Agenda item

Purpose: To consolidate the investments and borrowing strategy for the year ahead by detailing how and where the Council will invest and borrow in the forthcoming year, within a particular framework. This strategy is monitored throughout the year, with a mid-year report going to the Governance Committee as well as an annual report being presented to Members.

Before moving to the main agenda items, the Chairman acknowledged the passing of Melanie Ellis (Acting Head of Finance, Deputy S151 Officer). She expressed her condolences to Melanie’s colleagues and noted that Melanie would have contributed significantly to the development of the Budget.

Councillor Iain Cottingham (Executive Portfolio Holder: Finance and Resources) introduced the Investment and Borrowing Strategy for the financial year 2025-2026 (Agenda Item 6).

The following points were raised in the debate:

·       It was confirmed that the terms of the emergency financial support loan from the government were not yet known, so costs could not be included in the report. The Council would seek to repay the loan as quickly as possible through capital receipts from the sale of its commercial property portfolio.

·       Concern was expressed about the rapid increase in the High Needs Block deficit. That this was due to rising demand from children entering the school system. Relevant factors were the increasing complexity of needs and the impact of COVID-19 on children's readiness for school. Similar increases in demand and cost were being seen nationally. It was stressed that the Council had a statutory obligation to support children with Education, Health and Care Plans (EHCPs) and could not turn them away. If the Council did not make provision for the increase in High Needs Block spend, then it could be open to legal challenge. It was noted that where the Council did challenge awards and the matter went to court, the court often found in favour of the child.

·       Members asked why the High Needs Block deficit was reducing working capital and increasing the overall borrowing requirement. It was explained that although education could not be funded through revenue, the Council had to borrow to fund the increased cost of demand and £1.3M per annum was needed to service interest payments.

·       Members asked about the Council's collaboration with health partners to address preventable special needs (e.g., speech problems). It was confirmed that no issues had been raised with the Executive regarding this.

·       It was noted that although the Council had committed to a local best practice rule whereby annual capital financing costs should not exceed 10% of the net revenue, this figure was projected to reach 11.11% by the end of the Medium Term Financial Strategy (MTFS). It was explained that inclusion of the High Needs Block deficit would cause the Council to exceed its target. It was acknowledged that the report required a correction to say that the Council would not be compliant with the best practice rule. The report to Council would contain the correct wording.

·       Scepticism was expressed about the High Needs Block figures. It was highlighted that some other local authorities had not experienced similar increases. The importance of early intervention was emphasised. It was suggested that the Council should look again at the numbers and explore ways to control costs, including the providing in-house facilities, rather than relying on the market, where costs could be up to six times higher. It was explained that discussions had taken place with the other Berkshire local authorities about creating their own children's homes. Councils had previously de-risked due to safeguarding concerns, but it was recognised that too much reliance had been placed on the private sector, and there was evidence of profiteering.

·       Members recalled that a recommendation from the recent Peer Challenge had been for the Council to look at thresholds for the provision of special needs services, and asked if this had been done. It was suggested that this could be covered as part of the next High Needs Block review.

·       Members asked about contingency plans to avoid breaching the Capital Financing Requirement (CFR) in 2027/28. It was explained that the forecast breach was related to the Dedicated Schools Grant override. It was hoped that the government would resolve the issue, possibly through a write-off.

·       There was a question about the Council's investment risk profile and liquidity position. It was explained that the return from the commercial property portfolio would diminish due to disposals. The Council also had around £10M on deposit and interest rates were predicted to fall over time. Although investment from income was predicted to fall over time, borrowing cost would also fall.

·       Members asked if the Executive were confident about being able to sell its commercial properties and secure a good deal. It was explained that the Council had appointed new commercial property advisors who had suggested a detailed disposal strategy. They were confident that a fair price could be secured, but this would be subject to the market. Although the Council needed a capital receipt this financial year, they had options to achieve this. It was confirmed that the Council did not currently have a sinking fund for maintenance of its commercial assets.

·       A question was asked around the use of artificial intelligence (AI). It was explained that the Council was involved in three AI projects as part of the Transformation Programme, which were delivering significant time savings:

o   Magic Notes and Copilot were being used to write up meeting notes for Adult Social Care meetings. (It was stressed that Generative AI was not being used, and AI was not making decisions on care packages.)

o   Minute AI was being used to help generate minutes of public meetings.

o   AI was also being used to monitor local roads for gritting purposes.

RESOLVED to note the report.