flow requirements.
13.8
There are no changes proposed
to the council’s AIS or risk appetite for
2026/27.
14
Budget Book 2026/27
·
A
summary of the overall council budget 2026/27;
·
A
detailed list of anticipated government grants;
·
Basic
information about each major service area including service
statistics;
·
Information at
sub-divisional levels to aid understanding of the wide range of
services and teams in each service directorate;
·
Analysis of
spending and income by category (subjective analysis);
·
Staffing
information for each service;
·
Analysis of
budget movements between years;
·
Analysis of
savings and investments;
·
Summary
information on capital investments;
·
Summary MTFS
projections and assumptions.
14.2
The Budget Book will be
provided to Budget Council as an appendix to the Supplementary
Information agenda item.
15
Council Tax Setting
15.1
The Administration is proposing
a council tax increase of 4.99% which includes a 2% Adult Social
Care precept allowed by government within the local government
finance settlement. A council tax increase of 4.99% results in a
Band D council tax of £2,180.01 for the council’s
element, an increase of £103.62 from 2025/26.
15.2
In order to propose an overall
Council Tax for the city, the Council Tax set by other precepting
authorities needs to be known and this information will be included
in the Supplementary Information item to Budget
Council.
Supplementary
Information for Budget Council
·
Any other grants that are
announced before Budget Council;
·
The agreed Council Tax set by
East Sussex Fire Authority and Sussex Police & Crime
Commissioner;
·
The statutory Council Tax
calculations required under the 1992 Local Government Finance
Act;
·
The full budget and Council Tax
resolution for Budget Council;
·
Other information as necessary
including a detailed Budget Book.
15.4
At Full Council on 1 February
2024, it was agreed a new 100% Council Tax premium be applied to
empty furnished properties (second homes) from 1 April 2025.
Following this, a clarification to the premium determination is
required in relation to serviced accommodation.
15.5
Serviced accommodation
generally offers fully furnished homes (apartments, houses) for
short to medium stays, blending the comfort of a home with
hotel-like services, including kitchens, WiFi, cleaning, and
utilities. Serviced accommodation is not specifically covered by
the Levelling-Up and Regeneration Act 2023. They are not
anyone’s main home and so the premium for empty furnished
properties does not apply.
15.6
To ensure transparency and
clarity of Brighton & Hove’s premium determination,
approval is sought for serviced accommodation to be an exemption.
If approved, this will come into effect from 1 April 2026. More
detail is contained in Appendix 8.
16
Report of The Chief Financial
Officer (Section 151) Under Section 25 of the Local Government Act
2003
16.1
Section 25 of the Local
Government Act 2003 requires the Chief Financial Officer (Section
151 Officer) of a local authority to report on the robustness of
the estimates included in the budget and the adequacy of the
reserves for which the budget provides. This report has to be
considered by the Cabinet and full Council as part of the budget
approval and council tax setting process.
Robustness of
Estimates
16.3
It also aims to demonstrate
that sensitivity and risks have been considered. No local
authority’s reserves and balances are limitless and severe
financial shocks can and do destabilise local authorities and can
require government intervention should the Council’s level of
reserves and contingency be insufficient to cover these shocks or
service pressures.
16.4
For 2026/27, pressures funding
of £28.1 million has been identified to meet known
commitments and support estimated inflationary and demand pressures
including for core statutory demand-led services across Adults
Social Care, Children’s Safeguarding and Care services, and
Homelessness services. These pressures have been calculated through
detailed and robust financial analysis which has considered
additional numbers of people requiring the Council’s support
through homelessness and social care services, analysis of market
costs for housing or placements, and so on. This should ensure that
services start from the position of being funded for known and
projected cost and demand increases, the impact of some external
factors is difficult to predict accurately. Macro-economic factors
can fluctuate significantly but also the impact of increases in the
National Living Wage and Employers’ National Insurance may
play out in different ways across the private, independent and
third sectors from which the council procures and commissions over
£300 million services each year.
