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.

Mrs Belenger introduced the report which set out the financial strategy and the principles which underpinned the council’s approach to managing its financial matters and medium term financial plan. Part of that process was trying to understand the risks and how we could control and mitigate some of those risks. The council was currently in year three of a four year government settlement. 2019-20 was the final year of the settlement and thereafter officers had made assumptions based on best information. Part of that was underpinning the key financial principles and how we approach those future years with an unknown quantity.

One of the key financial principles set out in Appendix 1 relating to investment income had been amended. Last year the investment income from the property fund was used to support the deficit reduction plan. It was intended that the extra £8m we were placing in mixed asset bonds would also be used to close that gap. 

Mrs Belenger recommended that we maintain the £5m reserve and continued to maintain the provision of £1.3m of revenue support which would allow the council to smooth things in relation to business rates retention as localisation had some risks. The council has not used this reserve which was first earmarked in 2010 and she assured the committee that the reserves figure was there to help mitigate risks with the council’s spending plans.

The committee made the following comments and received answers to questions as follows:

·       Queried which elements of current fees and charges were susceptible to the economy. Certain areas such as green waste and car parks were subject to fluctuation. The council had a fees and charges policy setting out that the user pays for the service where it was not a statutory service. The increase in charges in 2017-18 had been 3%. An income of £16.4m had been achieved through our income streams. Officers did their best to forecast this figure based on a number of predictions. The council was working in a more commercial environment; officers were expected to look for new opportunities and services were expected to continually assess their charges.

·       Queried the point of entering the business rates pilot for 2018-19 if there was no impact on the model. There was no impact on individual authorities but as part of a wider pool the growth money that would have gone to the government would be available to the pool to invest across the county. The bid required to be submitted from an economic area and all authorities in West Sussex were part of that bid.

·       Queried whether certain areas would not get their full business rate return. Even with localisation there would still be a mechanism to redistribute business rate income to areas where need was greater. The mechanics had not yet been divulged.

·       Queried the current council tax premium payable on empty properties following the Chancellor’s announcement of the power to charge a 100% premium. The council currently has a zero council tax discount policy on empty homes.  

·       Queried the principles behind the five year financial model. The model reflected a mixture of the most likely and most prudent scenarios. Sensitivity was not modelled in it. Income was continually monitored. Complex projects were monitored to ensure that income streams came into being at the same level as predicted. This model was updated regularly behind the scenes in order that officers could get a position statement for members’ decision. This strategy was officers’ best estimates taking a prudent approach.

·       Queried measures taken to ensure that parish councils consulted with their communities when developing bids for New Homes Bonus (NHB) grants. A certain amount of NHB funding was available to parishes each year. At present this funding was not in base budget but sat in the council’s reserves. Parish Councils were required to consult with their communities in order to bid for grants that would benefit their local areas.

·       Queried the extent to which the council was prepared for an increase in the bank base rate and the increase in mortgage rates payable by staff. In relation to pay settlements the council was going through a pay review and £300,000 has been built into the model to allow for fluctuations. The pay scheme would be revised with every post being reviewed against Hay criteria. The minimum wage had changed and would affect our pay structure, particularly the first pay band. Some services were struggling to appoint professional staff and there were potentially vacant posts. Use of agency staff would be considered taking account of budget provision available. Market supplements, ‘golden hellos’, relocation costs etc. were considered as part of recruitment benefits to encourage suitable applicants.

·       Queried whether the council invested in property in order to get a financial return instead of a social return. The council was investing in commercial and retail properties and not directly in housing. Property investments were carried out within the Chichester district in line with the criteria in the Investment Protocol and therefore the local economy was supported as a result. 

·       Queried the number of temporary staff in the authority at any one time – Mrs Belenger undertook to respond on this point. [Post meeting note: There were 74 temporary staff in September 2016; 71 in December 2016; 65 in March 2017 and 87 in September 2017]

RECOMMENDED TO CABINET

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

2)      That the current provision of £1.3m of revenue support be maintained due to a number of uncertainties and risks within the financial strategy model.

3)      That 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 monitor delivery of the agreed deficit reduction plan.