Purpose of Report

 

Under the Council’s Constitution, the Council is required to set a balanced Revenue and Capital Budget and set the Council Tax for each financial year. This report:

 

·         Provided the context for budget setting, both in terms of the Council’s strategic objectives for the city and the local government landscape nationally

·         Sets out the Service Director for Finance’s (Section 151 Officer) budget robustness statement as required by law

·         Summarised financial risks and associated mitigations

·         Sets out revenue budget planning assumptions in respect of income, approved savings plans, resource requirements

·         Sets out the Capital budget, Capital Financing Strategy and the Treasury Management Strategy for 2026/27

·         Sets out the Medium-Term Financial Plan for the period 2026/27 – 2030/31

·         Sets out indicative Council Tax levels for 2026/27, prior to approval of Fire Precept

·         Sets out proposed Fees and Charges for 2026/27 for Cabinet Approval

·         Set outs the Tamar Bridge & Torpoint Ferry Joint Committee 2026/27 Revenue Budget and Capital Programme and the 2026/27 draft Business Plan

·         Sets out Cabinet Savings Proposals for approval

 

Decision

 

Cabinet agreed to:

 

1. Note the Financial Risks as set out in Appendix 3.

2. Note the section from the Council’s Section 151 Officer (Chief Finance Officer) on the robustness of the budget estimates and the adequacy of the level of reserves.

3. Note that the Fire Precept will not be confirmed until after the Cabinet meeting and delegate to the Section 151 Officer to make final amendments to Council Tax Resolution prior to Full Council.

4. Recommends the following to Full Council, subject to amendments by the Section 151 Officer in consultation with the Leader reflecting any final technical adjustments and changes upon receipt of the Final Local Government Finance Settlement.

i) The Revenue Budget 2026/27:

 £329.275m

ii) The drawdown of a maximum of £3.618m of flexible capital receipts, as set out in the report

iii) The Capital Budget 2026/27 £113.938m and five-year programme £319.725m

iv) The Capital Financing Strategy 2026/27

v) The Treasury Management Strategy 2026/27 (incorporating the Non-Treasury Management Strategy and the Minimum Revenue Provision Statement)

vi) The Medium-Term Financial Plan for the period 2026/27 to 2030/31

vii) The Tamar Bridge & Torpoint Ferry Joint Committee 2026/27 Revenue Budget and Capital Programme and the 2026/27 draft Business Plan, as referenced in Appendix 16, and the longer-term forecast to 2029/30 is noted.

5. Approve the partial reversal of up to £31m of the council’s Interest Rate Swap to provide a net£9.7m one-off benefit to the council’s revenue budget position in 2026/27, noting the overall financial impact and alternative options set out in Section 20 of the report.

 

6. Approve Fees and Charges Setting 2026/27 (Appendix 15)

7. Approve the Cabinet Savings Proposals 2026/27 (Appendix 5)

 

Reason:

 

Setting a balanced budget is a statutory requirement. The obligation to make a lawful budget each year is shared equally by each individual Member, discharged through Council. Options for achieving a balanced budget have been considered in the preparation of the proposed budget set out in this report. Using part of the value created through the council’s beneficial Rate Swap arrangement will enable the council to set a budget in2026/27, whilst driving forward its transformation plans to achieve a more sustainable financial position in2027/28 and beyond.

 

Alternative options considered and rejected

 

1) Not to bring forward proposals in respect of the 2026/27 Budget – rejected on the basis that there isa legal requirement for the Council to agree a balanced budget, and seeking support for further development of the recommended proposals will enable this to happen.

 

2) Funding demand pressures at a lower level or increasing savings – despite extensive work to reduce and contain demand, independent review of forecasts for key pressure areas (SEND, Adults and Children’s Social Care, and Homelessness), and the development of £17.2m in recommended savings with further transformation savings planned for later years, the S151 Officer cannot recommend this option because it would fail to deliver a robust, balanced budget position.

 

3) Exceptional Financial Support via Capitalisation Direction or Council Tax referendum limits –rejected because a capitalisation direction is anticipated to create higher financing costs than current proposals, while raising Council Tax to the average rate would still fail to close the budget gap and would place an additional burden on residents.