16.5
These and other potential risks
and sensitivities are considered in the Medium Term Financial
Strategy (Appendix 4) which attempts to quantify risks and sets out
the main remedies and mitigations available to the council. As seen
in the current financial year, there have been significant
pressures on finances, predominantly as a result of the huge
pressures experienced in emergency and temporary accommodation, and
to an extent in respect of social care placements. Strict and
significant recruitment and spending controls alongside other
financial management actions have been in place throughout the year
in order to bring the Council’s financial position towards
balance. TBM2 at the beginning of the year set out a projected
overspend of more than £15 million in 2025/26, and subsequent
to that additional pressures have emerged, for example in respect
of housing benefit subsidy (£4.7m) and a planning legal
challenge. The current overspend at TBM9 is projected to be
£4.8m, which is a considerable improvement against over
£20m of pressures, however more work is needed to bring the
position into balance.
16.6
The TBM Month 9 overspend
forecast is still unmanageable given the Council’s very low
level of reserves and therefore work is needed to continue to
address this overspend position. Taken as a whole, this position
demonstrates that:
·
The
authority continues to adopt a proactive approach to managing its
budget, taking appropriate financial management actions in
sufficient time to avert overspending and any unplanned use of
reserves or the Working Balance. While not an ideal scenario, given
the financial challenges of the sector and successive very large
annual savings requirements, the approach to in-year financial
management is proving effective and enables the authority to live
within very tight resource constraints albeit with some impacts on
service delivery.
·
The
authority continues to achieve substantial savings, supported by
invest-to-save programmes that are backed by the use of capital
receipt flexibilities.
·
The
authority has been able to maintain and build its reserves and
provisions since overspending in 2022/23. However, given the
context of huge service pressures, particularly in respect of
emergency and temporary accommodation, it is the view of the Chief
Finance Officer that the current level of reserves is too low to be
considered adequate in the current financial planning climate. The
plan to increase this level of reserves is set out in more detail
below.
16.7
The budget set out in this
report includes a number of measures to protect the Council against
future financial planning risk. These are set out on the basis that
the Council’s application to government for £15 million
of Exceptional Financial Support is granted. These are as
follows:
·
A
Working Balance of £8 million which will be increased to
£12 million to meet the revised recommended level;
·
A
risk provision held in revenue of £1.1m to enable the
management of unexpected risks and pressures;
·
A
General Risk Reserve of £3.9 million to provide an additional
safeguard for unexpected risks and pressures;
·
Other
Earmarked Reserves (excluding Section 106 and Community
Infrastructure Levy) of approximately £12m that can be
borrowed from internally in the short term;
·
Approximately
£17m in Section 106 and Community Infrastructure Levy
resources held in lieu of agreed schemes that can also be borrowed
from internally to manage short term pressures;
·
Continued
flexibility provided by the government’s capital receipt
flexibilities, allowing the council to capitalise more eligible
revenue costs, for example, project managers, should it need
to;
·
Flexibility in
the application of unringfenced grants including the Extended
Producer Responsibility grant, Shared Prosperity Fund and many
other grants that allow administrative costs to be charged to the
grant;
16.8
Taking into account identified
risks as set out in the MTFS (Appendix 4), the Council is
recommended to maintain it’s working balance at between
£12-15 million. The level on 1 April 2026, taking the
recommendations in this report, is expected to be £12
million. This is just over 3.5% of the net General Fund budget. The
Council should also continue to maintain a General Risk Reserve and
other earmarked reserves to meet long term commitments and provide
additional flexibility to manage any short term pressures. The
Working Balance and other usable reserves are held to mitigate
exceptional legal and financial risks including appeals and
challenges, as well as potential billing failures, civil
contingencies and other emergencies.
Adequacy of
Reserves
16.10
As indicated above, current
analysis of authority-level risks indicates that a working balance
of between £12-15 million is prudent and appropriate having
taken into account foreseeable risks in relation to the 2026/27
budget and in the context of other available short-term resources.
Importantly, the 2026/27 budget also includes a risk provision of
£1.1m, and will hold a General Risk reserve of £3.9m to
mitigate against potential part-year effect savings.
16.11
These figures are set out on
the basis that the Council’s application to government for
exceptional financial support is granted. It is important to note
that this is not additional money, it is the flexibility to
capitalise revenue spend/pressures and spread this cost over a
longer period of time to help financial sustainability. The cost of
borrowing from exceptional financial support has been factored into
the MTFS. The delivery of the Council’s transformation plan
over the next 4 years is essential to support the achievement of
the targets within the MTFS.
