Agenda item

The committee is asked to consider the attached report and to make recommendations to Cabinet on the Council’s five year financial strategy.

The Committee considered a report by the Head of Finance & Governance (copy attached to the official minutes). A revised Appendix 1 was tabled (copy attached to the official minutes).

Mr Ward advised members that the purpose of this report was to allow the committee to assess the financial strategy in terms of risk. The Government’s spending review announcement was due the following day so the timing was unfortunate. Officers’ assumptions were included regarding pay, pension and a council tax freeze over the next five years as well as anticipated savings. A surplus position was predicted over the next four years but not in the fifth year. Some of the risks to the Council include the achievement of EU set recycling targets, the localisation of business rates and phasing out the New Homes Bonus. An analysis was included of figures with a council tax freeze and without. There were a number of uncertainties – pay increases, welfare reforms and cultural grants with no further provision beyond 2018.

Mrs Hardwick asked for clarification of the operation of the business rate pool. Mr Ward advised that since April 2013 the business rate collection in the district was shared 50% with Government, 40% retained and 10% passed to WSCC (which receives 10% from each of its districts/boroughs). The Government decided that a 40% share (approximately £17m)was too high in comparison with our funding need so a levy was imposed removing all but £2m. In terms of growth the government also assessed 40% retention to be too high and so a levy is applied so we only retain 20% of the growth. The other 20% i.e. the levy that would have gone to Government is retained by the business rate pool and that money is spent on projects that would have an economic impact, either individually by Council or collectively. Finance officers assess the business case for projects and the West Sussex Leaders determine how the money is spent. The advantage of pooling for the Councils in the pool is worth an estimated £2m in 2015/16 that would otherwise have gone to the Government.

The types of projects coming forward include a bid for a West Sussex coastal tourism project and a request for a European Union (EU) Funding Officer based in WSCC to provide support to local authorities.

Mr Barrett asked whether we had a model in order to compete with wages in the private sector. Mr Ward responded that we undertake a review of salaries through South East Employers and had recently introduced some supplements for Chichester Contract Services (CCS) drivers and for Planning Officers. The cost of this, and a further similar amount has been built into the projections, however at this stage we were not sure where cost pressures may come from.

A number of services, but particularly Careline, had in the past suffered the effects of inflation in setting their fees as they are dealing with vulnerable customers often on limited income and were also struggling to expand the business. The Council has a Fees & Charges Policy and all services are required to break even unless there is a policy decision to subsidise the service. Careline was in a much stronger position going into next year’s budget.

Mr Ward advised that the minimum level of reserves had been set at £5m since 2010 representing 7% of the Council’s gross spend. He considered that £5m was a healthy and prudent level to maintain.

Mrs Hardwick questioned whether we had drawn against the Revenue Budget Support Grant of £1.3m. Mr Ward confirmed that there had been no need to draw against it; there had been discussion about whether or not to retain this in the budget this year, however once we had our detailed settlement it may be reconsidered by Cabinet.

Mrs Hardwick requested that in order to be able to review this model at Appendix 1 appropriately it would be useful to have some historic figures to set the context. Mr Ward agreed that this could be done and circulated to members separately.

RECOMMEND TO CABINET

1.    In the short to medium term the Council maintains a minimum level of reserves of £5m for general purposes.

2.    To maintain the current provision of £1.3m of revenue support to smooth the impact of funding reductions and volatility associated with the comprehensive spending review and full localisation of Business Rates.

3.    The Council should continue to aim to set balanced budgets without the use of reserves, although some use of reserves in the short term may be necessary.

4.    That in order to achieve a balanced budget over the medium term, officers should work up options for consideration by Cabinet to implement a new deficit reduction programme.