Orkney Islands Council

Revenue Budgets

2024/25

IMAGE: Cover showing the words “Orkney Islands Council”, “Revenue Budgets” and “2024/25” over a photograph of an ornate historic stone doorway.

Revenue Estimates

Contents

• Foreword by Head of Finance — page 1
• 1 General Fund Budget Strategy & Assumptions — page 4
  • Strategy and Assumptions — page 5
  • Approved Budget Calculation 2024/25 — page 9
  • Council Tax Calculation 2024/25 — page 9
  • Summary of Approved Service Pressures 2024/25 — page 10
  • Summary of Settlement Adjustments 2024/25 — page 11
  • Summary of Efficiency Savings 2024/25 — page 12
• 2 Service Committee Budgets — page 13
  • Service Committee Summary — page 14
  • Development and Infrastructure — page 15
  • Education, Leisure and Housing — page 17
  • Policy and Resources — page 19
  • Harbour Authority Sub-Committee — page 21
  • Asset Management Sub-Committee — page 21
  • Investments Sub-Committee — page 22
  • Pension Fund — page 22
• 3 General Fund Service Budgets — page 23
  • General Fund Summary — page 24
  • Central Administration — page 33
  • Education — page 38
  • Leisure Services — page 45
  • Orkney Health and Care — page 53
  • Law, Order and Protective Services — page 60
  • Roads — page 61
  • Transportation — page 66
  • Operational Environmental Services — page 70
  • Environmental Health and Trading Standards — page 74
  • Other Housing — page 76
  • Economic Development — page 80
  • Planning — page 83
  • Other Services — page 85
  • Sources of Funding — page 91
• 4 Housing Revenue Account — page 92
  • Housing Revenue Account — page 93
• 5 Harbour Accounts — page 95
  • Scapa Flow Oil Port — page 96
  • Miscellaneous Piers and Harbours — page 100
• 6 UHI Orkney — page 104
  • UHI Orkney — page 105
• 7 Corporate Holding Accounts — page 108
  • Corporate Holding Accounts — page 109
• 8 Strategic Reserve Fund — page 112
  • Strategic Reserve Fund — page 113
• 9 Pension Fund — page 117
  • Pension Fund — page 118
• 10 Glossary of Terms — page 120

Foreword by Head of Finance

Introduction

The Local Government Finance Act 1992 is the legislative basis for the current system of local taxation, namely Council Tax. The Council is required to set a balanced budget by the 11 March in the financial year preceding that for which it is set. The revenue budget for the financial year 2024/25, commencing 1 April 2024, was agreed on 11 March 2024 with the Council Tax Band D level remaining at 2023/24 level, of £1,369.21.

Level of Expenditure

The net revenue budget for 2024/25 stands at £112.303m.

General Fund services were asked to identify any efficiency savings, detailed on page 12, for financial year 2024/25. In addition, whilst recognising the need to balance the budget and bring spending into line with available funding, a number of service pressures were approved for inclusion in the revenue budget. Service pressures are detailed on page 10. Settlement Adjustments are detailed on page 11.

Document Structure

The Strategy and Assumptions on page 5 were presented to the Policy and Resources Committee on 27 February 2024, and agreed by Council on 11 March 2024. These include the Council Tax calculation and the allocation of approved service pressure and savings across General Fund Service Areas.

The Service Committee Budgets on page 13 provides a budget summary by service committee. This includes details of all General Fund and Non-General Fund services.

The General Fund Service Budgets on page 23 details the General Fund Revenue Estimates, beginning with a Service Committee Summary then Service Area Summary, which includes a summary by Service Function. More detailed Service Area budgets by Subjective Group then follow.

The Housing Revenue Account on page 92 deals with the Housing Revenue Account.

The Harbour Account on page 95 deals with the Harbour Accounts: Scapa Flow Oil Port and Miscellaneous Piers and Harbours.

UHI Orkney on page 104 deals with the UHI Orkney Account.

The Corporate Holding Accounts on page 108 deal with the budgets for General Fund and Non-General Fund Repairs and Maintenance to properties, General Fund and Non-General Fund Ground Maintenance costs and Utilities, Insurance, Telephones, Photocopiers and Postages holding accounts.

