The report and its first two appendices are at item 6 of the agenda (pages 16 to 32) for the Cabinet’s meeting on Tuesday 5 December 2017 and its third appendix is in the first agenda supplement (page 1).
The Cabinet made the following recommendations to the Council:
That the Council:
(1) Approves the key financial principles and actions of the five-year financial strategy set out in appendix 1 to the agenda report.
(2) Notes the current five-year Financial Model in appendix 2 to the agenda report.
(3) Approves that a minimum level of general fund reserves be set at £5m and the £1.3m provision for revenue support be maintained, having considered the recommendations from the Corporate Governance and Audit Committee.
(4) Approves that Chichester District Council participates in the West Sussex 100% Business Rates Pilot for 2018-2019 if the bid is accepted by the Ministry of Housing, Communities and Local Government or continues to participate in a West Sussex Business Rates pool for 2018-2019 if the pilot bid is unsuccessful.
(5) Notes the current resources position as set out in appendix 3 to the agenda report.
[Note Since the foregoing recommendations were made CIPFA has adopted an accounting standard which might have an adverse effect on Chichester District Council’s (CDC) budget for 2018-2019 and potentially on its reserves at 31 March 2019. This new accounting standard (IFRS9) applies to certain types of investments. Unless the government issues a statutory override, the impact would potentially be a charge to the revenue budget of £565,000 and an estimated loss in March 2019 of £3.65m. A full explanation of this was issued by the CDC’s Head of Finance and Governance Services by e-mail to all members on 8 January 2018. In order to address this financial risk and in the current absence of a statutory override Peter Wilding (Cabinet Member for Corporate Services) will propose at this meeting the replacement of recommendation 3 above with the following:
3 (a) That the £5m General Fund Reserve and £1.3m Revenue Support Reserve be combined to provide a £6.3m General Fund Reserve.
3 (b) That the draft 2018-2019 budget which will be considered by the Cabinet in February 2018 should provide for a £565,000 charge to revenue in respect of IFRS9 unless a statutory override is issued by the government in the meantime.
3 (c) In the event that the government issues a statutory override after the budget is approved in March 2018, officers shall review these allocations at 3 (a) and 3 (b) above and make recommendations to release potentially both the £1.3m and the £565,000 back to being available for investment purposes.]
Minutes:
The Council considered the recommendations made to it by the Cabinet at its meeting on Tuesday 5 December 2017, as set out on the face of the Council agenda, the details in respect of which were contained in the report and its first two appendices on pages 16 to 32 of the Cabinet agenda and the third appendix in the first agenda supplement.
In her introduction Mrs Hamilton (a) referred to the note on the Council agenda stating that recommendation (3) made by the Cabinet would be the subject of an amendment proposal and (b) advised that the text of recommendation (4) would be changed in view of the unsuccessful outcome of the bid mentioned therein, as a consequence of which the words ‘participates in the West Sussex 100% Business Rates Pilot for 2018-2019 if the bid is accepted by the Ministry of Housing, Communities and Local Government or’ were no longer applicable and so had been deleted.
Mr Wilding (Cabinet Member for Corporate Services) formally moved the Cabinet’s recommendations and this was seconded by Mr Dignum (Leader of the Cabinet).
Mrs Tull, the chairman of CDC’s Corporate Governance and Audit Committee (CGAC) commented that the recommendation to the Cabinet made by the CGAC at its meeting on 23 November 2017 (minute 161), and which had been approved in an amended form by the Cabinet on 5 December 2017 (recommendation (3)), was now to be the subject of a further amendment as explained in the Council agenda. She confirmed her support for the additional revision.
Mr Wilding introduced the report, which updated CDC’s financial strategy and plan for 2018-2019 and set the scene for the forthcoming annual budget. Whilst there was a degree of certainty due to being halfway through the four-year settlement with central government, some elements of CDC’s revenue stream were subject to the vicissitudes of the wider economy. He drew attention to the five-year financial model in appendix 2, which since 5 December 2017 had changed in certain respects. He summarised (a) what the model reflected, the council tax assumptions made and some of the more significant uncertainties and risks set out in para 4.16 of the agenda report; (b) the 13 key financial principles behind the financial strategy (appendix 1); (c) the resources position (appendix 3) which demonstrated that CDC was in a sound and sustainable financial state going forward; and (d) two key changes which had been identified while preparing the budget estimates: (i) the lower than anticipated income growth from the commercial programme board (revised down by approximately £150,000 for 2018-2019) and (ii) a general reduction in the current year planning fee income due to fewer large developments coming forward than expected (revised down by £250,000 for 2018-2019). He drew attention to and explained two other significant changes: (1) the receipt of the Draft Financial Settlement (three key factors meant there was a predicted surplus on the revenue budget of £1.4m) but subject to (2) the impact of adopting Accounting Standard IFRS9. It was the advent of (2) which had necessitated the tripartite amendment (3 (a), 3 (b) and 3 (c)) to recommendation 3. He outlined those amendments (details of which had been e-mailed by Mr Ward to all CDC members on 8 January 2018) and which he fully supported. If those amendments were approved, the projected £1.4m surplus for 2018-2019 would be reduced to approximately £0.8m, subject to the draft budget being finalised. He also explained the reason for the excision from the text in recommendation (4). In commending this prudent and conservative plan, which would continue to maintain CDC’s strong financial position and underpin the emerging budget, he thanked Mrs H Belenger (Accountancy Services Manager) and her colleagues for their hard work.
Mr Wilding, Mr Ward and Mr Dignum responded to questions and comments with regard to (a) the need for the £6.3m General Fund Reserve in revised recommendation 3 (a) in the context of IFRS9; (b) the case for an against whether CDC ought to bear in mind that if it increased council tax other precepting authorities would or might follow suit; (c) how the fall in planning fee income might affect the new urgent planning policy team appointments (agenda item 17).
Decision
On a show of hands members present voted in favour of the Cabinet’s recommendations, as amended in the case of (3) and (4), with none against and no abstentions.
The Cabinet’s recommendations as amended aforesaid were, therefore, carried.
RESOLVED
That:
(1) The key financial principles and actions of the five-year financial strategy set out in appendix 1 to the agenda report be approved.
(2) That the current five-year Financial Model in appendix 2 to the agenda report be noted.
(3) (a) That the £5m General Fund Reserve and £1.3m Revenue Support Reserve be combined to provide a £6.3m General Fund Reserve.
(3) (b) That the draft 2018-2019 budget which will be considered by the Cabinet in February 2018 should provide for a £565,000 charge to revenue in respect of IFRS9 unless a statutory override is issued by the government in the meantime.
(3) (c) That in the event that the government issues a statutory override after the budget is approved in March 2018, officers shall review these allocations at 3 (a) and 3 (b) above and make recommendations to release potentially both the £1.3m and the £565,000 back to being available for investment purposes.
(4) That it be approved that Chichester District Council continues to participate in a West Sussex Business Rates pool for 2018-2019.
(5) That the current resources position as set out in appendix 3 to the agenda report be noted.