URL: https://stroud.moderngov.co.uk/ieDecisionDetails.aspx?ID=319

Decision Maker: Strategy and Resources Committee

Outcome:

Is Key Decision?: No

Is Callable In?: No

Purpose: To set out an updated Medium Term Financial Plan and the Strategy that will be used in setting the budget for the 2026/27 year

Content: The Strategic Head of Finance (Section 151 Officer) introduced the report and highlighted the following key points: The report set out a framework for budget setting for the upcoming financial year and detailed changes to funding, assumptions on inflationary uplifts and any other known changes. It did not include service updates or Council Plan items.   Fair Funding Review Paragraph 2.2 of the report detailed the Fair Funding Reform which was due to commence in April 2026. The full details and impact would not be known until the draft settlement was received in December. The Review was intended to remove funding from Councils that the government considered overfunded and direct more resources to those with statutory responsibilities for Social Care. There would be one core funding grant, the ‘Revenue Support Grant’ (RSG). This would be provided instead of the individual grants for New Homes Bonus, Funding Guarantee Grant, Employer NI, Homelessness Prevention and Domestic Abuse. Spending power was currently expected to reduce by 7% in 2026/27 but more would be known once we received the draft settlement.   Business Rates Paragraph 2.8 detailed the changes to Business Rates which confirmed Business Rates growth would reset alongside funding reform in April 2026. Business Rates were set nationally and in 2025/26, the total Business Rates collected was £40m, of which the Council expected to obtain £7m after tariffs and levies. It was expected to be around £2m next financial year. There was expected to be transitional funding as part of the new reforms being implemented. Renewable Energy Business Rates were expected to continue, however the Gloucestershire Business Rates Pool was unlikely to continue next year due to expected loss of growth. More would be known once the draft settlement had been received.   Council Tax Paragraph 2.16 detailed that Council Tax was the Councils biggest area of income at £11.6m this year. The referendum limit was expected to remain at 3%, meaning if a 2.99% increase was agreed it would see Band D properties be charged an additional £7.27 a year or 14p per week. Tax base growth was assumed at 1.5% however would be updated once actual growth was known in January. The impact of collection rate would be reviewed in January and the Council Tax Support Scheme would be considered by the Committee in January and Council in February 2026. There were no planned changes.   Other Government Grants Extended Producer Responsibility (EPR) Grant was expected to continue outside of the one core RSG. It was not expected that the grant could be used for new waste projects and could only be used for waste disposal and recycling. Temporary Accommodation was expected to be funded within the RSG, however Homelessness and Rough Sleeping were expected to be funded separately.   Inflation The report and Medium-Term Financial Plan modelled inflation of 4% for 2026/27 and then reduced to 3% and 2% for subsequent years. Inflationary uplifts have been assumed for salaries, contracts and fees. Pay award salary increases for 2025/26 were 3.2%, 2.5% from the base budget and £109k being funded from reserves.   Draft Medium Term Financial Plan (MTFP) The MTFP was detailed at Appendix A on Page 143 and set out expenditure and inflationary uplifts. Appendix B detailed budget adjustments. The funding section provided details on Business Rates income, EPR and RSG. The surplus/deficit line showed the deficit each year before reserve movements and was in line with previous MTFP’s.   Reserves 2 main earmarked reserves listed were Business Rates at £4.3m and the Equalisation Reserve at £7m. There was no current intention to reduce income in the MTFP however the Business Rates Reserve was expected to be depleted over the next 3 years. an estimated £1.5m of upfront costs for Local Government Reorganisation (LGR) to be drawn down when needed. The Council were in a position where the final year of the MTFP was not fundable within its reserves. If the Council had not been preparing for LGR, it would’ve been required to make £4-5m in savings over the coming 3 years. The process would include a review of all earmarked reserves, with a view to releasing funds where possible to reallocate towards priority areas.   Local Government Reorganisation Funding received would be transferred to the new successor Council. The Council’s strong reserve position allowed time to review and prioritise Services and Council Plan items. Vesting day of the successor Council was expected on 1 April 2028, however the Council would be prudent to prepare for slippage and consider the financial position beyond this date. The Council would need to work towards balancing the core position, delivering priorities and reducing the funding gap with difficult decisions being made, prioritising delivery of existing services and the Council Plan objectives with LGR considerations.    