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Apologies for absence were received from Panel Members County Councillors: J. Pugh, A Jones, G Ratcliffe and Co-opted Member G Hall. Officers: Jane Thomas (Director of Corporate Services & S151 Officer), Clive Pinney (Monitoring Officer). Lynne Hamilton Observer – Chair of Governance and Audit Committee.
There were no Declarations of Interest from Members relating to items to be considered on the agenda.
The Chair was authorised by the Panel Membership to sign off the minutes of the previous meeting held on the 9th September 2025 as a true record of the meeting.
Background: Councillor David Thomas, Portfolio Holder for Finance and Transformation, provided the following background and contextual commentary on the MTFS report: • The report was described as an update on the latest economic projections and their influence on the development of the Council’s budget for 2026–27 and the medium term. • Inflation, although slowing, was said to continue impacting the cost of delivering council services. • The report outlined key factors affecting financial planning and the assumptions used in budget development. • Commentary from the Office for Budget Responsibility and the Welsh Government was referenced, including remarks from the First Minister regarding the budget announcement expected in November. • Interest and inflation rates were acknowledged as volatile, and assumptions were to be kept under review and updated when necessary. • A cautious approach to financial assumptions was adopted, potentially more pessimistic than other Welsh local authorities, due to historically lower settlements. • Service-specific Financial Resource Models (FRMs) were being developed and were expected to be available for scrutiny shortly. • Concerns were raised about the affordability of the capital programme, with borrowing costs and limited capital receipts necessitating a review of ambitions. • The “Sustainable Powys” approach was emphasised, aiming to achieve savings through service transformation rather than direct cuts. • Traditional “salami-slicing” savings were considered no longer viable, with future savings expected to come from changes in service delivery models. • Heads of Service were asked to plan for a five-year horizon, assuming no budget uplift, and to identify pressures and realistic savings. • Budget gaps were to be managed corporately, and the affordability of the capital programme was recognised as directly impacting service delivery. • Evidence-driven decisions were encouraged, particularly in relation to school transformation and asset disposal. • Benchmarking borrowing costs against other Welsh local authorities was supported to better understand Powys’s financial position. Points raised by the Panel: Responses received from Officers or Cabinet Members. Economic Assumptions and Inflation • Members asked whether inflation and borrowing cost assumptions would be updated closer to the budget-setting period. • Questions were raised about the realism of the 2% inflation assumption and whether Powys was an outlier compared to other Welsh local authorities. • The Panel queried what would trigger a review of inflation assumptions and how comparisons with other councils were being used to inform this. • Members asked what the financial impact would be if inflation increased by 1%, particularly in relation to pay pressures. • Clarification was sought on whether service-specific inflation rates were being built into Financial Resource Models (FRMs). • Members questioned the volatility of interest rates and how this was being reflected in financial planning. Officers confirmed that assumptions around inflation and interest rates were being kept under regular review. They explained that the baseline assumption for pay inflation was set at 2%, and that wider inflation assumptions varied across service areas depending on contractual obligations. Services had been asked to build in their own inflation estimates where appropriate, and these were reviewed over the summer and would be revisited again in the autumn. It was acknowledged that Powys County Council tended to adopt a more cautious stance than other Welsh local authorities, partly due to historically lower settlement figures. Officers stated that benchmarking was undertaken through the Welsh Local Government Association (WLGA) and the Society of Welsh Treasurers to ensure Powys was not an outlier. Any significant deviation from the norm would trigger a reassessment of assumptions. Capital Programme and Borrowing • Members asked whether the Council should be re-profiling capital projects in light of long-term borrowing implications. • Questions were raised about the affordability of the capital programme and whether ambitions needed to be scaled back. • The Panel queried how borrowing costs compared to other Welsh local authorities and requested benchmarking data. • Members asked whether the Council’s borrowing costs were squeezing the revenue budget and impacting service delivery. • Clarification was sought on the impact of capital receipts on borrowing and whether the lack of receipts would increase borrowing costs. • Members asked whether the Council had a strategy to reduce debt and how this would affect future capital investment. The Portfolio Holder and officers acknowledged the increasing cost of borrowing and its impact on the affordability of the capital programme. They noted that borrowing costs were influenced by Public Works Loan Board rates, which were tied to gilt yields. Officers explained that the Council was facing a “perfect storm” of rising costs, limited capital receipts, and essential infrastructure needs. It was confirmed that the capital programme would need to be reviewed in detail, and that ambitions might have to be scaled back unless borrowing costs reduced or additional funding became available. Officers agreed to provide benchmarking data comparing Powys’s borrowing costs as a percentage of revenue with other Welsh local authorities, although they noted that some authorities did not carry housing-related debt, which could skew comparisons. Service Pressures and Savings • Members asked how savings targets were being set and whether they were realistic and deliverable. • Questions were raised about the process for identifying savings and whether services were being asked to plan without budget uplifts. • The Panel queried