Agenda item

To inform Members of the key highlights within the Council’s 2025/26 financial statements (draft) and summarise management’s assessment of the Council’s ability to operate as a going concern.

Chris Dagnall (Interim Consultant) presented the Financial Statements 2025/26 Highlights and Going Concern Assessment (Agenda Item 4).

Members asked about the level of Emergency Financial Support (EFS) required in 2027/28. It was confirmed that there was no forecastable change to what was in the budget (approximately £40M). However, a budget refresh was underway, which would include a refresh of the Medium Term Financial Strategy, and EFS numbers would be updated as part of this process.

There was a question about pension liabilities following Local Government Reorganisation. This was yet to be confirmed.

The Committee noted that the Council had applied for grant funding to cover 90% of its SEND High Needs deficit accrued to the end of 2025-26. Members asked about the impact of Oxfordshire County Council’s debt on the new Ridgeway Council, and what contingency plans had been put in place in the event that the full 90% was not achieved. It was noted that disaggregation work was ongoing across the Oxfordshire authorities. The timeline would be shared with Members once agreed, but it would most likely extend beyond vesting day for the new local authorities in 2028.

Members asked if there was confidence that the Council’s SEND Reform Plan would be accepted by central government. It was explained that there had been a two-stage process, with interim and final submissions. The Council had complied with all requested changes, and initial feedback had been positive, so it was hoped that the grant would be paid as expected.

There was a question about reducing reliance on EFS and returning to a more sustainable borrowing position. It was explained that planned social care expenditure for 2026/27 totalled £134M, which accounted for most of the income from Council Tax and retained Business Rates (£147M). The Council was doing its best to reduce costs, but many social care costs were outside of its control. It was noted that local government funding formula prioritised areas of social deprivation - WBC was only allowed to retain 13% of the business rates it collected.

The Committee queried the provision for short-term debtors. Officers indicated that there were no concerns. Monthly reconciliations were produced as part of which debts and trends were reviewed. Variations occurred due to the timing of Easter and whether the last working day of the year fell on a weekday or at a weekend. Auditors had not identified any concerns in this respect. The £3.5M provision within the Collection Fund allowed for cost of living challenges.

Members suggested that given the provisional status of the EFS and SEND deficit grant, these significant uncertainties should be mentioned in the conclusion of the Going Concern Assessment. Officers indicated that there was reference to EFS throughout the document and the balance sheet was not significantly different to the previous year when a Going Concern Assessment had been signed off. It was highlighted that there were 35 Councils in receipt of EFS, and central government had indicated that they would be the ‘bank of last resort’. Local authorities had been allowed to capitalise excess revenue expenditure and pay this back through interest on EFS. WBC was making representations to central government expressing concerns about the inclusion of Minimum Revenue Position (MRP) within EFS, which added 8% to the revenue account. If the government reversed its decision to fund 90% of SEND deficits, then it was suggested that most local authorities would go bust. This was considered highly unlikely. As such, loss of EFS and SEND deficit payments were considered high impact, but very low probability risks.

KPMG explained that auditors of local authorities were required to consider ‘continuity of service provision’. So long as there was a body providing local authority services in West Berkshire, then that entity was a going concern. This was set out in Practice Note 10. In order for a local authority not to be considered a local concern, central government would have to announce that they were getting rid of the body and that no services would be provided in the affected local area.

Members asked about business rates retention in South Oxfordshire and Vale of White Horse Councils. It was highlighted that Oxfordshire County Council collected business rates as the upper tier local authority. It was not clear what proportion were attributable to each district.

Concerns were expressed about the morality of using the balance surpluses of South Oxfordshire and Vale of White Horse to solve the financial issues faced by West Berkshire Council. Officers indicated that the initial focus of Local Government Reorganisation was on two-tier areas and small unitary authorities in financial distress, in recognition of the challenges they were facing. This was a sector issue rather than something particular to West Berkshire. The government’s decision would result in the creation of three new councils, with the assets and liabilities of the existing authorities shared across the new bodies. It was noted that a similar process had taken place when Berkshire County Council was replaced in 1998.

RESOLVED to note the report.