Welcome to this latest version of Wealden’s General Fund Medium Term Financial Strategy covering the period 2023-2028.

Wealden District Council (“The Council”, “Wealden”, “we”, “our”) is continuing to operate in an environment of uncertainty due increasing higher inflation, higher interest rates, uncertain government policy, and a deteriorating economic outlook. As a result financial planning is becoming increasingly complex, requiring multiple variables to be balanced in an environment of increasing uncertainty. Having a thorough understanding of the financial outlook and the associated impact on the organisation’s ability to achieve its strategic objectives is an essential starting position for future planning and ensuring sustainability. Resources are becoming scarcer, which coupled with increasing pressures and demands on services, makes it more challenging to ensure that resources are effectively targeted.

This Medium Term Financial Strategy (“MTFS”) sets out how the Council will use its financial resources to underpin the strategic priorities within the Corporate Plan, and builds on its track record of:

• Managing growth to meet future needs;
• Protecting and enhancing Wealden’s unique rural character and environment;
• Supporting our local economy and local businesses;
• Generating sustainable sources of income to invest in local priorities; and
• Helping to improve connectivity and access to services for all our communities.

It is the Council’s commitment to use the financial resources it employs over the coming years to make a positive difference to the area and its residents, and achieve value for money.

Since 2010 the Council, alongside the majority of other local authorities, has experienced unprecedented financial uncertainties in various forms and has had to adapt to:

• The impact of Central Government funding reductions;
• The Coronavirus (‘’Covid-19’’) pandemic which has reshaped the Council’s services and changed the way Wealden’s residents live, work and socialise;
• The local impacts of the economic crisis affecting jobs, housing and business growth, which has in turn created pressure on the generation of local income streams and incurring additional costs;
• The local impacts of the economic crisis creating a rising demand, and increased cost pressures, for council services from customers who rely on the safety net provided by local government; and
• The impact of the vote to leave the EU and the consequent impact on the economic and political landscapes.

During this same period, the basis on which local government is funded has undergone radical reform, heralding a new era where local government is funded from local taxes with limited reliance on Central Government. This new methodology for funding local government is inextricably linked to the performance of the local economy via business rates, council tax and local council tax reduction schemes, and Housing Revenue Account Self-Financing.

Each change to the funding brings new elements of uncertainty and volatility. However, it does present opportunities for local authorities with the freedom from and removal of reliance on Central Government and a key stake in the financial prosperity of its local economy.

The 2023-24 local government finance settlement is for one year only. This followed a policy statement published on 12 December 2022, covering 2023-24 and 2024-25, which are the remaining years of the Spending Review 2021 period.  This in turn was hard on the heels of the Autumn Statement 2022 on 17 November 2022, which set the overall level of available resources. Detailed numbers are only available however for 2023-24 and there remain significant uncertainties for 2024/25, particularly for district councils like Wealden. 

In response to this environment the Council has delivered a track record of strong financial discipline. Planning ahead, undertaking a transformation programme which secures savings in advance, re-investing in more efficient ways of working, adopting a more commercial approach, whilst making careful use of reserves to meet funding gaps and mitigate risks, is an approach that has served the Council well.

The Council’s successful financial management to date has enabled the protection of core services for the people of Wealden while at the same time allowing the redirection of resources to the priority areas in the Corporate Plan, and the MTFS 2023-24 to 2027-28 builds on this approach. This MTFS will be kept under constant review and will need to adapt in response to new risks and opportunities during this unprecedented period of uncertainty and change.

Laurence Woolven

Head of Financial Services (S151 Officer)

Background

The purpose of this MTFS is to set out the overall framework on which the Council draws together the strategic planning priorities, demand and resource forecasts and impact of the wider service delivery environment to produce a costed plan for the impact of proposed policies and plans on the longer-term financial sustainability of the Council. The MTFS pulls together in one place all known factors affecting the Council’s financial position and financial sustainability over the medium term (i.e. over a five-year period).

In order to achieve its priorities the Council has a clear and robust financial strategy, which focuses on its long-term financial sustainability. The MTFS does this by balancing the financial implications of objectives and policies against constraints in resources and provides the basis for decisions to be made about its finances.

The MTFS integrates revenue allocations, savings targets, reserves and capital investment, and provides a budget for 2023-24 upon which the 2023-24 Council Tax level (General Fund) and rent levels (Housing Revenue Account(‘’HRA’’)) are determined, and sets out the forecasts for the period 2024-25 to 2027-28.

Whilst the purpose of this MTFS is to provide a costed plan over the period 2023-24 to 2027-28, it must be recognised that this plan becomes more uncertain the further out in time the forecast moves. However, uncertainty is more of a reason to produce a MTFS as the identification of potential longer-term revenues and expenses and the key risks associated with those forecasts and income and expense streams provide valuable insight for the Council and aids decision-making.

The MTFS is a living document that forms the basis of the Council’s fiscal strategy. Inevitably the Council’s plans will need to evolve and develop in response to new financial opportunities and risks and new policy directions during the period of the Strategy and the dynamic nature of local government funding. Therefore, the Strategy will be reviewed on a regular basis and at least annually.

The MTFS is underpinned by a sound finance system, coupled with a solid internal control framework, sufficiently flexible to allow the Council to respond to changing demands over time and opportunities that arise.

Objectives

This MTFS seeks to achieve a number of specific objectives:

• Ensure the Council’s limited resources are directed to achieving the vision and strategic priorities within the Council’s Corporate Plan and HRA Business Plan;
• Ensure the Council maintains a sound and sustainable financial base, delivering a balanced budget over the life of the MTFS;
• Provide a range of good quality services that people expect, and offer excellent value for money;
• Deliver key projects that enhance quality of life and wellbeing across Wealden, thoughtfully generating reasonable income streams in line with our Commercial Strategy to achieve a financially stable and self-sufficient council;
• Maintain our measured, professional approach to managing the Council’s finance and investments, and continue to develop our enterprise culture for the benefit of the District as a whole;
• Deliver more by working with partners, continue to extend our use of technology, minimise transaction costs and sustain customer satisfaction;
• Growing the Council Tax and Business Rates tax base, whilst ensuring that Council Tax rate increases are kept an acceptable level;
• Ensure the Council maintains robust, but not excessive, levels of reserve and balances to address any future risks and unforeseen events without jeopardising key services and the delivery of outcomes; and
• Continue to manage down the Council’s recurrent cost base, in line with reductions in overall resources by ensuring the provision of efficient, effective and economic services which demonstrate value for money.

In order to set the framework for the Council’s approach to policy and financial planning it is important to understand the potential impact of economic conditions and overall national policy context, as well as the policy and delivery priorities for the Council over the MTFS period.

Local Priorities

This MTFS is central to identifying the Council’s capacity to deliver its local priority outcomes and it reflects:

• The Council’s current financial position and outlook.
• The Council’s overall financial strategy, including use of reserves.
• Internal and external pressures which may influence the council’s financial position.

The following sub-sections set out the local context and priorities, that we have had regard to in producing a costed plan over the period 2023-24 to 2027-28.

Wealden as a Place

Wealden is the largest local government district in East Sussex covering 323 square miles and has a population of 160,100[1]. Half the population live in five main towns: Crowborough, Hailsham, Heathfield, Polegate and Uckfield. The rest live in villages and hamlets in some of the most attractive countryside in the South of England.

With two-thirds of the district covered by the High Weald Area of Outstanding Natural Beauty and the South Downs National Park, as well as 41 conservation areas (33 of which are administered by the Council) and 2,241 listed buildings, Wealden has to place a high value on protecting the environment.

Wealden has 8,585 businesses, with small and micro businesses forming a fundamental part of the Wealden economy. 92% of Wealden’s businesses employ fewer than 10 people[2].

The largest proportion of business enterprise in the District are the Professional, Administration & support services and Construction, both at 17%[3].

The most common age group within Wealden is those aged 50-64 years old (22%). Just under a quarter (23%) of the population is traditional retirement age or above (65+).

Three quarters (78%) of Wealden residents own their home; more (44%) own it outright than do through a mortgage (34%).

90% of Wealden residents are happy with where they live, and 76% happy with the way the Council is run – nationally the figures are 79% and 61% respectively.

Financially Stable and Self-sufficient Council

To avoid cuts to services, the Council continues to explore alternative options of service delivery to ensure that services remain fit for purpose in the context of smaller budgets. This may mean revisiting the expectations of residents in order to protect services for the most vulnerable. It is also an opportunity to work with partners and neighbouring authorities to maintain and improve outcomes against a backdrop of reducing public spending.