whether savings proposals were backed by detailed plans and what proportion of the budget gap had been addressed. • Members asked whether savings could be brought forward from future years to help close the current budget gap. • Clarification was sought on how transformation work, such as the Newton diagnostic in social care, was contributing to savings. • Members asked whether the Council had reached the point where further savings were no longer achievable without service reductions. Officers explained that Heads of Service had been asked to plan for a five-year period without assuming any budget uplift, while accounting for inflationary pressures and known changes in legislation or policy. Services were required to identify realistic savings to offset these pressures. The Portfolio Holder emphasised that the Council had moved away from traditional “salami-slicing” approaches and was instead focusing on transformational change through the Sustainable Powys programme. Officers confirmed that savings proposals were being scrutinised for deliverability and that services were being challenged to bring forward savings from future years where possible. It was acknowledged that some savings might not be fully delivered, but services were expected to find alternative mitigations. Schools and Education Transformation • Members asked what savings had been made in the education sector, particularly in secondary schools. • Questions were raised about the impact of falling pupil numbers and whether schools had adjusted staffing accordingly. • The Panel queried whether the delegated schools budget was adequate and how post-16 education was being funded. • Members asked whether the Council was pushing ahead with expensive school capital projects without reviewing their long-term viability. • Clarification was sought on the use of statutory powers, such as warning notices and removal of financial delegation, in schools with budget deficits. • Members asked whether the “team around the school” approach was effective in supporting financial recovery. Officers and Cabinet Members responded to concerns about school budgets by confirming that the delegated schools budget was currently fully funded and therefore excluded from the wider savings process. However, they acknowledged that many secondary schools had not adjusted their operations to reflect falling pupil numbers, which had led to financial pressures. The Education Portfolio Holder stated that transformation of the school estate was essential but would require significant capital investment. Officers confirmed that the Council used statutory powers such as notices of concern and warning notices to support schools in financial difficulty. These powers were deployed intelligently and accompanied by a “team around the school” approach to ensure tailored support. Officers also highlighted ongoing work to improve curriculum planning and resource sharing across schools. Council Tax, Fees and Charges • Members asked why a 5% council tax increase had been used for modelling and whether this figure was justified. • Questions were raised about the impact of council tax increases on low-income households and how affordability was being considered. • The Panel queried whether fee increases were linked to inflation or actual cost of service delivery. • Members asked whether higher fees could lead to reduced service usage and lower income, particularly in areas like car parking. • Clarification was sought on the Council Tax Reduction Scheme and how it affected net income from council tax. Officers explained that the 5% council tax increase used in modelling was a placeholder and would be reviewed once the settlement figures were known. They confirmed that affordability was a key consideration, particularly for low-income households. The Council Tax Reduction Scheme was factored into financial planning, and officers noted that only around half of households paid the full council tax rate. In relation to fees and charges, officers stated that the Council aimed for full cost recovery, with adjustments based on inflation and service delivery costs. They acknowledged that excessive fee increases could reduce service usage and confirmed that such impacts were considered during budget planning. Energy, Fleet and Real Living Wage • Members asked whether the transition to electric vehicles and changes in vehicle excise duty had been factored into financial planning. • Questions were raised about the Council’s energy procurement strategy and whether switching suppliers would result in savings. • The Panel queried whether all contractors were paying the Real Living Wage and how this affected contract costs. • Members asked when the new Real Living Wage rate would be announced and how it would be incorporated into budgets. Officers confirmed that the Council’s energy procurement was managed through Crown Commercial Services, which provided greater purchasing power and price stability. They noted that energy prices were fixed in advance of the financial year but acknowledged that future volatility remained a risk. The transition to electric vehicles and the introduction of vehicle excise duty on such vehicles were being considered within service-specific FRMs. Regarding the Real Living Wage, officers stated that not all contractors were currently compliant, but efforts were being made to ensure consistency, particularly in the social care sector. The Council used the previous year’s rate until the new figure was announced, typically in December. Asset Management and Capital Receipts • Members asked whether the Council was moving quickly enough to dispose of surplus assets and generate capital receipts. • Questions were raised about the status of the County Farms policy and whether the moratorium on sales was affecting financial resilience. • The Panel queried whether buildings requiring significant investment were being sold and how essential assets were being replaced. • Members asked whether the maintenance programme had slipped and whether early intervention could prevent costly repairs. • Clarification was sought on the publication of the asset review and whether shared use of buildings was reducing liabilities. Officers confirmed that the County Farms policy was out for consultation, with a Cabinet decision expected in January. They acknowledged that the moratorium on farm sales had affected capital receipts and