The Cabinet of Cardiff Council met on Thursday, 9 January 2025, to discuss and approve the approach to the 2025/2026 budget modelling and consultation requirements. The meeting resulted in the approval of recommendations for the budget consultation process.

2025/2026 Budget Modelling Update and Consultation Requirements

The Cabinet received an update on the 2025/26 budget preparation, which included the impact of the Provisional Local Government Financial Settlement. A significant budget gap of £49.726 million was identified for the upcoming financial year, influenced by funding uncertainties, pay awards, inflation, and increasing demand for services.

The council has been consulting with citizens through the 'Ask Cardiff' survey since November 2024 to gauge priorities for resource allocation. This report outlined the arrangements for a more detailed, city-wide consultation, which was set to commence on 9 January 2025 and run until 5 February 2025. The outcomes of this consultation will be crucial in shaping the Cabinet's final budget proposal for consideration by the Council in March 2025.

Key financial factors influencing the budget include changes to employers' National Insurance (NI) rates and thresholds announced in the UK Budget, which are estimated to cost Cardiff Council £9.827 million for directly employed staff and an additional £5.100 million for commissioned services. While HM Treasury has indicated funding will be provided to compensate for the impact on directly employed staff, only 85% of this cost is currently factored into the draft budget due to ongoing uncertainties regarding the exact allocation.

The Provisional Local Government Settlement, received on 11 December 2024, indicated a 5.3% increase in Aggregate External Finance (AEF) for Cardiff, amounting to £33.955 million. This increase is attributed to changes in population and pupil numbers, though it only covers approximately half of the identified pressures. The settlement also includes baseline adjustments and transfers of specific grants into the Revenue Support Grant (RSG), totalling £17.754 million.

The report detailed various grant changes, including the cessation of some grants and reductions in others, alongside increases in certain education and revenue grants. The Shared Prosperity Fund (SPF) allocation for 2025/26 has been reduced by 40.9%.

The budget modelling indicates a projected budget gap of £23.410 million for 2025/26, after accounting for efficiency proposals totalling £11.457 million. The remaining shortfall of £11.953 million will need to be addressed through a combination of service change proposals, finalisation of schools' budgets, further efficiency measures, and potential increases in Council Tax and the use of reserves. The current modelling assumes a 3.95% Council Tax increase, which would generate £7.536 million.

The consultation process is designed to be comprehensive, utilising online and paper-based methods, multi-lingual materials, social media campaigns, and targeted outreach to seldom-heard groups. Engagement with trade unions and staff is also a priority, given the potential for redundancies.

The Cabinet resolved to:

1. Note the updated Budget Position for 2025/26 at Provisional Settlement Stage.
2. Agree the proposed approach to Budget Consultation for 2025/26, noting that the formal consultation would commence on 9 January 2025 and run until 5 February 2025, with the results to be considered by Cabinet in preparing the final budget proposal.