The Strategic Reserve Fund on page 112 deals with the Strategic Reserve Fund.

The Pension Fund on page 117 deals with the Pension Fund Account.

A Glossary of Terms is provided at page 120.

Definition of Key Terms

The estimates have been prepared using the format of the Council’s financial ledger system, which reflects the standard classification of local authority income and expenditure as recommended by the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authorities (Scotland) Accountancy Advisory Committee (LASAAC).

Each of the constituent elements of the 2024/25 budget total are shown to enable both reader and budget holder to quickly see what makes up the budget figure presented.

The budget figures given cover eleven separate datasets, ranging from Approved Budget 2023/24 through to Approved Budget 2024/25.

These eleven datasets or columns of information are split between two distinct groupings which cover the two financial years 2023/24 and 2024/25.

The details show the full year revenue costs of providing General Fund, Housing Revenue Account, Harbour Authority, UHI Orkney, Corporate Holding Accounts, Strategic Reserve Fund and the Pension Fund.

Definition of Key Terms (cont.)

The following terms are used throughout the estimates with the undernoted definitions:

More detailed descriptions of each element within each of the Subjective Groups now follow:

Subjective Group (Expenditure)

Subjective Group (Income)

Erik Knight

Head of Finance

May 2024

General Fund Strategy and Assumptions

1 The Budget Strategy

1.1

The Council agreed and set the General Fund budget and Council Tax for 2024/25 based on the allocations in Finance Circular 08/2023. The Council’s settlement from the Scottish Government was confirmed in Finance Circular No 2/2024 at £96.360m as set out in the table below.

1.2

Accordingly, the General Fund revenue budget for financial year 2024/25 has been set at £112.303m, a decrease of £0.121m from that reported in February 2024. The changes are as follows:

1.3

Budget uprating assumptions, detailed below, were agreed during the 2024/25 budget setting process.

2 Headline Grant Settlement Figures

2.1

At Council level, the settlement has delivered an increase in the revenue grant that will be received of £6.425m, as illustrated below:

Represented by:

*New Money:

3 Projected Spending Pressures

3.1

As part of the budget process for 2024/25 service pressure bids were invited for “known unavoidable service pressures”. These fall into three general groupings:

• Contractual obligations, where, for example, contracts include terms which apply inflationary increases.
• Historical funding deficiencies, in recent years this has included funding nursery provision, Braeburn and Out of Orkney Placements.
• Budgets becoming detached from actual performance, i.e. school meals – where it is unrealistic to maintain school meals income targets when government policy is to provide more free school meals.

3.2

The approved spending pressures, totalling £6.645m, can be found on page 10.

4 Reserves and Balances

4.1

The General Fund Reserves Strategy report presented to the Policy and Resources Committee at its meeting of 27 February 2024 stated that it was anticipated that there will be no excess General Fund reserves to contribute to the 2024/25 budget setting.

4.2

The General Fund Reserves Strategy report recommended that General Fund non-earmarked balances for 2024/25 be set at 2% of the net revenue budget for 2024/25, with a minimum balance of approximately £2,250,000 as a contingency for in-year pressures.

4.3

In setting the revenue budget for 2024/25, a contribution of up to £20.0m of the investment income, or interest, that would be earned on the Strategic Reserve Fund be budgeted as a means of cushioning efficiency targets/requirements, and to maintain and protect spending and services which might otherwise have been reduced or removed when setting the budget.

5 Council Tax

5.3

The budget announcement by the First Minister in October 2023, stated that Council tax rates will be frozen in the next financial year to support people struggling with the effects of high inflation. The budget report to Policy and Resources Committee on 27 February 2024 recommended a 10% increase subject to the Scottish Government making additional funds available to enable the Council to agree to the First Ministers announcement.

5.4

The Council meeting of 11 March 2024 confirmed additional funding had been allocated to the Council. The Council Tax freeze meant the Council Tax bands for 2024/25 remain the same as 2023/24. A full breakdown of the calculation is shown on page 9.