A key component of the Council being financially stable and self-sufficient, is the Council’s Commercial Strategy, which provides a framework for activities that:

• Form an essential part of the solution to the funding gap, which has arisen due to public sector budget cuts, a restructuring of how local authorities are funded and increasing demographic pressures;
• Potentially lead to the generation of disposable income, to provide additional resource to meet the Council’s ambitions and statutory duties for Wealden as set out in other strategies and plans; and
• Deliver functions, services and outputs that bring benefits to local people and in doing so helps meet Corporate Plan objectives.

Partners and the Community

The Council continues to work with those partners, as well as service users and our communities, to protect and deliver services in new ways:

• Parish and Town Councils – have been proactive in identifying services important to their local communities and working with the District Council and other bodies on local priorities. For example, Mayfield and Five Ashes Parish Council has agreed to commit funding towards a proposed community facility in conjunction with a new doctors’ surgery to be built with funding by Wealden District Council;
• Wealden Strategic Partnership – is a non-statutory, multi-agency body, which matches Wealden District Council boundaries, and brings together the different parts of the public, private, community & voluntary, and special interest sectors to work to help improve the life of the residents of Wealden;
• Safer Wealden Partnership – brings together a number of agencies from the public, private, education and voluntary sector to improve people’s lives in the area by working together to reduce the levels of crime and anti-social behaviour and to manage the fear of crime;
• East Sussex Strategic Partnership – brings together different parts of our local community – public services, local businesses, community groups, voluntary sector organisations and local people. The Partnership helps organisations and individuals work together in a co-ordinated way to plan local services, tackle the issues that matter to local people and improve quality of life in East Sussex; and
• Sussex Weald Homes Limited – An initiative to contribute towards the self-financing objective was the Council setting up Sussex Weald Homes Limited in December 2017, a 100% owned subsidiary to build properties that will be rented or sold to the Council and privately, and acquisition of commercial properties.

Corporate Plan

The Council’s Corporate Plan sets out our long-term vision for the district, our aim as an organisation, our strategic priorities and the long-term outcomes that we want to achieve. The Council’s strategic priorities are overarching in their application to prioritising spend. The strategic priorities are:

• Engaged Communities
• Sustainable Environment
• Thriving Economy

These priorities are underpinned by the Council being an ‘Ambitious Council’ through being transparent, accountable, dynamic and forward thinking.

National Priorities

The following sub-sections set out the national priorities, that we have had regard to in producing a costed plan over the period 2023-24 to 2027-28.

Covid-19 Pandemic

The Coronavirus (‘’Covid-19’’) pandemic has had a significant impact through reshaping Council’s services and changing the way Wealden’s residents live, work and socialise. The pace and scale of the support that the Council, with our local partners and communities, have mobilised to help those in need and minimise the spread of infection has been a Herculean effort. Through its business continuity planning, the Council has long prepared for eventualities such as this and worked to maximise its resilience and the ability to continue delivering the key services it provides to Wealden residents and businesses.

The continuing priority for Central Government is providing businesses and individuals with financial support during the Covid-19 pandemic (and administered by Council’s), and protecting vulnerable people. In the Autumn Statement 2022 the Chancellor of the Exchequer announced that support for eligible retail, hospitality and leisure businesses would be extended and increased from 50% to 75% business rates relief to £110,000 per business in 2023-24. There will also be additional support for small businesses which means that small businesses that are losing some or all eligibility for relief will see a bill increase of no more than £50 per month in 2023-24.

The significant levels of public sector debt as a result of Central Government spending to support the economy during the Covid-19 pandemic, as well as lower tax receipts, will need to be repaid and could lead to significant reductions in grant funding over the medium term. However, the successful vaccine rollout has allowed the economy to reopen largely on schedule despite continuing high numbers of coronavirus cases, and the stronger economic recovery has also helped to reduce the fiscal cost of pandemic-related support.

Autumn Statement 2022

The Chancellor of the Exchequer presented the Autumn Statement in 17 November 2022 alongside the Office for Budget Responsibility’s (‘’OBR’s’’) new set of Economic and Fiscal Outlook forecasts. The Autumn Statement responds to the OBR forecasts and sets out the medium-term path for

public finances. This follows the previous Chancellor’s Growth Plan announcements in late September 2022, the majority of which have since been rolled back.

The Autumn Statement included announcements on the following policies and programmes relating to the cost of living, pensions and benefits:

• From April 2023, the government will adjust the Energy Price Guarantee (‘’EPG’’), which places a limit on the price households pay per unit of gas and electricity. This means that a typical household in Great Britain will pay £3,000 per annum (up from the current £2,500 per annum) from April 2023 to April 2024, saving £14 billion of government spending.
• The government will provide households on means-tested benefits with an additional £900 Cost of Living payment in 2023/24. Pensioner households will receive an additional £300 Cost of Living payment, and individuals on disability benefits will receive an additional £150 Disability Cost of Living payment in 2023/24. These payments will be made on a UK-wide basis.
• The government is increasing benefits in line with inflation, measured by September CPI, which is 10.1% this year. This includes increasing the State Pension by inflation, in line with the commitment to the Triple Lock. The standard minimum income guarantee in Pension Credit will also increase in line with inflation from April 2023 (rather than in line with average earnings growth).
• The benefit cap will be raised by 10.1%, in line with September CPI, so that more households will see their payments increase as a result of uprating from April 2023. The cap will be raised from £20,000 to £22,020 for families nationally and from £23,000 to £25,323 in Greater London. For single adults, it will be raised from £13,400 to £14,753 nationally and from £15,410 to £16,967 in Greater London.

The following announcements in the Autumn Statement have a direct impact on local government:

• Social Care – The government has delayed the national rollout of social care charging reforms from October 2023 to October 2025. Funding for implementation will be maintained within local government to enable local authorities to address current adult social care pressures.
• Council tax – The government will provide local authorities in England with additional flexibility in setting council tax, by increasing the referendum limit for increases in council tax to 2.99% per year from April 2023. In addition, local authorities with social care responsibilities will be able to increase the adult social care precept by up to 1.99% per year. The previous policy, set at the 2021 Spending Review, was for a general limit of 2%, with an extra 1% for adult social care.
• Business Rates – From 1 April 2023, business rates bills in England will be updated to reflect changes in property values since the last revaluation in 2017. A package of targeted support worth £13.6 billion over the next five years is intended to support businesses as they transition to their new bills. It is stated that local authorities will be fully compensated for the loss of income as a result of these business rates measures and will receive new burdens funding for administrative and IT costs. Elements of this package are as follows:
• The business rates multipliers will be frozen in 2023-24 at 49.9p and 51.2p, preventing them from increasing to 52.9p and 54.2p. This is worth £9.3 billion over the next five years.
• Upwards Transitional Relief will cap bill increases caused by changes in rateable values at the 2023 revaluation. This £1.6 billion of support will be funded by the Exchequer, rather than by limiting bill decreases, as at previous revaluations. The ‘upward caps’ will be 5%, 15% and 30%, respectively, for small, medium, and large properties in 2023/24, and will be applied before any other reliefs or supplements. The caps will increase in later years of the scheme. The Government has responded to its consultation on the transitional relief scheme.
• Retail, Hospitality and Leisure Relief – support for eligible retail, hospitality, and leisure businesses is being extended and increased from 50% to 75% business rates relief up to £110,000 per business in 2023/24. Around 230,000 RHL properties will be eligible to receive this increased support worth £2.1 billion.
• Bill increases for the smallest businesses losing eligibility or seeing reductions in Small Business Rate Relief (SBRR) or Rural Rate Relief (RRR) will be capped at £600 per year from 1 April 2023. This is support worth over £500 million over the next three years and is intended to protect over 80,000 small businesses, who are losing some or all eligibility for relief. This is intended to ensure that no small business losing eligibility for SBRR or RRR will see a bill increase of more than £50 per month in 2023/24.
• At Autumn Budget 2021, the government announced a new improvement relief to ensure ratepayers do not see an increase in their rates for 12 months as a result of making qualifying improvements to a property they occupy. This will now be introduced from April 2024. This relief will be available until 2028, at which point the government will review the measure.
• Social Housing Rent Cap – The government is limiting the increase in social housing rents. Under current rules, rents could have risen by up to 11.1% – but now they will only be able to rise by a maximum of 7% in 2023/24. This policy change applies to social housing provided by Registered Providers (including Local Authorities and Housing Associations).
• Levelling up and investment zones – The Autumn Statement confirms that the second round of the Levelling Up Fund will allocate at least £1.7 billion to priority local infrastructure projects. Successful bids are expected be announced in early part of 2023, with Wealden awaiting the decision of a £20 million bid for levelling up funding for the Hailsham Aspires Combined Medical and Leisure Hub (Phase 1).
• Local Welfare – The government’s plans to create a new housing element of Pension Credit to replace pensioner Housing Benefit are now intended to take effect in 2028/29. Eligible pensioners will continue to receive Housing Benefit. £1 billion (including Barnett impact) will be provided to enable the extension of the Household Support Fund in England over 2023/24. The Fund is administered by local authorities who will deliver support to households to help with the cost of essentials.
• National Living Wage – Following the recommendations of the independent Low Pay Commission (LPC), the government will increase the NLW for individuals aged 23 and over by 9.7% to £10.42 an hour from 1 April 2023. The government has also accepted the LPC’s recommendations for the other NMW rates to apply from April 2023, including:
• Increasing the rate for 21-22 year olds by 10.9% to £10.18 an hour
• Increasing the rate for 18-20 year olds by 9.7% to £7.49 an hour
• Increasing the rate for 16-17 year olds by 9.7% to £5.28 an hour
• Increasing the apprentice rate by 9.7% to £5.28 an hour; and
• Increasing the accommodation offset rate by 4.6% to £9.10 an hour.