increased borrowing requirements. Officers stated that some farm properties were not in lettable condition and required significant investment, which made disposal a more viable option. The Council had established an asset working group to accelerate disposals and reduce liabilities. Officers noted that shared use of buildings, such as with the police and Brecon Beacons National Park Authority, was helping to reduce costs. Maintenance priorities were being guided by available funding and service needs, but it was accepted that early intervention could prevent more costly repairs. Financial Resilience and Benchmarking • Members asked whether Powys’s level of reserves was sufficient and how it compared to other Welsh local authorities. • Questions were raised about the use of benchmarking data to assess financial resilience and borrowing costs. • The Panel queried whether usable capital receipts were being accurately reported and whether deferred receipts were included. • Members asked whether the Council was learning from financial failures in other authorities and applying best practice. Officers stated that Powys remained in a relatively robust financial position, although reserves were lower than many other Welsh authorities. The Council continued to maintain a 4% general reserve policy. Officers confirmed that benchmarking data on reserves and capital receipts had been included in the report, although some figures were based on older datasets. They agreed to review and update the graphs to ensure accuracy. The Panel was informed that the Council was learning from financial failures in other authorities, with recent analysis from CIPFA highlighting common risks such as underdeveloped transformation programmes, failure to deliver savings, and depletion of reserves. Officers confirmed that Powys was actively monitoring these risks and implementing best practice. Panel Recommendations To Cabinet: Panel made the following observations: The Panel noted that: • Inflation had slowed but continued to impact the cost of delivering council services. • A 1% increase in pay inflation equated to an additional £2.3 million pressure on the budget. • The Council’s assumptions for inflation were set at 2% for both pay and non-pay, though these were under review. • Gilt yields were approaching 4.8%, significantly affecting borrowing costs. • The Welsh Government’s draft budget was due on 14 October, with an update expected on 4 November, ahead of the UK budget on 26 November. • The Council’s total income was approximately £60 million, with fees and charges based on full cost recovery plus inflation. • Less than 50% of households paid full council tax, with the current yield exceeding £100 million. • Powys received more in business rates than it collected, making it a net beneficiary. • The Council owned approximately 650 assets valued at £492 million, excluding social housing. • The capital programme’s debt servicing cost was around £12–13 million per year. • The Council’s usable reserves were relatively low compared to other Welsh authorities. • The Budget Advisory Group had been established to allow cross-party input into budget planning. The Panel welcomed that: • Greater detail was provided within the Service-specific Financial Resource Models (FRMs), yet improvement could still be made. • The Council was transitioning to LASER energy procurement via Crown Commercial Services in 2027. Officers to provide further detail on fuel, in terms of fixed priced contracts. • The “team around the school” approach was being used to support schools in financial recovery. • The Wave 3 ALN strategy aimed to increase specialist places and build capacity within schools. • Shared use of buildings (e.g., with the police) was helping to reduce liabilities. The Panel requested that: • Early confidential access be granted to draft FRMs for scrutiny purposes. • Benchmarking data be provided on borrowing costs as a percentage of revenue across Welsh authorities. • The full 10-year capital programme be published to improve transparency and public understanding. • Clarification be given on what constituted “standard” in asset disposal criteria. • More detailed FRMs be shared for each service, including inflation assumptions and cost pressures. • The impact of savings proposals be monitored and reported, particularly in relation to original impact assessments. The Panel remain unconvinced of: • The realism of the inflation and settlement assumptions used in the FRM, particularly the 2% inflation and 1.3% annual settlement increase. • The deliverability of all proposed savings, especially those scheduled for future years. • The current 5 year capital programme showing a clear vision of how capital spend could deliver revenue savings, as opposed to the full 10-year capital programme which would improve transparency and public understanding of the Council’s long term vision. • The adequacy of the £4 million maintenance budget for the County Farms estate. • The pace and effectiveness of the Council’s asset disposal strategy. The Panel expressed concern of: • The affordability of the capital programme given current borrowing costs and limited capital receipts. • The condition of secondary schools and the feasibility of recovering their budgets under current funding levels. • The impact of falling pupil numbers on school budgets and the need for transformation. • The lack of early intervention in building maintenance, leading to higher long-term costs. • The Council’s ability to dispose of assets due to high refurbishment costs. • The Council’s financial resilience amid economic volatility and policy constraints. Panel made the following Recommendations to Cabinet: • That service-specific Financial Resource Models (FRMs) be shared with Members as soon as they were available, to support scrutiny and budget planning. • That benchmarking information be provided to compare Powys County Council’s borrowing costs as a percentage of revenue against other Welsh local authorities. • That assumptions within the FRM, particularly around inflation and settlement figures, be kept under regular review and adjusted based on emerging data and comparative analysis. • That the Council considers the affordability and prioritisation of the capital programme, especially in light of limited capital receipts and rising borrowing costs.
Noted.
Noted.
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