Decision details

In the absence of Mrs Hardwick, Mr Dignum (Leader of the Council), seconded by Mrs Tull, moved the recommendations of the Cabinet.

He commented that it was not the ideal time to be presenting a Financial Strategy because the Chancellor of the Exchequer had only just announced the comprehensive spending review, setting out the Government’s own plans for the next 4 years. It was not yet clear how the Council would fare compared with the average real reduction of 24% in Government funding for Local Government planned over the next 4 years. There were three components in that funding: New Homes Bonus (NHB), Business Rates and Revenue Support Grant.

NHB receipts could be cut by far more than 24%. The Government’s favoured option as it goes out to consultation was a 2/3 cut, probably from 2017/18.

Local Government as a whole would keep 100% of business rates receipts by 2020, but it was not clear what proportion the Council would retain of business rates collected by Chichester District Council.

Revenue Support Grant would, as expected, be reduced to zero by 2020 but the pace of elimination over the 4 years was not known.

Given these uncertainties, the 5 year Financial Model in Appendix 1 to the report was the best forecast that could be made at present. The underlying assumptions were that: no NHB would be received from new homes completed from 2017/18, but NHB from previous housing completions would be received for the full six years; no radical change was expected in business rates except the anticipated growth from new enterprises; Revenue Support Grant would fall steadily to zero by 2020/21.

The Model assumed no increase in Council Tax. Whether this would be sustainable in later years would depend on whether there were unforeseen cost pressures or income setbacks after 2017/18. On the current forecast, significant savings would be needed to offset a deficit in 2020/21. Major elements in the forecast included the expected gain if a decision was made to outsource leisure services, and a significant additional cost, perhaps of £700,000 per year from 2018/19, to meet the EU objective of 50% recycling by 2020.

On present forecasts, it appeared that an increase in council tax in 2016/17 would not be necessary, but no decision could be made until the Government policies were clearer. Moreover, not raising council tax had implications in later years. If the allowed 2% increase was not made then it was foregone forever; it could not be made up later.

All the Council’s policies conformed to the principles of prudent finance itemised in Sections 6 and 7 of the report.

Mr Dignum drew attention to paragraph 7.2(c) of the Cabinet report. The Corporate Governance and Audit Committee had endorsed the maintenance of a minimum level of general reserve of £5m.

Mr Plowman thanked the Council for making grants to parish councils from the New Homes Bonus. These grants had provided welcome capital for a number of projects, especially for young people, for which funds were not available from elsewhere.

Mr Dignum answered a number of questions from members, particularly in relation to business rates, and emphasised that the Chancellor’s statement left a number of major uncertainties. Whilst he agreed that business rates might increase in relative importance as a component of the Council’s income, he pointed out that the way business rates receipts were to be shared between local authorities was not clear. Mr Ward (Head of Finance and Governance Services) reported that currently the Council collected about £44m business rates a year, but retained only 5% of this, most of the remainder going to Government through tariffs and levies.

RESOLVED

(1)  That the key financial principles and actions of the 5 year financial strategy be as set out in paragraph 6 of the Cabinet report.

(2)  That the current 5 year Financial Model at Appendix 1 is noted.

(3)  That a minimum level of general fund reserves of £5m be set, having considered the recommendations from the Corporate Governance & Audit Committee.

(4)  That this authority continues to participate in a West Sussex Non-Domestic Rates (NDR) pool, until such time as the government fully localise NDR, at which point the situation will be reviewed.

(5)  That the current resources position, as set out in Appendix 2, be noted.

(6)  That a decision on the level of Council Tax for 2016/17 be deferred until the details of the Local Government settlement are known.