Local Government Finance Settlement

Policy Commentary:

The settlement is once again a holding position, designed for stability and certainty for planning purposes and to promote financial sustainability within available resources – this time based on proposed allocations for 2023/24, and a fairly full set of policy principles for 2024/25 published on 12 December 2022, covering 2023-24 and 2024-25, which are the remaining years of the Spending Review 2021 period.

The broad approach is based on a uniform roll-over of the core elements of the settlement; additional resources for priority services; balancing service pressures with taxpayer concerns, through council tax referendum principles; and a fall-back, by way of a minimum funding guarantee, for outlying councils.  Finance reform is deferred, once again, at least until 2025/26 and possibly later, as even this could be an ambitious timetable for designing and delivering reform.  The period leading up to the General Election provides an opportunity to consider broader changes that are needed.

The 2023-24 local government finance settlement is for one year only, and there remain significant uncertainties for 2024/25, particularly for district councils like Wealden. These include the future of the New Homes Bonus scheme, which is now simply a one-year retrospective payment. There is also uncertainty around the distribution of resources from Extended Producer Responsibility for packaging and on the future position of areas with 100% business rates retention. All of these will inhibit detailed budget planning.

One of the clearest assumptions on which to base forward planning was the admission that the planned Review of Relative Needs and Resources (the ‘Fair Funding Review’) and the planned reset to business rates growth will not be implemented in the next two years.

The recent history of reform goes back quite far, in government terms.  In 2012, before the introduction of business rates retention, the Government promised a reset of accumulated business rates growth in 2020.  In 2016, they promised a review of the needs assessment formula which would be used in re-allocating the accumulated growth between councils.  In 2018, they published major consultation documents on all this, for implementation in 2020/21.  Since then, implementation has been successively delayed.  At the earliest, implementation will now be until 2025/26 or realistically, depending on the timing of the General Election and the appetite of the new government for reform, until perhaps 2026/27.

The significant reduction on central grants (i.e. Revenue Support Grant) has required the Council to focus on more local self-sufficiency through other forms of local income generation, such as:

• Council Tax rate increases, within prescribed referendum limits;
• Increases to fees and charges;
• Widening the scope of fees and charges by introducing charges for services not previously charged for;
• Increasing trading activities to generate surpluses for reinvestment, including the establishment of trading companies; and
• Look at ways of commercialising existing services and seeking opportunities to ‘sell’ goods and services externally.

Main Points – 2023-24 local government finance settlement

• Council Tax – As previously announced, the council tax referendum limit will be 2.99% for local authorities, with social care authorities allowed an additional 1.99% social care precept. The provisional settlement confirmed that districts will be allowed to apply the higher of the referendum limit or £5.
• Business Rates Retention – As previously announced, the government has changed the inflation measure used to increase the local government funding amount within the Settlement Funding Amount (SFA). CPI (September increase of 10.1%) has been used, instead of RPI (September increase of 12.6%).  The increase of 10.1% is split between the business rates system (+3.74%) and the compensation grant for under-indexing (+6.36%).   The under-indexing multiplier grant has increased (by £930m), in order that local authorities do not lose what would have been the increase to the multiplier.  
• Revenue Support Grant – For those authorities still receiving RSG, this has been increased by 10.1%, in line with what would have been the increase to the multiplier; there have also been existing grants worth £78m rolled into the RSG amounts.
• Top Up/Tariff Adjustments (Negative RSG) – As in previous years, the government has decided to eliminate the negative RSG amounts.
• Local Government Funding Reform – As per the previously published Policy Statement, the Review of Relative Needs and Resources (‘Fair Funding Review’) and a reset of Business Rates growth will not be implemented in the next two years.
• Reduced: Services Grant (Previously the 2022/23 Services Grant) – This grant has been reduced from £822m to £464m. This reduction is due to the cancellation of the increase in National Insurance Contributions and to move funding to the Supporting Families programme.  The methodology for the grant remains unchanged.
• Reduced: New Homes Bonus – The 2023/24 allocations have been announced at £291m; a reduction of £265m on 2022/23. There have been no changes to the design of the scheme for 2023/24, with a single year’s new allocation.  The large reduction in funding from the scheme is due to all prior years’ legacy payments having now been paid.   
• Abolished: Lower Tier Services Grant – This grant (worth £111m in 2022/23) has been removed and replaced by the Minimum Funding Guarantee of 3% for 2023/24.
• New: Funding Guarantee – This £136m grant replaces the Lower Tier Services Grant. This grant is intended to provide a funding floor for all local authorities, so that no local authority would see an increase in Core Spending Power that is lower than 3% (before assumptions on council tax rate increases, but includes those on Council Tax base).  
• No Change: Rural Services Delivery Grant – There has been no change to this grant in either the national allocation (£85m) or the distribution methodology. Therefore, 2023/24 amounts will be the same as 2022/23.
• Business Rates Pooling – The option for Pooling will continue for 2023/24. The East Sussex Business Rates Pool, which Wealden is member have confirmed to Government it will continue. Given the business rates reset is not planned until 2025/26, it is assumed that there will be a further opportunity to pool in 2024/25 also.

Business Rates Revaluation 1 April 2023

Business rates revaluation is due to take effect from 1 April 2023, changing business rates income retained locally. It is government policy that retained business rates income from the BRR system should, as far as practicable, be unaffected by either Business Rates Revaluations or the announced movement of ratepayers from local lists to the central rating list at the 2023 revaluation. This will be achieved through there are changes to authorities’ NNDR Baselines (and therefore Top Up/Tariff amounts).

Extended Producer Responsibility for packaging

The 2024/25 settlement will include a new funding stream, subject to successful delivery of the Extended Producer Responsibility for packaging (pEPR) scheme, as soon as is feasible within this financial year. Local authorities can expect to receive additional income from the scheme, whilst being asked to submit data relevant to their waste collection services.

Alongside HM Treasury and the Department for Environment, Food and Rural Affairs, the Department for Levelling Up, Housing and Communities will be assessing the impact of additional pEPR income on the relative needs and resources of individual local authorities in the coming year.

The government will review the 2024/25 position of funding for lower tier authorities, particularly given the possible interactions with the pEPR scheme.

Economic and Fiscal Climate

It is important to note up front that the next few years are particularly uncertain economically and fiscally. There are a number of questions where definitive answers cannot be provided. How high will unemployment rise, how quickly and fully will the economy recover, and what will this mean for councils’ revenues? To what extent will changes in service provision made in an effort to control the Covid-19 pandemic continue, and what will this imply for service delivery costs?

The public sector finances are increasingly coming under pressure, due to the high levels of government debt due to the economic impacts of the Covid-19 pandemic, higher energy prices as a result of the war in Ukraine which is driving higher inflation, and the Bank of England increasing interest rates to reduce inflation. The Office for Budget Responsibility’s (“OBR’s”) Economic and fiscal outlook, published on 17 November 2022 (alongside the Autumn Statement 2022) paints a challenging picture with the following forecasts/expectations:

• In the UK, CPI inflation is set to peak at a 40-year high of 11 per cent in the current quarter, and the peak would have been a further 2½ percentage points higher without the energy price guarantee (EPG) limiting a typical household’s annualised energy bill to £2,500 this winter and £3,000 next winter.
• Rising prices erode real wages and reduce living standards by 7 per cent in total over the two financial years to 2023-24 (wiping out the previous eight years’ growth), despite over £100 billion of additional government support.
• The squeeze on real incomes, rise in interest rates, and fall in house prices all weigh on consumption and investment, tipping the economy into a recession lasting just over a year from the third quarter of 2022.
• Unemployment rises by 505,000 from 3.5 per cent to peak at 4.9 per cent in the third quarter of 2024.
• The medium-term fiscal outlook has materially worsened since OBR March forecast due to a weaker economy, higher interest rates, and higher inflation (the latter largely due to global factors, so raising public spending much more than it boosts tax bases). Based on policy as it stood in March, government borrowing would have been £108 billion (3.7 per cent of GDP) in 2027-28 and underlying debt would have been rising in every year. Of the £75 billion increase in the pre-measures deficit in 2026-27 relative to March, almost two-thirds is due to higher debt interest costs from higher interest rates, with the energy-shock-driven loss of receipts and the inflation-driven rise in welfare spending the other major factors.

