MERTHYR Tydfil Council has laid out its financial position as it prepares to set its budget and council tax for next year.
A report set to go before the council’s joint audit and scrutiny committee on Wednesday, January 27 said the provisional local government settlement from Welsh Government announced in December saw Merthyr’s funding increase by 4.64% (£4.5m) for the next financial year making it the third-best settlement out of the 22 Welsh councils.
The council has set a provisional budget requirement of £133.78 million for 2021/22 after considering a number of revisions to the original budgeted position.
The final Welsh Government settlement is due on March 2 and the provisional budget for next year is currently based on the 4.99% rise that was approved last year although no figure has been approved for 2021/2022 yet.
Former specific grants which include £5.13 million in the Teachers Pay Award which was previously held outside of the revenue settlement have been transferred into the settlement with Merthyr Tydfil’s proportion totalling £77,000.
The social care specific grant, held outside of the revenue settlement, has increased from £40 million to £50 million, with Merthyr Tydfil’s share increasing from £856,000 to £1.07 million.
The minister for housing and local government Julie James MS has confirmed that the Welsh Government’s Covid-19 Hardship Fund will continue into 2021/22.
The Medium Term Financial Plan from 2020/21 to 2023/24 originally showed a projected budget deficit of £3.58 million for 2021/22 but the current position is a budget surplus of £394,000.
The impact of the Welsh Government settlement on the budget is an increase in spending power of £2.78m and there was a £216,000 boost to the social services grant for Merthyr Tydfil.
The council is facing additional demands worth £4.9m which result from things like demographic growth, legislative changes, new initiatives, loss of income and changes to grants terms and conditions but the £1.27 million of additional demands relating to Covid-19 is projected to be funded by Welsh Government through the continuation of the Hardship Fund.
There was £3m of additional demands originally budgeted for 2021/2022 so there is still £623,000 left to be accommodated.
The council has had to spend £705,000 on a corporate capacity exercise to assess the current resilience of council services in determining potential risks and investment requirements after concerns raised by Welsh Government advisors and Audit Wales.
This is set to be funded through the Provision for Further Commitments which is worth £764,000.
The council has saved £150,000 through the corporate vacancy factor which reflects the salary savings resulting from the natural delay between a post becoming vacant and then being filled and a further £350,000 in employee severance costs.
This is because of capacity issues faced by the council which mean there is currently less opportunity for employees to leave the employment of the council through voluntary early retirement or voluntary redundancy
And the council has found £1.04m worth of provisional service cuts from reviewing medium-term financial plan assumptions, reviewing the council’s borrowing strategy for financing capital expenditure, identification of general operational savings, the receipt of additional grant income, increased income generation and the determination of efficiency initiatives.
The report recognises potential further commitments to be funded from the £394,000 surplus which include a potential schools budget increase resulting from updated information in respect of free school meals entitlement, council tax bad debt provision increase since council tax collection during the pandemic has reduced by around 2% and a reduction in the council tax increase reduction from the budgeted 4.99%.
The report said the position over these will become clearer over the coming weeks and will be resolved prior to the budget setting council meeting in March.
A council tax proposal is expected to be made by February 15 with the council expected to set a balanced budget and the council tax rate on March 3.