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That Cabinet note a forecast revenue budget
underspend at update 3 of £1,146,000, representing a variance
of 0.5% of total budget. This is a significant improvement of
£1,117,000 from the forecast underspend of £29,000 that
was reported at the second financial update.
 
That the improved forecast is primarily driven
by changes in Social Care where the ability to maximise the impact
of grant funding to meet core expenditure has benefited the
forecast by around £600,000, alongside improvements in debt
financing budgets of around £500,000.
 
That Cabinet note that £800,000 of any
confirmed underspend that is realised at year-end will be required
to maintain the Council fund reserve at a level of 5% of the
proposed net revenue budget for 2026/27.
 
The Cabinet notes the projected increase of
£3,426,000 in the cumulative schools’ reserves deficit,
a deterioration of £456,000 compared to the previous
forecast. School balances are expected to close the financial year
at a deficit of £7,517,000, with nineteen of thirty-five
schools anticipated to have a deficit balance. Further detail of
individual schools’ movements is shown in Appendix 4.
 
That Cabinet note that 75% of the forecast
deficit relates to three schools - King Henry VIII 3-19 School,
Chepstow Comprehensive School and the Pupil Referral Service, with
all three of these schools being a focus of support and challenge
from the Local Authority to ensure budgets return to a surplus
within the agreed recovery plan timeframe.
 
The Cabinet note the forecast Capital budget
expenditure for the year of £50.8 million, alongside
projected slippage of schemes into 2026/27 of £21.0 million.
No significant variances are anticipated at the current time with
minor underspends of £35,000 reported across a small number
of grant funded schemes. Additionally, the Council’s capital
contingency budget of £1.3m has not been required and will be
released with the funding utilised as part of the 2026/27 budget
proposals.
 
The Cabinet approve the capital budget
revisions outlined in Appendix 5 that have resulted from the
receipt of new, or variation of existing grants and external
contributions that weren’t included in the original capital
budget approved at the start of the year. Under the Council’s
financial procedures, any changes to the capital budget that are
fully funded by grants or external contributions must be approved
by Cabinet.
 
That Cabinet note that as we move towards the
remaining weeks of the financial year, many of the risks
highlighted in previous updates begin to fall away. There remain a
small number of specific budgetary risks that do still have the
ability to further impact upon the revenue budget during
2025/26:
 

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

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

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

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