Councillor Lowry (Cabinet Member for Finance) introduced the Proposed Revenue and Capital Budget 2026/27 report and discussed:

 

 

a)    Officers, including David Northey (Interim Service Director for Finance), Tracey Lee (Chief Executive) and Helen Slater (Assistant Head of Finance), had undertaken a significant amount of work to deliver the budget to this stage and further work would be required in the coming weeks ahead of Full Council consideration;

 

b)    The report set out both the revenue and capital budgets for 2026/27, including an indicative Council Tax level showing the proposed Plymouth City Council element, while confirmation of the Fire Authority precept was still awaited. Once received, this would be incorporated into the final Council Tax proposals for consideration at Full Council later in February;

 

c)    Budget engagement activity had been carried out with residents, the voluntary and community sector, businesses, and other stakeholders, and the report included the Capital Strategy, Treasury Management Strategy and Capital Receipts Strategy for 2026/27, together with a full schedule of proposed fees and charges and the Tamar Bridge and Torpoint Ferry budget;

 

d)    A three?year Local Government Finance Settlement had been secured, following sector lobbying, which provided greater financial certainty and enabled more effective medium?term planning of departmental budgets and service spending;

 

e)    Approximately £73 million of grants that had previously been awarded as one?off funding streams had now been consolidated into the Council’s core funding, improving stability and predictability within the financial framework;

 

f)     The budget included additional funding for highways, including potholes, and for waste collection services to support the implementation of the new food waste collection service, as well as dedicated funding for ongoing maintenance of the Armada Way public realm scheme in response to public concerns about its long?term upkeep;

 

g)    An additional £25.7 million was proposed for demand?led statutory services, particularly adults’ and children’s social care, SEND and homelessness, reflecting continued exceptional pressure in these areas. The average annual cost per client aged 65 and over had increased for seven consecutive years, rising from around £15,000 in 2021/22 to approximately £23,000 in 2024/25, representing an increase of about 55% over that period;

 

h)    Homelessness pressures were highlighted, with the number of households in bed and breakfast accommodation increasing by around 15% since 2022/23, from 181 to 209 households;

 

i)     Home to school transport demand for children with SEND and other eligible pupils had risen by approximately 49% over five years, from 724 children to more than 1,000, and the average cost per child had increased by around 65%, from about £4,600 to £7,500 per year;

 

j)     Independent specialist placements for children’s services had increased from 487 children to 636 over the last three years (an increase of 149) and the weekly cost of some children’s care placements had risen from about £4,400 per child in 2021 to approximately £7,300 per child, equivalent to an annual cost of around £385,000 per child. This contributed to significant growth in the total children’s services budget (excluding education) from around £42 million in 2021 to approximately £73 million in 2026/27;

 

k)    The Council could not simply accept the status quo in the face of these trends and therefore a transformation programme had been launched, as set out in Section 8.8 of the report, to address both cost and demand pressures while maintaining or improving service quality;

 

l)     The capital programme totalled around £320 million over the next five years, with planned capital expenditure of nearly £140 million in 2026/27 alone, representing a major programme of investment in the city’s infrastructure, economy and communities;

 

m)  Key capital schemes included the completion of the Armada Way regeneration, commencement of the Civic Centre regeneration and associated City Centre Homes and Skills Campus, further investment in children’s homes, major transport and employment schemes, leisure and recreation projects such as the National Marine Park, as well as flood protection, energy bills, nature recovery and play space improvements;

 

n)    Subject to Cabinet’s agreement, the proposed revenue and capital budgets and associated strategies would be recommended to City Council for approval in February 2026;

 

o)    As the Final Local Government Finance Settlement had not been confirmed at the time of publication, an additional recommendation was included delegating authority to the Section 151 Officer, in consultation with the Leader, to reflect any technical amendments or changes arising from the final settlement in the budget submitted to Full Council.