16.12
All specific reserves have been
reviewed in detail to ensure they are set at an appropriate level
as set out in Annex A of the MTFS. The council’s earmarked
reserves fulfil specific contractual, legal or financial risk
requirements and are not therefore available to support the annual
revenue budget. However, as noted above, they can be borrowed from
internally to alleviate short term pressures, provided that
provision for their replenishment is built into the budget and MTFS
ahead of when they are required.
Assurance
Statement of the Council’s Section 151
Officer
16.13
In relation to the 2026/27
General Fund revenue budget, the Section 151 Chief Financial
Officer has examined the budget proposals and considers that the
budget is robust and deliverable while accepting that there are
inherent risks. The budget is recommended on the assumption that
the Council’s application to government for exceptional
financial support will be granted. This will enable the Council to
fully fund service pressures (particularly in respect of emergency
and temporary accommodation), and build sufficient reserves and
risk provisions to leave the Council in a more financially
resilient position. The delivery of the Transformation Programmes
underpinning the MTFS is essential, ensuring that the application
for exceptional financial support is only one off. Ongoing reliance
on exceptional financial support would push up the Council’s
levels of debt and reduce financial sustainability in the medium
term.
16.14
Should the Council’s
application for exceptional financial support not be granted, the
Chief Financial Officer is likely to be in a position of needing to
issue a Section 114 notice, requiring the Council to reconvene to
consider alternative proposals to balance the budget
16.15
In terms of the adequacy of
reserves, the Section 151 Chief Finance Officer considers a minimum
working balance of between £12-15 million to be appropriate
to manage risks, taking into account other available reserves and
resource options.
17
Analysis & Consideration of any alternative options
17.1
The budget process allows all
parties to engage in the examination of budget proposals and to put
forward viable alternative budget and council tax proposals to
Budget Council on 26 February 2026. Budget Council has the
opportunity to debate the proposals put forward by the Cabinet at
the same time as any viable alternative proposals. Budget Council
will normally be recommended to adopt special procedures at the
start of the Budget Council meeting, which set out the procedure
applicable to any alternative budget proposals put
forward.
17.2
In this respect, a
‘Budget Protocol’ for managing alternative proposals
(Budget Amendments) was presented to full Council on 29 January
2026 and determines both the number of allowable Budget Amendments
and the process and timeline for their prior assessment and sign
off by the council’s Section 151 Chief Financial Officer,
Chief Executive and Monitoring Officer.
18
Community Engagement & Consultation
18.1
This report will be shared
widely with key stakeholders and partners as it signals to all
parties the anticipated financial challenge facing the council for
next year and beyond.
18.2
The development of the
council’s budget and future plans is a major undertaking and
proposals can affect a wide range of services and therefore have
impacts on residents, businesses, visitors and staff. Appropriate
and necessary statutory consultation and engagement will be
undertaken with residents, service users, staff, unions, partners,
business representatives and the community and voluntary
sector.
General Information
18.3
The Council’s overarching
budget proposals will be published through a range of channels to
ensure that residents and community groups have an opportunity to
feed inro implementation plans with the Council as they are taken
forward.
City Partners
18.4
Information has been shared
with City Partners through the City Management Board and other
channels. In particular, the council continues to engage fully with
the NHS Sussex Integrated Care System to ensure that the budget
processes of the two organisations are aligned and communicated as
far as practicably possible.
Business Engagement
Schools Community
18.6
The Schools Forum, a
consultative body attended by representatives of all school phases,
will primarily focus on the allocation of the ring-fenced Dedicated
Schools Grant (DSG) funding across the relevant budget
‘blocks’ but will also be periodically informed about
the General Fund budget position and proposed changes to council
services where these may have implications for schools. Engagement
with the schools forum took place in January.
Third Sector Engagement
18.7
A key stakeholder is the
Community & Voluntary Sector, and communications and meetings
with representatives of the sector have been undertaken to provide
an opportunity to feedback views to the council and members which
will inform final budget proposals. The Council funds lots of
activity within the voluntary and community sector, through the
Thriving Communities Fund, the Household Support Fund (which will
become the Crisis and Resilience Fund in 2026/27) and the Fairness
Fund.