Against this more challenging backdrop, global and domestic risks, the main positive risk would stem from a rapid end to Russia’s invasion of Ukraine that stabilised energy markets and lowered prices. That could relatively quickly feed through to reduced inflationary pressure, smaller rises in interest rates, and a stronger economic recovery

The economic and interest forecast[4] by the Council’s Treasury Management Advisors, Arlingclose, highlights the follows:

• The Bank of England (‘’BoE’’) increased Bank Rate by 0.5% to 3.5% in December 2022. This followed a 0.75% rise in November which was the largest single rate hike since 1989 and the ninth successive rise since December 2021. The December decision was voted for by a 63 majority of the Monetary Policy Committee (‘’MPC’’), with two dissenters voting for a no-change at 3% and one for a larger rise of 0.75%.
• The November quarterly Monetary Policy Report (‘’MPR’’) forecast a prolonged but shallow recession in the UK with CPI inflation remaining elevated at over 10% in the near-term. While the projected peak of inflation is lower than in the August report, due in part to the government’s support package for household energy costs, inflation is expected remain higher for longer over the forecast horizon and the economic outlook remains weak, with unemployment projected to start rising.
• The UK economy contracted by 0.3% between July and September 2022 according to the Office for National Statistics, and the BoE forecasts Gross Domestic Product (GDP) will decline 0.75% in the second half of the calendar year due to the squeeze on household income from higher energy costs and goods prices. Growth is then expected to continue to fall throughout 2023 and the first half of 2024.
• CPI inflation is expected to have peaked at around 11% in the last calendar quarter of 2022 and then fall sharply to 1.4%, below the 2% target, in two years’ time and to 0% in three years’ time if Bank Rate follows the path implied by financial markets at the time of the November MPR (a peak of 5.25%). However, the BoE stated it considered this path to be too high, suggesting that the peak in interest rates will be lower, reducing the risk of inflation falling too far below target. Market rates have fallen since the time of the November MPR.
• The labour market remains tight for now, with the most recent statistics showing the unemployment rate was 3.7%. Earnings were up strongly in nominal terms by 6.1% for both total pay and for regular pay but factoring in inflation means real pay for both measures was -2.7%. Looking forward, the November MPR shows the labour market weakening in response to the deteriorating outlook for growth, leading to the unemployment rate rising to around 6.5% in 2025.
• Interest rates have also been rising sharply in the US, with the Federal Reserve increasing the range on its key interest rate by 0.5% in December 2022 to 4.25% – 4.5%. This rise follows four successive 0.75% rises in a pace of tightening that has seen rates increase from 0.25% – 0.50% in March 2022. Annual inflation has been slowing in the US but remains above 7%. GDP grew at an annualised rate of 3.2% (revised up from 2.9%) between July and September 2022, but with official interest rates expected to rise even further in the coming months, a recession in the region is widely expected at some point during 2023.

Inflation rose consistently in the Euro Zone since the start of the year, hitting a peak annual rate of 10.6% in October 2022, before declining to 10.1% in November. Economic growth has been weakening with an upwardly revised expansion of 0.3% (from 0.2%) in the three months to September 2022. As with the UK and US, the European Central Bank has been on an interest rate tightening cycle, pushing up its three key interest rates by 0.50% in December, following two consecutive 0.75% rises, taking its main refinancing rate to 2.5% and deposit facility rate to 2.0%.

[1]  2021 Census

[2]  ONS/Inter Departmental Business Register (IDBR) 2022

[3]  ONS/Inter Departmental Business Register (IDBR) 2019

[4]   Source: Economic and Interest Rate Forecast, January 2023, Arlingclose

Spending Plans

This MTFS is central to identifying the Council’s financial capacity to deliver its vision and strategic priorities within the Corporate Plan, and requires a balance to be struck between the need to support the delivery of the vision with the need to maintain a sustainable financial position. Striking the correct balance between these two requirements becomes ever more difficult in the challenging financial context in which the Council operates. This is compounded by the impact of the cost of living crisis, high inflation and borrowing costs, and the localised business rates funding which is subject to uncertainty and volatility.

The Council’s Corporate Plan is supported by a programme of work containing a range of projects that will meet each of the strategic themes. In the absence of any new Government funding, general cost pressures, and savings underpinning the MTFS, the resources to finance these projects have been made possible by allowing the redirection of resources to the priority areas as well as seeking external financial support in the form of grants and contributions.

It should be noted that the full financial implications of a number of major projects have not been reflected in the costed General Fund Revenue Summary and Capital Programme 2023-24 to 2027-28, because these projects are still being developed These projects are:

• Hailsham Aspires Combined Medical and Leisure Hub (Phase 1);
• Crowborough Leisure Centre;
• Wealden Community Sports Hub; and
• Knights Farm West Employment Park.

At the point when a full business case has been assessed and finalised to demonstrate that the capital investment is affordable and sustainable, the full revenue and capital implications will be built into future iterations of the MTFS.

Climate Change

As the Council has declared a Climate Emergency, there will be costs associated with addressing this, where these are known they are built into the MTFS.

It is anticipated that there will be further impact on the General Fund and therefore the Council has set aside earmarked reserves to finance climate change initiatives, which demonstrates the Council’s commitment to reducing the impact of climate change.  Thus reserve has been used to allocated funding for solar PV on the roof of the Wealden Crematorium, Electric Vehicle Charging in Council owned and managed car parks and to provide Electric Vehicle charging for new Council electric fleet vehicles.

The UK Environment Bill 2021 received royal assent on 9 November 2021. This Bill covers a wide range of changes including expanding the responsibility for recyclable waste. This could have a significant impact on the Council’s General Fund Revenue and Capital Programme. However, the detail of the Bill and how this affects local authorities is not know at this time to say what this impact would be. Once the detail is known the financial implications will need to be assessed and appropriate funding identified.

The 2024/25 finance settlement will include a new funding stream, subject to successful delivery of the Extended Producer Responsibility for packaging (pEPR) scheme, as soon as is feasible within this financial year. Wealden can expect to receive additional income from the scheme, whilst being asked to submit data relevant to their waste collection services. However, it is unclear at this time if this income will fully cover the costs of the scheme.

Spending Pressures

A review of the financial pressures facing the Council over the period of the MTFS has been undertaken. This information has been drawn from a Star Chamber budget challenge process involving members of the Council’s corporate management team, heads of service and budget holders. This challenge process had regard to the experience of previous years, the current economic climate and local and national issues that are likely to influence the financial outcomes.

Inflation – Pay and Prices

The General Fund MTFS includes a pay award for officers of 3% for 2023/24, and 2% pay award in 2024-25 to 2027-28, plus an estimate of staff increments. The impact of the pay review has been built into the MTFS.

Automatic inflationary increases of budgets are not provided for all goods and services, instead individual inflation rates have been applied for specific items of expenditure (i.e. contracts), all remaining areas of expenditure are maintained at the previous year’s levels, which is in effect a real terms reduction in spending power.

Revenue implications of the General Fund Capital Programme 

In section 4. ‘General Fund Capital Programme’, the full expenditure for major projects (where known) i.e. Farningham Road and Mayfield Community Hall and Health Centre, and the loan to Sussex Weald Homes Ltd, has been built into general fund capital programme. This has the following implications for the General Fund – revenue.

• Interest Payable on External Loans

New capital expenditure totalling £2.150 million [plus previous expenditure of £18 million] is anticipated to be funded from borrowing and the interest payable associated with this additional borrowing has been built into the MTFS.

• Minimum Revenue Provision (“MRP”)

As detailed in the Council’s Capital Strategy, the method of charging MRP[1] will reflect the repayment profile of how the benefits of assets financed by borrowing are consumed over their useful life. MRP however, is only charged once an asset becomes operational, and for the Council’s major projects this is expected to be towards the end of the MTFS period or beyond.

• Capital Expenditure Charged to Revenue

Increases in the amount of revenue being used to fund the capital programme are partly negated on the General Fund through the contribution from CIL and earmarked reserves i.e. Capital Investment Fund.

Resources

Business Rates

The MTFS has assumed that Wealden will continue being part of the existing East Sussex Business Rates Pool based on a 50% rate retention, over the period 2023-24 and 2024-25, the agreement to pool is one that is reviewed on an annual basis.