 

In response to questions, the Cabinet discussed:

 

p)    The importance of the three?year settlement in enabling better forward planning, with the Section 151 Officer explaining that three of the five years in the Medium Term Financial Plan (MTFP) now contained confirmed funding numbers rather than estimates, thereby providing greater stability for both Cabinet and senior management in addressing the scale of future financial challenges;

 

q)    While greater certainty was welcome, it also removed any residual assumption that further Government funding might plug the budget gap. The Council therefore needed to address its structural deficit over the medium term through a combination of demand management, transformation and cost reduction, particularly in high?pressure areas such as adults’ and children’s social care, homelessness and SEND;

 

r)    The transformation and prevention programmes, including work on Loving Homes for Plymouth Children, reablement in adult social care, expansion of temporary accommodation, and other initiatives already underway, which aimed to improve outcomes whilst reducing long?term costs. Further detailed reports on these programmes would be brought to Cabinet in March 2026;

 

s)     The Chief Executive’s emphasis that every part of the Council would need to be examined, not only the biggest demand?led services, with particular focus on reducing placement costs across adults, children and homelessness, maximising income (including through the Property Regeneration Fund portfolio) and investing in early intervention and prevention to turn the curve on rising demand;

 

t)     The role of digital transformation and AI (Artificial Intelligence) in delivering efficiency and improving services, including the development of a cohort of digital and AI apprentices within the organisation and the need to invest in capacity and skills to enable change while frontline services remained stretched;

 

u)    The ongoing in?year financial controls, including restrictions to essential spend only, to minimise the drawdown from usable reserves in 2025/26 and protect the working balance. The Chief Executive stressed that drawing significantly on reserves was not sustainable and that the Council must watch every penny;

 

v)    The Section 151 Officer’s assessment of alternative options considered in setting the budget, including the possibility of withholding growth from adults’ and children’s social care or further increasing savings targets in directorates, but concluding that such approaches would not be based on “firm foundations” and would risk creating larger in?year problems;

 

w)   The decision to utilise the Council’s interest rate swap as a one?off budget measure, generating an estimated net benefit of around £10 million in 2026/27. The Section 151 Officer stressed this was a one?off measure and that reliance on one?off solutions could not continue. Any additional Government funding received through the Final Settlement should first be used to reduce this reliance;

 

x)    The Section 151 Officer’s assessment of robustness and legality, noting that historic issues related to the capitalisation direction and outstanding accounts had been resolved, with five years of accounts now signed off. Table one relating to usable reserves showed that around one?third of usable reserves would be consumed if the Council continued to rely on one?off measures, and concluded that, subject to the transformation and cost?reduction programmes being delivered, the budget was robust and lawful;

 

y)    The Leader’s reflection that the three?year settlement allowed the light of optimism to enter after many years of uncertainty, enabling the Council to plan for growth in population, housing and industry which, in turn, would positively affect the tax base and the medium?term financial position;

 

z)    The Leader’s comments on the administration’s growth strategy, including partnership work with Homes England and the dockyard expansion project, and the aim to rebuild an “active growth” approach where population and economic growth supported both social outcomes and the Council’s revenue base;

 

aa)  The Leader’s emphasis that the theme of the budget was one of optimism, focused on creating a city of which residents could be proud, supported by projects such as Armada Way and other place?shaping investments;

 

bb)The Council’s renewed focus on the local environment and public realm, including the substantial additional investment in grounds maintenance and tree safety in recent years, which had led to a reported reduction in grass?cutting complaints of around 70–80% compared with the previous year;

 

cc)  The decision to double the revenue budget for play maintenance so that equipment could be kept safe and enjoyable, noting the emerging multi?million pound play and public realm investment programme within the capital pipeline;

 

dd)Confirmation of libraries as key community assets, with Cabinet Members and officers re?affirming the commitment not to close libraries but instead to modernise them through co?locating services, extending opening hours, utilising self?service technology and developing “one?stop shop” functions for wider council and partner services;

 

ee)The development of a Future Libraries Plan that would repurpose library facilities as community hubs supporting health, wellbeing and access to council services, while recognising the strong cultural and emotional connection residents had with libraries;

 

ff)    Initiatives such as On Course South West, which utilised libraries for adult education and skills, particularly benefitting residents who might otherwise face travel barriers or have low literacy, and linking this to the national Year of Reading and local plans to promote reading through schools, the school library service and public libraries;

