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A paper to be discussed on Thursday 31st October 20014 by the Highland council alludes to the possibility of a 7 percent increase in council tax for 2025/26.

This report commences the review and refresh of the Council's Medium-Term Financial Plan (MTFP), agreed February 2024, the purpose of which is to ensure the Council takes an ongoing and rolling three-year financial planning approach to support budgeting and financial sustainability. This report also represents the
commencement of revenue budget planning for the coming three financial year period, 2025/26 to 2027/28.

This report builds upon the MTFP agreed in February, and the decisions already taken to close the then forecast budget gap. Members will recall that of a then projected £113m budget gap over 2024/25 - 2026/27, the Council had agreed £54.6m of budget savings, and a range of other financial decisions or assumptions
relating to financial flexibilities, council tax and reserves use, which at that time set out plans to address the forecast gap over that 3-year period. This report revisits those planning assumptions and extends to cover a new rolling three-year period, and the forecast level of budget gap the Council needs plan for.

The timing of the UK Budget is 30th October, and in turn the Scottish Government Budget is scheduled for 4th December. There
remains uncertainty regarding what the impact of these Governmental budgets may be, and the risk that scenarios as modelled in this report need revisited in light of those budget announcements.

The revised forecast, before taking account of agreed savings and other measures, is a revised headline budget gap over three years ranging from £116m-£132m. After allowing for budget savings and other decisions already made by the Council, and other assumptions on council tax and other funding, these scenarios suggest a residual budget gap of £38m-£54m over the three years. The ‘new' 3rd year of the financial plan accounts for a significant element of that residual budget gap.

There have been a number of key developments and statements in recent months relating to the public sector budget outlook, well covered in the press and media, which suggest that the public sector and local government need plan and prepare for a more challenging financial outlook than had been assumed previously.

• the Chancellor has stated there is a £22 billion ‘gap' identified by the UK government for 2024-25, including Pay Review Body wage settlement implications;

• Public sector pay settlements continue to outstrip current inflation levels and are placing significant financial pressures on public sector budgets;

• At a UK level, the Chancellor has stated that funding for pay settlements will need around one third of the cost met from Departmental internal efficiency savings. By implication Scotland's Barnett Consequentials of any pay funding additions will also reflect the implication of those efficiency saving assumptions;

There has been press speculation around potential employer National Insurance increases that could be a mechanism being considered by the Chancellor as part of the budget;

• The UK Budget is scheduled for 30th October;

• The Scottish Government has announced a number of in-year fiscal measures to balance the 2024/25 budget. These measures are to address in-year pressures of which pay costs are stated as a significant driver. This has resulted in £500m of saving measures in-year across a range of portfolios;

• The implications of these in-year measures by Scottish Government into the 2025/26 budget is unclear at this time. There is a clear expectation that Scottish Government funding for Local Government pay settlements in 2024/25 will need baselined into grant settlements for 2025/26;

There remains a risk and uncertainty relating to £145.5m of Teacher pay funding in 2024/25, with Scottish Government making recent statements to re-state that the release of this funding is conditional on the maintenance of teacher numbers. The Council's 2024/25 budget is based on the assumed receipt of the Council’s £6.2m share of that funding and the rolling forward into future years. Non-receipt of that funding would impact the financial outlook;
• The Scottish Government Budget for 2025/26 is scheduled for 4th December with it understood the Finance Circular detailing grant to individual Councils available week commencing 12th December. Albeit as in past years there is likely to be some time period beyond receipt before full details and implications are assessed and understood.

[url=https://www.highland.gov.uk/meetings/meeting/5057/highland_council]Read the paper Medium Term Financial Plan 2025-26 to 2027-28 Item 4 HERE[/url]

Note
If press speculation about employers NIC to be increased there will be huge impact on the public sector including NHS and councils who have high numbers of employees.

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