At budget setting in February 2022, business rates for 2023-24 and 2024-25 were estimated to be £3.1 million and 3.3 million respectively. This has improved significantly since then to an estimated £6.4 million [excluding pool gain] for 2023-24 and £6.5 million [excluding pool gain] for 2024-25. This increase is due to the anticipated reset of business rates from 2025-26 as opposed to 2023-24 (delayed from 2020-21).  This delay is consistent with announcements by DLUHC and was confirmed in the 2023-24 finance settlement. As part of the reset, the Council will lose any growth it has built up since the last baseline reset in 2013-14. In effect, the Council has benefitted from keeping its growth since 2013, and this reset redistributes the growth. This is a result of how the current redistribution system was designed and implemented in 2013.

Business rates revaluation is due to take effect from 1 April 2023, changing business rates income retained locally. It is government policy that retained business rates income from the BRR system should, as far as practicable, be unaffected by either Business Rates Revaluations or the announced movement of ratepayers from local lists to the central rating list at the 2023 revaluation. The MTFS has therefore assumed there will be no financial impact of the 1 April 2023 business rate revaluation.

The MTFS currently reflects our predicted worst case scenario, as there a number of unknowns that may occur including:

• The reset being delayed further (post 2025-26);
• The government giving some form of transitional relief to those who lose out and also the impact of the fair funding review;
• Any impact this may have on the reform of the business rates system; and
• Whether service grant and minimum funding guarantee grant will continue and at what levels.

The estimates will be reviewed throughout the remainder of this year and through next year ahead of setting the budget for 2024-25.

As part of the measures put in place to help councils during the Covid-19 pandemic the Government announced additional legislation in early November, the Local Authorities (Collection Fund: Surplus and Deficit) (Coronavirus) (England) Regulations 2020, which allows councils to spread the estimated 2021-22 collection fund surplus/deficit equally across the next three years. The business rates estimate within the MTFS takes this into account.

Council Tax

The Council’s main income stream is from Council Tax. The 2023/24 finance settlement confirmed that districts [such as Wealden] will be allowed to apply the higher of the referendum limit of 2.99% or £5.

In light of the financial position of the Council and mindful of the potential referendum thresholds the MTFS assumes the following indicative council tax increases and subsequent overall yields:

The 2023-24 tax base estimate has been calculated in accordance with legislation in December 2022.

Actual council tax increases will be decided on an annual basis taking into account financial circumstances of the Council at the time and the level of resources available. Annual increases remain subject to the decision of both Cabinet and Council.

Revenue Support Grant (“RSG”)

The core grant funding from Government is known as RSG. This MTFS assumes RSG in line with 2023-24 finance settlement [£0.150 million] and forecasts for 2024-25 to 2027-28 [£0.159 million pa].

Central and Specific Grants

Over recent years the number of grants received by the Council from Government has been very limited. Within the revenue budget we receive a small amount of Rural Services Delivery Grant. As part of the 2023/24 final finance settlement, the Council received the following grants, with forecast included for 2024-25 to 2027-28:

The 2023-24 and 2024/25 amounts in the table above a reasonably certain given the 2023-24 finance settlement and the policy statement published on 12 December 2022, covering 2023/24 and 2024/25. However, it is uncertain this level of funding will be maintained in following years. As set out in the National Priorities section above, there are a number of Government reviews that will change how central grants are distributed between councils i.e. reforming the NHB to reward delivery and the fair funding review which aims to provide updated formulas for assessing councils’ spending needs. When the outcome of these reviews are known the implications for Wealden and the MTFS will be determined. Therefore the forecasts in the table above for 2025-26 to 2027-28 included in the MTFS remain uncertain.

Within some services there are specific grants such as the Homelessness Grant and Housing Benefit & Council Tax Benefit Administration, which are ring-fenced grants and can only be used for clearly defined purposes.

Fees and Charges

The fees and charges levied by the Council are an important source of income. The fees and charges levied include planning fees, garden waste collection and building control.

Cabinet at the meeting held on 13 July 2022 approved a fees and charges policy that provides a consistent approach in setting, monitoring and reviewing fees and charges across the Council. It is normal practice for the Council to review fees and charges annually and propose revised and new charges from 1 April each year. This will include the development of any policies in respect of discounts and concessions. As part of the annual review, all fees and charges are considered.

The fees and charges are approved separately from this MTFS as part of the February round of budget setting for the forth-coming year. Any impact on income budgets arising from these fees and charges are reflected in the income budgets included in this MTFS.

Bridging the gap

The General Fund MTFS includes additional income/ savings targets as set out in the table below:

The Council has had a successful track record in the past of delivering additional income/savings. The Council’s approach to achieving this target will be centred on planning ahead, securing additional income and savings in advance, re-investing in more efficient ways of working and digital services, and adopting a more commercial approach whilst making careful use of reserves to meet funding gaps, and has sought to protect its core services that matter most.

General Fund Revenue Budget and Forecast

Based on the preceding financial objectives, underlying principles, national and local priorities, income/ savings targets, spending pressures and resources assumptions, Appendix 1 provides a five-year (2023-24 to 2027-28) General Fund revenue budget and estimates for the Council.

As highlighted earlier the full costings (i.e. capital financing implications, and operating costs and income) of the Council’s major projects have not been reflected in the General Fund Revenue Budget and Forecast 2023-24 to 2027-28, because some projects are still being developed. These projects are:

• Hailsham Aspires Combined Medical and Leisure Hub (Phase 1);
• Crowborough Leisure Centre;
• Wealden Community Sports Hub; and
• Knights Farm West Employment Park.

The affordability of these schemes are being assessed in the context of the MTFS and if the business cases are approved, the financial implications will be built into the MTFS.

Risks to the General Fund Revenue Budget and Forecast

The Council has adopted a corporate approach to risk management, and financial risk management is integrated into the Council’s overall management and decision-making processes.

A number of key high-level risks have been identified which could have a positive impact that could yield additional resources, but conversely some risks may have a negative impact and result in a reduction of resources. These key risks are action planned and continually reviewed as the MTFS develops.

The main areas the key risks cover are:

• Future [but diminishing] impact of the Covid-19 pandemic;
• Fluctuations in the Business Rates tax base;
• Future changes to the retained Business Rates system;
• Future levels of Central Government funding;
• Impact of current economic climate on both demand for services and income streams;
• Changes to other key external funding sources;
• Changes to other key assumptions within the MTFS; and
• Financial and budget management issues.

These risks form part of our financial risk assessment, Officers will continually monitor and appraise these risks as part of the on-going financial management.

[1] MRP is statutory requirement for a Council to make a charge to its General Fund to make provision for the repayment of the Council’s capital borrowing

The Council’s approach to determining and funding its investment programmes is set out in the Council’s Capital Strategy, which explains the Council’s financial framework for capital investment in support of its strategic priorities. The General Fund Capital Programme covers all aspects of capital expenditure within the Council, with the exception of the Council’s housing stock, and includes external capital investment that assists in achievement of the Council’s Strategic Priorities.

General Fund Capital Priorities

The Capital Programme is made up of a number of rolling programmes which include repairs, maintenance and improvement programmes to car parks, leisure centres and open spaces, as well as continuing investment in IT and Digital services, climate change initiatives and waste containers/ vehicles.

In addition to this, the programme includes a number of major projects that the Council is embarking on:

• Hailsham Aspires Combined Medical and Leisure Hub (Phase 1)*;
• Crowborough Leisure Centre*;
• Wealden Community Sports Hub*;
• Knights Farm West Employment Park*;
• Farningham Road; and
• Mayfield Community Hall and Health Centre.

* As highlighted earlier the full costings of these projects have not been reflected in the Capital Programme 2023-24 to 2027-28, because these projects are still being developed. The affordability of these schemes are being assessed in the context of the MTFS and if the business cases are approved, the financial implications will be built into the MTFS.

Indicative allowances have been included within the capital programme to support an additional £2.150 million of borrowing in excess of the allocations within the existing approved programme over the period bringing the total borrowing up to £20.15 million, and this position will be reviewed as the capital programme is developed.

Any capital investment decision will have implications for the revenue budget. The revenue costs over the lifetime of each proposed capital project are considered when the project is being developed to ensure that the impact can be incorporated within the Council’s financial plans and to demonstrate that the capital investment is affordable. Revenue implications may include the costs associated with supporting additional borrowing as well as any changes to the running costs associated with the asset or wider benefits to the Council such as the delivery of on-going revenue budget savings or additional income through the generation of business rates, lease income and council tax.

Resources

The resources necessary to fund the Council’s General Fund Capital Programme are fully identified in Appendix 2, and are summarised below.

Capital receipts

The Council holds a balance of capital receipts from the disposal of land and buildings. These can only be used to fund capital expenditure unless permission is sought from the Secretary of State to use them for a set of specific revenue purposes such as transformation purposes.