 

gg)  Recognition of approximately £75 million of highways investment over the next five years (averaging around £15 million per year), which would support planned maintenance based on assessed need, reduce reactive works and allow residents and Members to have greater certainty about when particular roads would be addressed;

 

hh)Recognition that while around 15,000 potholes and carriageway defects had been repaired over recent years, proactive, multi?year planning and modern repair techniques were essential to keep pace with usage, particularly given Plymouth’s role in providing around 116,000 jobs for the wider region and the heavy traffic volumes this generated;

 

ii)    Recognition that drainage responsibilities were shared with South West Water and the Environment Agency, and that effective flood risk management depended on multi?agency cooperation as well as local maintenance;

 

jj)    Observations that national funding formulas for highways, which often relied heavily on road length, tended not to favour urban authorities with relatively short but heavily?used road networks. Cabinet Members supported further lobbying to reform these formulas;

 

kk)      Confirmation that the Final Local Government Finance Settlement had been received during this meeting and appeared to include a positive adjustment to Revenue Support Grant reflecting issues previously raised by Plymouth, and a national one?off grant to address local authority High Needs DSG deficits as at the end of the current financial year, with further analysis required before the full impact for Plymouth could be confirmed;

 

ll)         Cabinet Members’ positive reaction to the initial settlement news, noting that while the decision to support DSG deficits was pragmatic given wider local government reorganisation, Plymouth had contributed to the effective lobbying and engagement with Government;

 

mm)   Alongside the necessary focus on risk and pressure within the revenue budget, there was significant optimism embedded in the capital programme and pipeline, with around £140 million of capital investment planned in 2026/27, approximately 45% of which was funded by grants and additional external contributions taking the externally funded proportion to over half, and a further capital pipeline of around £50 million supported by future grants and developer funding;

 

nn)      The Leader summarised that the Council had received assurance from the Section 151 Officer regarding the robustness and legality of the budget, had resolved historic accounting issues with external auditors, and was now able to invest in capital projects that underpinned growth and delivered services that residents valued, while still meeting unavoidable statutory obligations for the most vulnerable;

 

oo)      The Leader concluded that although the Council faced continued financial challenge and a significant medium?term gap, the budget represented a serious, balanced response which combined realism about risks with a clear ambition to support growth, civic pride and improved outcomes for Plymouth residents.

 

Cabinet agreed to:

 

1.    Note the financial risks;

 

2.    Note the section from the Council’s Section 151 Officer on the robustness of the budget estimates and the adequacy of the level of reserves;

 

3.    Note that the Fire Precept would not be confirmed until after the Cabinet meeting and delegate to the Section 151 Officer to make final amendments to Council Tax Resolution prior to Full Council;

 

4.    Recommend the following to City Council, subject to amendments by the Section 151 Officer in consultation with the Leader reflecting any final technical adjustments and changes upon receipt of the Final Local Government Finance Settlement;

 

i)             The Revenue Budget 2026/27: £329.275m;

 

ii)            The drawdown of a maximum of £3.618m of flexible capital receipts, as set out in the report;

 

iii)           The Capital Budget 2026/27 £113.938m and five-year programme £319.725m;

 

iv)            The Capital Financing Strategy 2026/27;

 

v)            The Treasury Management Strategy 2026/27 (incorporating the Non-Treasury Management Strategy and the Minimum Revenue Provision Statement);

 

vi)           The Medium-Term Financial Plan for the period 2026/27 to 2030/31;

 

vii)          The Tamar Bridge & Torpoint Ferry Joint Committee 2026/27 Revenue Budget and Capital Programme and the 2026/27 draft Business Plan, as referenced in Appendix 16, and the longer-term forecast to 2029/30 is noted;

 

5.    Approve the partial reversal of up to £31m of the council’s Interest Rate Swap to provide a net£9.7m one-off benefit to the council’s revenue budget position in 2026/27, noting the overall financial impact and alternative options set out in Section 20 of the report;

 

6.    Approve Fees and Charges Setting 2026/27;

 

7.    Approve the Cabinet Savings Proposals 2026/27.