Agenda item

To set out for Cabinet’s consideration and recommendation to Council the proposed 2026/27 budget and council tax based on.

·     Increasing council tax by 4.99% in 2026/27 in line with the government’s annual referendum threshold which can be broken down into a 2.99% basic increase and a 2% uplift by way of the Adult Social Care (ASC) precept.

·     Implementation of the approved financial strategy including £14m of further savings, efficiencies, and additional income generation.

·     Borrowing a further £95.7m to fund the Special Educational Needs and Disability services revenue expenditure above the level of the Dedicated Schools Grant (DSG) High Needs grant.

·     Recognition that the council has technically been insolvent from the 1 April 2025 onwards as the accumulated deficit on the DSG is now greater than the total reserves held by the council, with a negative overall general fund position and is only protected by the legislative statutory override that allows the council to ignore this issue to 31 March 2028.

This report also provides the latest Medium Term Financial Plan (MTFP) covering the 3-year period to 31 March 2029.

It is also important to recognise that in the absence of government support for historic and accruing DSG deficits, the proposed 2026/27 budget has been drawn up based on the use of £4.8m of previously unearmarked reserves to present a legally balanced budget. This reduces unearmarked to be around 6% which is still above 5% which is widely regarded as a statutory minimum. The Council’s Director of Finance advises that although the estimates used for the purposes of this budget are robust, subject to the list assumptions, the reserves should be considered inadequate based on the level of the DSG deficit and the ongoing risks faced by the council. His advice is to apply any resources announced by government as part of the final 2026/27 local government finance settlement to improve the financial health and sustainability of the council. Specifically, this may or may not include any of the following matters all designed to support the councils forecast £379m DSG deficit on the 31 March 2028.

·       In response to a 6 January 2026 application by the Council for Exceptional Financial Support from the government.

o   Government permission to increase council tax by more than the 4.99% threshold limit.

o   Government permission to capitalise the £10.5m cost of borrowing to finance the DSG deficit in 2026/27.

·       Any government support for historic or accruing DSG deficits.