The generation of capital receipts can help to provide resources to support additional capital investment or can help to reduce the borrowing requirement and therefore the cost to the revenue budget. Capital receipts totalling £3.731 million have been included as funding over the period of the capital programme. This will leave a £nil balance of unused capital receipts, (this balance assumes £0.117 million additional sales of general fund assets). If additional capital receipts are generated over and above this balance, this would provide the Council with the flexibility to consider the introduction of additional projects to the capital programme or the ability to reduce the current estimated borrowing requirement built into the capital programme.

Grants and Contributions

The Council continues to explore external funding possibilities when developing capital projects to minimise the borrowing requirement as far as possible. Within the MTFS, assumptions have been made around the level of external funding in the future but detailed work programmes will not be committed to until the allocations have been confirmed. Projects and investment plans may therefore be re-prioritised depending on the availability of external funding.

In the capital programme we are anticipating to secure external contributions to support a number of project (i.e. Mayfield Community Hall and Health Centre), details of which can be seen in Appendix 2.

Grants incorporated in the capital programme include the Disabled Facilities Grant (“DFG”) (£5 million). The continuation of the DFG and the amount has not yet been confirmed, and there is a risk that this funding will reduce, however, even without this grant we have a legal obligation to deliver a number of adaptations to some of our residents and would therefore have to look at other sources of funding to support this.

A number of capital schemes are being funded by CIL (£9 million in total) i.e. Wealden Community Sports Hub and Crowborough Leisure Centre.

Council Resources

The Council uses revenue (referred to as ‘Capital Expenditure Charged to Revenue’) to fund some projects in the capital programme. However, the impact of this is partly negated on the General Fund through a contribution from earmarked reserves i.e. Capital Investment Fund, and income i.e. CIL.

Borrowing

The basic principle of the Prudential System is that local authorities are free to borrow so long as their capital spending plans are affordable, prudent and sustainable. The Council will need to meet the whole of the capital financing costs associated with any level of extra borrowing through its revenue account. These financing costs cover MRP and interest. The use of prudential borrowing will be as a funding mechanism for some key projects i.e. Hailsham Aspires Combined Medical and Leisure Hub (Phase 1) (following a full financial assessment), and may be used as a short-term measure to fund capital expenditure prior to a capital receipt being received i.e. for the loans to Sussex Weald Homes. The MTFS includes a prudential borrowing requirement of £20.15 million over the period 2023-24 to 2027-28.

PWLB loans are no longer available to local authorities planning to buy investment assets primarily for yield. The Council intends to avoid this activity in order to retain its access to PWLB loans.

The Council’s General Fund Capital Programme does not include capital expenditure to buy or construct capital assets primarily for income, nor does the Council have commercial investments which it would need to use instead of borrowing.

Further details about the Council’s borrowing requirements (and impact of the changes to the Prudential Code) and the Prudential Indicators can be found in the Council’s Capital Strategy and Treasury Management Strategy.

General Fund Capital Programme

The capital spending plans for the next five years include the delivery of key capital schemes identified to support the delivery of the Council’s Corporate Plan. Appendix 2 provides a five-year (2023-24 to 2027-28) General Fund Capital Programme for the Council.

Risks to the General Fund Capital Programme

The Council has adopted a corporate approach to risk management and financial risk management is integrated into the Council’s overall management and decision-making processes.

A number of key high-level risks have been identified which could have a positive impact but conversely some risks may have a negative impact and result in a reduction of resources. These key risks are action planned and continually reviewed as the MTFS develops. The main areas they cover are:

• Loss of anticipated external resources;
• Increased project costs as a result of inflationary pressures;
• Raising borrowing interest rates; and
• Unplanned emergency maintenance to Council’s corporate properties.

The Housing Revenue Account (‘’HRA’’) shows all expenditure and income relating to the Council’s responsibilities as landlord of dwellings and associated property. It is a ‘ring-fenced’ account within the Council’s General Fund.

Housing Revenue Account Business Planning

HRA Self-financing was implemented from 1 April 2012 following a one-off settlement to the Treasury, in order to ‘buy out’ of the old subsidy system. The new system incentivised landlords to manage their assets well and yield efficiency savings. It was anticipated that there would be greater certainty about future income as councils were no longer subject to annual funding decisions by Central Government, enabling them to develop long-term plans, and to retain income for reinvestment. Council landlords were to have greater flexibility to manage their stock in the way that best suits local need with more opportunity for tenants to have a real say in setting priorities looking to the longer term.

Self-financing, however, also significantly increased risks from Central Government to local authorities, meaning that the Council:

• Now bears the responsibility for the long term security and viability of council housing in Wealden;
• Has to fund all activity related to council housing, from the income generated from rents, through to long term business planning;
• Is more exposed to changes in interest rates, high inflation and the financial impact of falling stock numbers;
• Needs to factor in the impact of changes in government policy e.g. the impacts of the welfare reform on income recovery, and rent setting; and

This places a greater emphasis on the need for long-term planning for the management, maintenance and investment in the housing service and housing stock.

The HRA Business Plan

A key element of the self-financing regime is for the Council to construct a 30-year Business Plan for the HRA. The HRA Business plan is a key contributor to the Council’s overall aims and the Council’s Housing Strategy.  The Council has also fully embraced the Government priority of “fixing our broken housing market” by delivering new build Council Housing to contribute to diversification of the local housing market.

The Council’s Housing Revenue Account Business Plan 2021-2051, updated during the summer of 2021, was approved by Cabinet in October 2021. The plan reflected national and housing policy, legislation and best practice at that time and included the need for further improvements to the energy efficiency of our homes to reduce carbon emissions, additional fire safety measures in anticipation of changes to the Building Regulations and ongoing investment in building new homes. The Business plan sets out:

• The long term plans for the Council’s housing stock, including the decarbonisation of our homes;
• The finances to deliver plans;
• How the Council will manage the income from its stock, demand for housing and stock condition; and
• Identifies resources for building new council dwellings.

Although the HRA budget estimates included in the MTFS broadly reflect the Business Plan strategies, the MTFS has been updated to reflect:

• The Governments temporary amendment to it’s policy on rents for Social Housing, by limiting rent increases for 2023/24 to 7%, reverting to CPI plus 1% from 2024/25;
• Significant increases in inflation impacting on our contracts costs and cost of services;
• One for one replacement of Right to Buy sales and continuation of the Council’s New Build programme;
• Appropriate capital investment in maintaining the quality of the housing stock through planned maintenance and replacement works; and
• Servicing and repaying debt so that new borrowing is available for future maintenance works or investment in further new build schemes.

The Business Plan is a living document which sets out our short, medium and long-term strategies for the management, maintenance, improvement and addition to the Council’s housing stock. It is continually reviewed on a regular basis to ensure that the priorities reflect local need and political aspirations, to ensure the investment proposals remain fundable and the assumptions on which the plan are based remain correct and that the HRA remains a sustainable and viable entity over the 30-year period.  The 30-year Business Plan assumptions will be further reviewed during 2023/24.

Spending Plans

Spending plans included within the HRA support the delivery of the Council’s strategic priorities within the Corporate Plan and Housing Strategy. The revenue expenditure has been forecast to manage and maintain the Council’s housing stock.

Climate Change

Within the HRA, £5 million has been built into the Capital Programme for decarbonisation works. It has been necessary to drawdown £3.9 million out of the HRA earmarked reserve set aside for climate change initiatives to fund these works, leaving balance of £0.050 million in the reserve.

The HRA have applied for Social Housing Grant Funding £2.334 million, if this bid is successful the budget and funding will be added to the HRA Capital programme 2023-24 and 2024/25.

Spending Pressures

A high level review of the financial pressures facing the Council over the period of the MTFS has been undertaken. This information has been drawn from experience in previous years, the advice of Corporate Directors, Heads of Service and Budget holders. This process had regard to the experience of previous years, the current economic climate and local and national issues that are likely to influence the financial outcomes.

Inflation – Pay and Prices

The HRA MTFS includes a pay award for officers of 3% for 2023/24, and 2% pay award in 2024-25 to 2027-28, plus an estimate of staff increments. The impact of the pay review has been built into the MTFS.  

Automatic inflationary increases of budgets are not provided for all goods and services, instead individual inflation rates have been applied for specific items of expenditure (i.e. contracts), all remaining areas of expenditure are maintained at the previous year’s levels, which is in effect a real terms reduction in spending power.

Repairs and Maintenance

The level of expenditure for revenue repairs proposed for 2023/24 is £4.203 million.  This covers costs such as responsive repairs, cyclical works, void repairs and redecoration.

High contract inflation and increased demand on the repairs service has put significant pressure in this budget area. The recent outcome of the coroner’s report and media interest on the issues of dampness, mould and condensation, have led to the Secretary of State, the Regulator of Social Housing and the Housing Ombudsman to write formally to all local authorities and social housing Registered Providers. It is considered likely there will be specific additional requirements placed on all landlords to ensure their properties have measures in place to prevent such problems from occurring.