Staff and Union Engagement
18.8
Consultation and engagement
with staff and unions is also very important. The scale of
financial challenge indicates further significant impacts on the
configuration and/or provision of services which will inevitably
entail staffing changes. Meetings with the council's recognised
unions, including appropriate officers and members of the
Administration, have been scheduled regularly to keep unions
abreast of developing proposals and to ensure they have sight of
where support to their memberships may be required. The
council’s Joint Staff Consultation Forum will continue to
provide a formal setting for sharing and raising matters relating
to the overall budget process and development.
18.9
Detailed proposals have been
shared with Departmental Consultative Groups (DCGs) and through
line management. Formal consultation and engagement with directly
affected staff will be undertaken as normal, including relevant
union representation, under the council’s Organisation Change
Management Framework.
Specific Consultation
18.10
It is recognised that specific
consultation will be required for individual proposals. CLT and
DLTs will lead on this engagement where there are changes to
service delivery models or changes to policy frameworks that
underpin how we provide services to residents and
businesses.
19
Financial
Implications:
19.1
The financial implications are
contained in the body and appendices of this report.
Finance Officer consulted: Haley
Woollard
Date: 26/01/26
20
Legal Implications:
20.1 Cabinet has the delegated power to
formulate the council’s revenue budget
proposals, Capital Strategy, including the capital
investment programme,
and the Treasury Management Strategy Statement, including
the Annual
Investment Strategy, and to recommend their adoption by
full Council as
part of the overall budget setting process. This decision
falls within the “Allocation of Responsibilities for
Functions for the Cabinet” under Part 2E of the constitution.
This report complies with the Council’s process for
developing the budget framework, in accordance with the
Council’s Budget and Policy Framework Procedure Rules as set
out in Part 3D of the Constitution.
20.2 Whilst The budget decision is an
indicative resourcing decision and does not necessarily constitute
final approval of what policies will be implemented or what sums of
money will be saved under the budget proposals. By approving this
budget, an overall indicative budget envelope is agreed for
Directorates and individual services for the 2026/27 budget, with
the Corporate Leadership Team being required to meet the revenue
budget for the delivery of Council Services.
20.3 Any decisions taken as part of the budget
setting process are subject to
compliance with relevant legal requirements, where
appropriate, before
implementation. The revenue budget and capital strategy
recommendations
in the report do not commit the council to implement any
specific savings
proposal. When specific decisions on budget reductions are
necessary,
focused consultations and the full equality implications of
doing one thing
rather than another will be considered in appropriate
detail. If it is considered
necessary, in light of equality or other considerations, it
will be open to those
taking the decisions to spend more on one activity and less
on another
within the overall resources available to the
council.
20.4 For these purposes, the
“budget” includes the allocation of
financial
resources to different services and projects, and the
setting of the council
tax.
20.5 The Council has a
legal obligation to set a balanced budget on an annual basis as
prescribed in the Local Government and Finance Act 1992 and
associated Regulations. The recommendations contained in this
report will assist in the discharge of that obligation by full
Council. In the event that the application to obtain Exceptional
Financial Support is not agreed by the Ministry of Housing,
Communities and Local Government, Cabinet will note the s 151
officer’s view that the Council will need to
to issue a Section 114 notice, requiring the Council to
reconvene to consider alternative proposals to balance the
budget.
20.6 The public sector
equality duty applies to the decisions relating to the budget in
this report. Under section 149 of the Equality Act 2010 Cabinet is
required to have due regard to the need to: eliminate unlawful
discrimination harassment and victimisation, advance equality of
opportunity between people who share protected characteristics and
those who do not, and foster good relations between people who
share protected characteristics and those who do not. Appendix 7
sets out the equality impact assessments of the budget proposals
and will assist Cabinet in complying with this duty.
20.6
Section 106 of the Local Government Finance Act 1992 applies to any
member of Cabinet present at a meeting when making a recommendation
relating to a council tax calculation, if at that time the member
is due to pay council tax payments which have remained unpaid for
at least two months. In those circumstances the member must as soon
as practicable after the meeting’s commencement disclose the
fact that the section applies and not vote on any question with
respect to this matter. These provisions apply to this Cabinet
meeting.