6 Efficiency Savings for 2024/25

6.1

As part of the budget setting process for 2024/25, Services were asked to present proposals for increasing charges, implementing efficiencies or for service redesign. A long list of proposals was received, however, on review it was evaluated that many of the proposals were operational changes which would aid in budgetary control, as opposed to freeing up corporate funds. This, together with other factors, like time to implement, has resulted in only £2.163m of efficiency savings being identified that can be applied to the 2024/25 budget.

6.2

The full list of savings is included on page 12.

7 Target Savings and Future Savings Proposals

7.1

The current level of budgeted expenditure is more than can be sustained through the ongoing support from Scottish Government and locally raised revenue from Council Tax and fees and charges. There is also a high level of risk inherent in propping up the budget through contributions from reserves.

7.2

There is a requirement for significant and real savings to be made if the Council budget is to remain sustainable in the medium term. As such each Service has been allocated savings targets which it is recommended forms part of their budget, and budget monitoring. Each Directorate has a Directorate Delivery Plan (DDP), within which the efficiency savings identified by services during the 2024/25 budget setting process should form the starting point for the detailed operational service plans, recommended by the Accounts Commission Best Value report, to put their finances on a more sustainable footing. The implementation of the financial action plans will assist services in meeting their savings targets. Services will be required to build on and develop full recovery plans to meet savings targets.

7.3

Directorate savings targets are recommended to be set as follows for 2025/26, 2026/27 and 2027/28:

IMAGE: Table titled “Strategy and Assumptions” showing directorate savings targets for 2025/26, 2026/27 and 2027/28, with totals of £2.000m, £3.000m, £4.000m and £9.000m respectively.

7.4

These efficiencies are required in addition to the actions to bring spending into line with the current budget. The savings are calculated as a pro-rata basis against gross budgets for 2023/24 (less ring-fenced grant funding).

8 Charging for Services

8.1

The February budget report recommended, subject to usual exceptions, that Corporate Directors should look to review and increase existing charges by a minimum of 6.7% (in line with Consumer Price Index at September 2023) from 1 April 2024, if it is possible to do so.

9 Revenue Budget Summary

9.1

A summary of the net budget movement between 2023/24 and 2024/25 is set out below.

Represented by:

IMAGE: A page headed “Strategy and Assumptions” containing a table of directorate savings targets and a revenue budget summary. The table shows totals of £2.000m for 2025/26, £3.000m for 2026/27, £4.000m for 2027/28 and £9.000m overall. The revenue budget summary shows an overall budget increase of £11.526m, represented by movements in gross revenue grant, non-domestic rates, Council Tax, General Fund reserves and the Strategic Reserve Fund.

Approved Budget Calculation 2024/25

Council Tax Calculation 2024/25

Band D Council Tax 2024/25: £1,369.21

Summary of Approved Service Pressures 2024/25

Summary by Service Area

IMAGE: Table titled “Summary of Approved Service Pressures 2024/25”. It lists approved pressures by service area, with the largest amounts for Orkney Health and Care (£2,177.2 thousand), Education (£1,912.8 thousand) and Transportation (£956.5 thousand), and a total of £6,644.8 thousand.

Summary by Item

IMAGE: Table titled “Summary by Item” listing budget increases including Transportation Service Level Agreements (£473.0 thousand), Braeburn Childcare Provision (£431.8 thousand), Outwith Orkney Placements (£545.0 thousand for SC and £475.0 thousand for ED), and Staffing (£3,299.3 thousand), with a total of £6,644.8 thousand.

Summary of Settlement Adjustments 2024/25

Summary by Service Area

Summary by Item

IMAGE: Table titled “Summary of Settlement Adjustments 2024/25”. It shows the largest settlement adjustments as Transportation (£3,262.0 thousand), Education (£2,255.0 thousand) and Orkney Health and Care (£1,044.0 thousand), with a total of £6,584.7 thousand.

Summary of Efficiency Savings 2024/25

Summary by Service Area

Summary by Item

IMAGE: Table titled “Summary of Efficiency Savings 2024/25”. It lists savings by service area and item, including Pension Scheme Contributions (£959.3 thousand), Staff Turnover 1% (£815.5 thousand), Review Loans Fund Revenue Interest (£128.0 thousand) and Winter Maintenance (£70.0 thousand), with a total of £2,162.6 thousand.