Housing Revenue Account (HRA) The HRA was in a good position. Rents were capped at the Consumer Price Index (CPI) +1%. Rents were assumed to be estimated at 4% which would give a rent increase of 5%, averaging £111.92 per week for tenants. Council were waiting on the governments decision regarding rent convergence which was expected in the Autumn budget.   Next steps Budget holders were reviewing their service budgets, there would be an all-Member budget briefing on 25 November 2025. The budgets would be considered at Service Committees in December before going to Strategy & Resources Committee in January and Council in February 2026. There would be an all-Member briefing ahead of Council for Members to ask questions.   The following responses were provided to Members questions: The second home premium would be taken into account for the Council Tax base. The Strategic Head of Finance (Section 151 Officer) agreed to check with Officers regarding whether empty homes would be taken into account for the Council Tax base and inform Members outside of Committee. It was expected that the fair funding formula would be based on population and deprivation and the formula would be included in the budget setting papers. Second home premiums were payable to Parishes in addition to the Council. The funding from the EPR was specifically for the disposal of waste packing as part of the Ubico contract. Council was able to set the budget how they saw fit, but consideration was needed on the overall financial position of the budget. There was an option to explore new sources of income; however, additional resources would be required to enable this and support the funding of other priority areas. The Senior Economic Development Officer, whose post was temporary and funded only until March 2026, had recently left the Council. The Strategic Director of Place advised that he would be submitting a budget request to extend the post, in order to support delivery of the remaining actions in the Council Plan. The Equalisation Fund and General Reserves were not included within the MTFP however were available to spend. However, for reasons of prudency, the Council would want to ensure a minimum level of reserves to cover unforeseen circumstances. A balanced budget meant that the Council could apply and use it’s assets to pay off the debt. The income from the asset would be used to satisfy the payments under the debt as a paired economic arrangement in relation to the HRA.  The Council would be undertaking an exercise as part of the budget setting process to ensure the financial position was in a sustainable position for the successor Council. The Committee were not in a position, until the draft settlement had been received, to undertake the budget exercise that Councillor Robert Brown had suggested, however Council would continue to review the budget position as more information became available. The use of reserves was used to consider a balanced budget. The EPR had been kept at £1.4m in the budget forecast until Council were certain that government could collect the expected £1.58m. The £1.5m allocated for upfront LGR costs did not impact the amount of money which could be spent in 2026/27 and would be moved out of the Equalisation reserves into a new LGR reserve. The Council would welcome the opportunity to apply for grants to deliver parts of the Local Plan if it arose. If a government announcement were to alter the timescales for devolution beyond the current MTFP, the Council would need to identify ways to address the funding gap. However, depending on the nature and length of any slippage, there wouldn’t be an immediate need to change the MTFP. The Equalisation Reserve listed showed the £1.5m reduction being used for LGR. The £1.5m Stroud LGR costs were based on directly comparable cases of authorities who had already gone through LGR. Discussions were taking place regarding the comparable financial size of 7 authorities and apportionment of cost contribution. The £1.5m figure had been agreed by the Chief Executive and Section 151 Officer. Financial size of authorities mentioned above referred to looking at net budgets. There was no current indication that central government would assist with LGR costs.   Proposed by the Chair, Councillor Turner, seconded by Councillor Braun.   Councillor Braun and the Chair, Councillor Turner, thanked the Officer for the comprehensive report.   On being put to the vote, the Motion was carried unanimously.   RECOMMENDED TO COUNCIL To approve the Budget Strategy and Draft MTFP 2025/26 to 2029/30 as set out in this report and appendices.  

Date of Decision: October 2, 2025