Revenue implications of the HRA Capital Programme

• Depreciation – must be charged to the HRA in accordance with proper accounting practices, it reflects the decline in the value of the HRA council’s stock over time due to wear and tear. The calculation is based on the social housing valuation of the councils stock. The Councils stock is revalued each year and the depreciation value will fluctuate depending on the annual valuations of the Council’s housing stock. Depreciation is transferred to a major repairs reserve to fund the HRA capital programme. This amounts to £4.250 million for 2023-24 and increases in future years to reflect the increases in housing stock from new builds and inflation.

• Interest Payable – is associated with additional borrowing for capital expenditure on the Housing investment programme, including interest payable on the balance of £44.3 million for the self- financing transaction from 2011-12.

• Provision for Loan Repayments – planned loan repayments have been updated in the MTFS which is key to self-financing and creating opportunities for new borrowing for investment in new builds and major repairs.

• Capital Expenditure Charged to Revenue – the amount of revenue that is being used to fund the capital programme between 2023-24 to 2027-28 is £8.06 million. £3.9 million of this revenue funding is being transferred from HRA earmarked reserves to fund the decarbonisation programme. £2.86 million is being funded through a reduction in the general HRA reserves towards for the development of the former Streatfield House site into 20 new homes. The balance of revenue funding of £1.3 million supports the planned maintenance programme over the MTFS period.

Debt write off and impairment

Income collection became more challenging due to the impact of the Covid-19 pandemic, although the position did improve following the rollout of the vaccine and ending of lockdown restrictions.

The transition to universal credit means that some rents that would have been received automatically are now recoverable from the tenant. Tenants are also facing challenges over rises in the cost of living and increases in energy bills.  Where tenants suffer a financial impact from the current economic climate, arrears are likely to increase, with a potential for further write offs/debt provision, which represents a cost to the council.

Taking the above into account the budget provision for debt write offs and impairment has been reviewed and the current annual provision of £0.180 million is adequate for this purpose.

Resources

Rents and Service Charges

The governments Autumn Statement announced the outcome of its consultation on setting a lower ceiling on social housing rent increases in 2023-24, with a cap being set at 7% for rent increases (the background to this cap is detailed the paragraphs below).

As a result of high inflation already placing pressure on many households, including social housing, on 31st August 2021 the government launched a six-week consultation on setting a lower ceiling on social housing rent increases in 2023-24. The consultation set out several options where this ceiling could be set, being 3%, 5% or 7%. It also recognised that imposing a ceiling on rent increases would leave social housing providers with less money to invest in providing new social housing, improving the quality and energy performance of their existing homes and providing services to tenants. The existing government rent policy for social housing allows for rent increases of CPI+1% based on the CPI rate in the previous September. When the rent policy was set in 2019, the inflation was forecast to be around 2% in 2022 and 2023. In September 2022 CPI was 10.1% which could have meant increases rent increases from April 2023 to 31 March 2024 of up to 11.1%.

Having reviewed the responses to the consultation, the Government has decided that a 7% cap strikes an appropriate balance between protecting social tenants from high rent increases, and ensuring that providers of social housing are able to continue to invest in new and existing social housing and provide decent homes and services to tenants. The government will implement this decision by issuing a statutory Direction to the Regulator of Social Housing.

In line with the Government’s temporary amendment to the policy on rents for social housing, rents will be increasing by 7% in 2023-24. The average rents are shown in the table below:

When properties become vacant, they will continue to be re-let at Formula Rent, in line with the social rent policy. 

The rent for shared ownership properties are not covered by the social policy rent cap of 7% and would normally increase in accordance with their lease, which is RPI + 0.5% for our Affordable General Needs Housing (currently 11 units). This could mean high increases of around 14% (depending on RPI indices in 2023) and would come at a time when shared owners will also be facing other pressures on their household finances, including rising interest rate. The government wrote to housing authorities in December 2022, to ask for a voluntary commitment to limiting rent increases for shared owners to be no more than 7%, noting that 90% of housing associations had already made this commitment. The recommended increase for shared ownership rents is therefore 7%.

It should be noted that the retirement living shared ownership properties (approximately 77 units) lease terms have the same rental increases as our retirement living social rents and will be increase 7%.  

The additional income generated by the rent increase of 7% will be utilised on a number of HRA items including; maintenance of the stock, supervision and management resources, paying for the cost of investment and running costs where appropriate for the stock.

The MTFS assumes rent increases in line with social rent policy of CPI + 1% per annum from 2024-25. The dwellings rent budget also allows for increased rental income from new build properties and reductions in rental income from RTB sales and voids.

Service Charges

• Tenants – in addition to the rent some tenants may also pay service charges. Rents are generally taken to include all charges associated with the occupation of the property, such as maintenance and general housing management services. Service charges reflect additional services which may not be provided to every tenant, or which may be connected with communal facilities. These service charges are reviewed annually and calculated on a per property basis to recover the actual cost of the service. Tenants will be notified in writing of any changes in their rent and service charges for the coming year April to March. The rent notification letter will set out a schedule of services that will be provided and how much we will charge for them. We will only increase service charges within the legal requirement that they will not exceed the cost of the services and will always be reasonable

• Leaseholders (Retirement Living, Shared Ownership and Right-to-Buy) – service charges to leaseholder are charged in accordance with their lease. Service charges are calculated to recover the costs of providing communal services, such as cleaning, repairs, grounds maintenance and electricity. Not all leaseholders receive additional services and the amount that is charged will depend on the type of property a leaseholder lives in, and what services are provided.

Shared ownership Retirement Living leaseholders will be notified in writing how much service charges they will have to pay for the year, April to March. The notification will also tell them of any changes in their rent, where payable, for the coming year.

Right-to-Buy leaseholders are usually notified in April with an annual estimated charge and again within six months of the year end with the Final account figures.

Interest Receivable

Interest is received on HRA cash balances during the year. This has significantly increased during 2022/23 and forecast to continue in 2023/24 due to increased interest rates, then starts to reduce over the remaining four years of the MTFS period as general reserve balances are reducing.

Other Income

Other income includes income received from feed in tariffs on solar panels on council dwellings of approximately £0.065 million per annum.

Housing Revenue Account Budget and Forecast

Appendix 3 provides a summary HRA revenue budget and estimates for the period 2023-24 to 2027-28.

Risks to the HRA Budget and Forecast

The Council has adopted a corporate approach to risk management, and financial risk management is integrated into the Council’s overall management and decision-making processes.

A number of key high-level risks have been identified which could have a positive impact that could yield additional resources, but conversely some risks may have a negative impact and result in a reduction of resources. These key risks are action planned and continually reviewed as the MTFS develops.

The main areas the key risks cover are:

• Risk of government announcements limiting the flexibilities and freedoms offered by the HRA Self -Financing regime;
• Government changes to legislations such as the Decent Homes review, Building Safety regulations and uncertainty of rent policy from 2025-26;
• Economic shocks such as shortage of labour, building costs;
• Changes to key assumptions within the MTFS e.g. inflation, interest rates etc;
• Efficient delivery of housing repairs;
• Impact on the rental income estimates included in the MTFS from any delays in the delivery of the New Build Programme;
• Ability to release further revenue resources for investment and improvements;
• Changes to other key external funding sources;
• The impacts of the Welfare Reform Act; and
• Financial and budget management issues.

These risks form part of our financial risk assessment, Officers will continually monitor and appraise these risks as part of the on-going financial management

HRA Capital Priorities

The Housing Revenue Account Capital Programme covers all aspects of capital expenditure relating to the Council’s landlord function. The Council’s approach to determining and funding its investment programmes is set out in the Council’s Capital Strategy, which explains the Council’s financial framework for capital investment in support of its strategic priorities. The Capital Strategy for the Housing Revenue Account capital programme reflects the self-financing housing regime.

The five-year Housing Revenue Account Capital Programme has been drawn up to ensure that the Council meets its legal obligations as a landlord. The Council has already invested significant resources over recent years to achieve the Decent Homes Standard.

The five-year housing programme comprises the following main areas of work:

• Maintenance of the Decent Homes;

• Health & Safety Requirements – covers the work to meet statutory requirements, and includes fire safety, communal lighting and asbestos removal;

• Decarbonisation works;

• New Build and acquisition programme to deliver approximately 116 new council dwellings within the HRA;

• LA Social Housing Fund Programme to deliver 12 council dwellings for Ukrainian and Afghan refugees; and

• ICT investment for a new Housing Management system to be procured over the next few years and for the installation of Wi-Fi in retirement living communal areas.