Lawyer consulted: Elizabeth
Culbert
Date: 29/01/2026
21
Risk Implications
21.1
There are a range of risks
relating to the council’s short and medium term budget
strategy including the ongoing economic impact of the higher
inflationary environment, the impact of the cost-of-living crisis,
further potential reductions in grant funding, the impact of
legislative changes, and/or other changes in demands. The budget
process will normally include recognition of these risks and
identify potential options for their mitigation.
21.2
A range of risk sensitivities
have been calculated and an assessment of these risks has been
included in the MTFS at Appendix 4.
21.3
The delivery of the 2026/27
budget to a breakeven position by 31 March 2027 relies upon the
delivery of the savings proposals outlined in Appendix 2. Officers
will monitor the savings delivery monthly through the Savings &
Innovation Delivery Board during 2026/27 and corrective actions
will be taken to mitigate non-delivery if appropriate.
22
Equalities
Implications
22.1
In Brighton & Hove City
Council a budget Equality Impact Assessment (EIA) process has been
used to identify the potential disproportionate impacts of
proposals on groups/individuals covered by legislation (the
‘protected characteristics’ in the Equality Act 2010)
and actions to mitigate these negative impacts or promote positive
impacts. This is a key part of meeting the requirements of the Act
and demonstrating that the council is doing so.
22.2
In law, the potential impacts
identified, and how far proposed actions mitigate them, must be
given due regard by decision-makers when making budget and resource
decisions. However, as noted under legal implications above, in
setting the budget members are making resourcing decisions which
remain subject to compliance with all necessary legal and statutory
consultation requirements.
22.3
All proposals with a potential
equalities impact in 2026/27 will have an EIA completed and
provided to members of the relevant Scrutiny Committees and to all
Members for the Budget Council. EIAs are cross-referenced with
savings proposals in Appendix 2. Detailed EIAs are available at
Appendix 7.
22.4
Note that, as in previous
years, EIAs relating to staffing impacts are not published with the
budget report as these may contain sensitive information. Instead,
EIAs relating to staffing changes are provided as part of the
relevant consultation paper issued to affected staff and recognised
trade unions.
23
Sustainability
Implications
23.1
The council’s revenue and
capital budgets have been developed with sustainability as an
important consideration to ensure that, wherever possible,
proposals can contribute to reducing environmental impacts and
support progress toward a carbon-neutral city.
24
Health and Well-being
Implications
24.1
The council’s budget
includes very substantial provision for expenditure on Adult and
Children’s Social Care, Public Health, Housing and
Homelessness, Welfare Assistance (for example the Council Tax
Reduction Scheme), Education and Skills, and many other essential
services that support vulnerable people and children, and
households on low incomes or experiencing homelessness. These
services contribute significantly to the health and well-being of
thousands of residents and the wider population, upholding the
council’s priority to support ‘A healthy city that
helps people to thrive’ and engender ‘A fair and
inclusive city’.
25
Conclusion
6
7
8
9
25.1
The council is under a statutory duty to set its budget and council
tax before 11 March each year and must agree a lawful and balanced
budget. This report sets out the budget assumptions to be used as
the basis for Council Tax calculations in order to meet the
statutory duty and the proposals to achieve a balanced budget,
including the application the Council has made to MHCLG for
Exceptional Financial Support. The full details of 2026/27 revenue
and capital budgets are appended to this report and will be brought
together in an annual Budget Book which will provided to Budget
Council as a supplementary information item
Supporting
Documentation
Appendices:
1.
Budget
Allocations 2026/27
2.
Detailed savings
2026/27
3.
Fees
and Charges 2026/27
4.
Medium Term
Financial Plan 2026/27 to 2029/30
5.
Capital Strategy
2026/27 to 2030/31 including the Capital Investment Programme
2026/27
6.
Treasury
Management Strategy Statement 2026/27
7.
Equalities Impact
Assessments (EIAs) – Individual Assessments
8.
Second Homes
Premium: Serviced Accommodation exception