Decision details

That Cabinet note a forecast revenue budget underspend at update 3 of £1,146,000, representing a variance of 0.5% of total budget. This is a significant improvement of £1,117,000 from the forecast underspend of £29,000 that was reported at the second financial update.

That the improved forecast is primarily driven by changes in Social Care where the ability to maximise the impact of grant funding to meet core expenditure has benefited the forecast by around £600,000, alongside improvements in debt financing budgets of around £500,000.

That Cabinet note that £800,000 of any confirmed underspend that is realised at year-end will be required to maintain the Council fund reserve at a level of 5% of the proposed net revenue budget for 2026/27.

The Cabinet notes the projected increase of £3,426,000 in the cumulative schools’ reserves deficit, a deterioration of £456,000 compared to the previous forecast. School balances are expected to close the financial year at a deficit of £7,517,000, with nineteen of thirty-five schools anticipated to have a deficit balance. Further detail of individual schools’ movements is shown in Appendix 4.

That Cabinet note that 75% of the forecast deficit relates to three schools - King Henry VIII 3-19 School, Chepstow Comprehensive School and the Pupil Referral Service, with all three of these schools being a focus of support and challenge from the Local Authority to ensure budgets return to a surplus within the agreed recovery plan timeframe.

The Cabinet note the forecast Capital budget expenditure for the year of £50.8 million, alongside projected slippage of schemes into 2026/27 of £21.0 million. No significant variances are anticipated at the current time with minor underspends of £35,000 reported across a small number of grant funded schemes. Additionally, the Council’s capital contingency budget of £1.3m has not been required and will be released with the funding utilised as part of the 2026/27 budget proposals.

The Cabinet approve the capital budget revisions outlined in Appendix 5 that have resulted from the receipt of new, or variation of existing grants and external contributions that weren’t included in the original capital budget approved at the start of the year. Under the Council’s financial procedures, any changes to the capital budget that are fully funded by grants or external contributions must be approved by Cabinet.

That Cabinet note that as we move towards the remaining weeks of the financial year, many of the risks highlighted in previous updates begin to fall away. There remain a small number of specific budgetary risks that do still have the ability to further impact upon the revenue budget during 2025/26:

·        Inflation increased by 3.4% in the year to December 2025, exceeding government targets and budget projections, which will impact costs for the remainder of the financial year.

·        Debt recovery rates are declining, especially in Council Tax and Social Care.

·        The number of Council tax discounts and exemptions continue to rise which impacts overall collection values.

·        The growing cumulative schools’ reserves deficit weakens the Council’s financial resilience.