Investment in our existing stock reflects the stock condition survey requirements and deliverability of these requirements through our contractors. The Fire Safety Act and Building Safety Bill requires significant and continued capital investment into the existing stock to ensure compliance with the regulations. The cost implications of the government’s Decent Homes Standard review are not yet known and are therefore not included in the current HRA investment plan. A review of the programmed works will be required once the new standard is announced.

Wealden has the ambition to become carbon neutral by 2050. This will require changes in the way that we manage our existing stock, cost and policy implications and our plans for investing in new council homes. The investment programme currently includes £1 million per annum for decarbonisation works. This was based an approximate benchmark cost of £20,000 per property. This will only go half way to meeting the 2050 target. External Grant funding has started to become available and the Council has recently bid for £2.3 million of government grant through the Social Housing Decarbonisation Fund. This has not been included in the current capital programme budget estimates, as the outcome of this bid will not be known until February/March 2023. If successful, the capital programme will be updated accordingly.    

In late December 2022, the Government wrote to local authorities regarding the £500 million LA Housing Fund to support local authorities to provide ‘move on and settled accommodation’ for Ukrainian and Afghan refugees. Wealden had been provisionally identified as eligible for capital grant to provide new homes for these refugees. The delivery timescale is November 2023. The grant would cover approximately 40%-50% of the expenditure with the Council being required to match fund the remaining 60%/50%. The Council had to respond to DHULC by the 25^th January with basic details of our delivery proposals including the number of units that could be delivered and match funding, the validation response required the support of the Council’s s151 Officer. In line with the Council’s response, the HRA capital programme includes the delivery of 12 homes with the supporting grant of approximately £1.936 million.

Resources

The resources necessary to fund the Council’s HRA Capital Programme are fully identified in Appendix 4.

Major Repairs Reserve

The Major Repairs Reserve (‘’MRR’’) is the main source of capital funding and the mechanism by which timing differences between resources becoming available and being applied are managed. The MRR may be used to fund capital expenditure and to repay existing debt. Depreciation is a real charge on the HRA and is paid into the MRR from the Housing Revenue Account (see Appendix 3) to fund capital expenditure. The total support to the capital programme over the five-year MTFS period 2023-24 to 2027-28 through depreciation is £25.38 million.

Capital Receipts

Housing capital receipts fall within the Governments pooling regime. Under these arrangements capital receipts from Right-to-Buy (‘’RTB’’) sales are pooled until a pre-set limit for government share of the income generated has been achieved. Non-RTB sales primarily are excluded from the pooling arrangement and are now retained in full by the Council for use as the Council sees fit.

Once the target for the government share of the RTB receipts has been reached, the Council may retain 100% of the receipts from any additional RTB sales. These are subject to a formal retention agreement between the Council and the DLUHC. Following the announcement in the Spending Review 2021, the Council will now be allowed to spend these over a longer timeframe (increasing to five years from three years), to pay up to 40% of the cost of a new home (up from 30%), and to allow them to be used for shared ownership and First Homes

New Build Shared ownership sales receipts are used towards funding the New Build shared ownership housing.

The New Build programme is primarily funded by retained RTB receipts, shared ownership receipts and borrowing. 

The proceeds of dwelling sales under the RTB scheme provide a regular source of capital receipts with the number of sales estimated to be c.12 per annum. RTBs sales applications have started to slow towards the end of 2022/23 with no new applications in the last few weeks (as at January 2023). This is understandable given the current economic climate. The MTFS assumes only 5 sales in 2023-24 increasing to 12 sales per annum from 2026/27. However, this is a difficult area to predict accurately as it is impacted by external factors, such as interest rates, property prices and Government initiatives aimed at further stimulating RTB sales.

Grant Funding

Grant Funding of £1.936 million from the government’s LA Housing Fund is included in the budget proposals to support delivery of new homes to Ukrainian and Afghan refugees.

Council Resources

The MTFS 2023-24 to 2027-28 includes £8.06 million of direct revenue contributions over the five-year period. £3.9 million of this revenue funding is being transferred from HRA earmarked reserves to fund the Decarbonisation programme. £2.86 million is being funded through a reduction in the general HRA reserves towards for the development of the former Streatfeild House site into 20 new homes. The balance of revenue funding of £1.3 million supports the planned maintenance programme over the MTFS period.

Borrowing

The Prudential Code allows the Council to take borrowing if it can demonstrate that such borrowing is affordable, sustainable and prudent in its Prudential Indicators (detailed in the Capital Strategy and Treasury Management Strategy). In October 2018, the government announced the removal of the HRA borrowing cap and issued local authorities determinations to confirm that the removal of the cap was to take immediate effect. Prior to the lifting of the debt cap, Wealden had reached its maximum borrowing it could undertake without eating into the margins of safety (the debt limit imposed was £71.679 million). The Council has now set its own prudential limit for the HRA of £95 million. As with all borrowing decisions, the council will still need to take into account the affordability of borrowing against available revenue streams.

The removal of the debt cap and high value council housing levy gives local housing authorities more certainty for future HRA Business Planning. In light of this, the Council previously agreed the use of HRA balances to fund the HRA Capital New build investment programme scheme Streatfeild House. The HRA balances minimum recommended level is 5% of the budget, which is in the region of £1 million. The use of the HRA general balances over the MTFS period reduces the balances to £1.2 million, which is still above the recommended level.

The graph below shows the position of the budget proposals for borrowing for the HRA Capital Programme against the prudential borrowing limit of £95 million.

CFR = HRA Capital Financing Requirement, measures the HRA underlying need to borrow to finance the capital programme

Following the implementation of HRA self-financing on 1 April 2012 the Council has £44.3 million of external debt relating to housing stock, which is being repaid over 30-years. In addition to this, the Council has undertaken further internal borrowing of £30 million as at 2022-23. The provision to repay debt over the MTFS period is £10.8 million with further borrowing of £27.1 million to fund the HRA Capital Programme. This leaves borrowing headroom of £4.4 million.

HRA Capital Programme

Based on the spending requirements and resource assumptions, Appendix 4 provides a summary HRA capital programme, 2023-24 to 2027-28.

The revenue implications of all capital schemes, have been taken account of and included within the HRA budget (see Appendix 3).

Risks to the HRA Capital Programme

The Council has adopted a corporate approach to risk management and financial risk management is integrated into the Council’s overall management and decision-making processes.

A number of key high-level risks have been identified which could have a positive impact but conversely some risks may have a negative impact and result in a reduction of resources. These key risks are action planned and continually reviewed as the MTFS develops. The main areas they cover are:

• Generation of sufficient revenue surpluses to resource required investment;
• Achievement of capital receipts (including Right to Buy sales) targets;
• Future building costs; and
• Interest rate increases impacting on future borrowing costs.

The minimum prudent levels of reserves and balances that the Council should maintain are a matter of judgement. It is the Council’s safety net for unforeseen circumstances and must last the lifetime of the Council unless contributions are made from future years’ revenue budgets. CIPFA guidance does not set a statutory minimum level but it is up to local authorities themselves, taking into account all the relevant local circumstances, to make a professional judgement on what the appropriate level of reserves and balances should be.

Some reserves and balances are essential for the prudent management of the Council’s financial affairs. These will provide a working balance to cushion the impact of uneven cash flow, a contingency for the impact of unexpected events or emergencies and allow the creation of earmarked reserves to meet known liabilities. The consequences of not keeping a minimum level of reserves can be serious and is therefore one of the considerations taken into account when setting the MTFS.

The Council has a very proactive approach to managing risk and there are effective arrangements for financial control already in place. However, as a result of the changes to the core system of local government funding introduced in April 2013, which saw a move from an absolute funding level to one which is very sensitive to changes in the level of local business rates, the level of volatility and risk to the Council significantly increased. Given this uncertainty of funding that this poses to the Council’s financial position, the prudent minimum level of general reserves is now held at a level greater than previously.

The financial risks identified throughout this document, and an assessment of the estimated exposure, likelihood and possible mitigation of these has been made in the context of the Council’s overall approach to risk management and internal financial controls. This information has been used to determine the optimum level of reserve holdings needed to meet the requirements of a working balance and contingency. The conclusion of this risk assessment is that it is deemed prudent that General Fund reserves are maintained at around £2 million – £3 million, and that Housing Revenue Account reserves are maintained at around £0.9 million – £1 million, over the period of the MTFS.

The general reserves at the end of each year for 2023-24 to 2027-28 are summarised in the table below:

The overall levels of General Fund and Housing Revenue Account balances are in line with the prudently assessed minimum level of balances, and are believed to be sufficient to meet all of the Council’s obligations over the duration of the MTFS and have been based on a detailed risk assessment.

Note: The figures in the ‘cost of services’ section above are net figures, these therefore include income we receive from planning fees, crematorium, vicarage fields etc.

Appendix 1 General Fund Revenue Summary (cont’d)