Agenda item

This report provides an update to the Council’s Financial Strategy and the 5 year Financial Model, which underpins the Council’s financial planning for the medium term forecasts, in preparation for the forthcoming financial year’s budget.

The Chairman drew members attention to a proposed amendment to the recommendations that had been circulated by Cllr Brown shortly before the start of the meeting, stating he wanted to ensure that the Committee had enough time to properly reflect on any implications there may be in considering this amendment.

Mr Ward presented the report to members where he advised it contained the strategy to underpin the Budget for the next financial year. As a result of the financial impacts of the pandemic, the current year’s (2021/22) budget was set for the first time using the General Fund reserves to help balance the budget, just over £2miliion was used for this purpose. The use of the future services framework is intended to gradually bring this back to a balanced position over the medium term but was likely the Council would be using the reserves over the next couple of years. To help the Council cope with the financial impact of Covid, he reminded members of the report taken to Council last July (2020), which approved the release of £8million form the reserves. At the current time only £2milion of this has been used.

Drawing members attention to appendix 1 where the strategy is set out including the guiding principles which are fundamental to the Council’s resilience. The confidential appendix (appendix 2) has been updated to reflect the current assumptions, however he stressed to members that there was a huge amount of uncertainty within those assumptions. He explained that the Government had deferred the Fair Funding Review and was still waiting for the Annual Spending Assessment, the distribution of finances would be impacted after that review. There was a lot of cost growth within the model, the two big ticket items, members should be aware of are, separate food waste collection service and a potential to have to make the green waste collection service free of charge, the cost pressures of these alone could add over £1.5million to the Council’s annual revenue budget. In summing up he confirmed that it was expected that it will be necessary to use reserves to balance the budget for next year (2022/23) and the year after (2023/24), whilst the efficiency review is concluded. This year (2021/22) is the first year of the three-year efficiency saving period, of which we are expected to over deliver on this first year’s target. However, current projections indicate, even with the efficiency review the Council will still have a residual deficit in the budget at the end of the 5-year period, if, all of the projections within the model are implemented and impact on the Council’s financial position.

Moving to appendix 3, Mr Ward confirmed there was an inaccuracy within paragraph 6.12 he confirmed that the capital receipts had been excluded so the figures in appendix 3 were the actual cashable amounts of investment available to use regardless of whether asset sales proceed or not. He addressed that long term use of the reserves would be contrary to the financial principals of not using reserves to fund recurring shortfalls by reminding members that they approved the approach of balancing the budget over the medium-term, whilst the Council works through the efficiency review and the service prioritisation exercise. A report will be brought back to members in January 2022 on the outcomes of this work. He confirmed that a budget briefing task and finish group will be created and will meet after the Christmas break, when hopefully the draft settlement will have been received. It is unclear currently to know whether this would be a 1-year or a 3-year settlement. In appendix 1, he highlighted that the savings to date for the efficiency review are expected to be over £980,000. The Policy options included in the model are still yet to be fully considered as part of the future services framework, however, those that are likely to be considered as low priority may be removed from the model, which would assist the financial position. The approved 5-year capital programme remains fully funded without the need to borrow.

The Chairman then invited members to ask any questions which are summarised below;

• It was asked what the Council’s underlying reserve position was, as concern was raised on the revised reserve position detailed in appendix 2. It was confirmed that if you remove all other commitments such as the Capital Programme, any monies set aside for specific purposes, there is still £10.6million available, however the recommendation before members today is to maintain a minimum balance of no less that £4million, so the Council would only be able to spend £6.6million of the £10.6million. The Gross reserves are £66.9million, but only £6.6million (over the next 5-years) is available to spend as the remaining funds have commitments attached to them.
• Clarification was sought on the assumptions of the car park income, compared with the year 2019/20, as the Council are currently running at 10% down on pay and display income, season ticket income is down 60%. It was confirmed that the income had been based on the current year 2020/21. Appendix one sets out the inflationary increases and next year is set at 3% inflation on costs and income for next year, but this was an adjusted figure.
• It was asked when would the Council have a definitive answer regarding possibly paying for food and garden waste? It was confirmed that it is expected a clearer indication would be given or a decision next year (2022).
• It was queried where do we see the effect of not making any attempt to close the budget? It was confirmed that this could be seen at the projected deficit (surplus) figures in appendix 2.  

Cllr Brown was invited to present his proposed amendment to the Committee. The amendments and additions are highlighted in bold;

The Committee recommend to Cabinet that:

3.1 The key financial principles (as amended) which underpin the financial management of the Council, and the 5 year Financial Strategy set out in Appendix 1 Annex A to the agenda report.

3.2 That the Council maintains a minimum level of reserves of £4m for general purposes.

3.3 That, with expert professional advice, the Council creates a new Commercial Property Investment Strategy that would take advantage of the preferential long term lending rates of the Public Works Loan Board (PWLB) to generate additional income, avoid the need for service cuts and, where possible, to improve the public realm.

That the Committee:

3.4 Notes the updated 5 year Financial Model in appendix 2 (Part 2) and the resources statement in appendix 3 to the agenda report.

3.5 Nominates 3 members of the Committee to attend the Budget Briefing Task and Finish Group.

3.6 Tasks the Economic Development Panel with overseeing the writing of the new Commercial Property Investment Strategy.

The Chairman expressed his dissatisfaction regarding the amendment proposed given its timing, he then sought advice from Mr Ward regarding the options to defer this proposal, where Mr Ward advised that he would be within his right as Chairman to reject this proposal as it had not followed the Motions protocol or he could defer it to another meeting of the Committee for consideration at a future meeting. The Chairman then asked Cllr Brown if he would consider withdrawing his proposal on the basis that it goes through the Economic Development Panel (EDP) first and then comes back to this Committee as formal proposal. Cllr Brown stated he would consider withdrawing his proposal but wanted to hear comments from this Committee today. Members then took part in a full debate on the proposal, officer advice was provided in response to the points raised. It was then agreed with Cllr Brown that his proposal would be withdrawn and deferred to a future meeting of the EDP with agreement from the Chairman of the EDP. Some members of the Committee were keen to ensure that their concerns were passed to Cabinet that consideration be given in the financial strategy for opportunities to invest to create additional revenue. The Chairman then advised Cllr Brown no further amendments would be considered and referred members to the original recommendation’s detailed in the report.

Cllr Johnson left the meeting.

In the vote the Committee agreed the following recommendations and resolutions;

The Committee RECOMMEND to Cabinet

1. that the key financial principles which underpin the financial management of the Council, and the 5-year Financial Strategy set out in Appendix 1 Annex A to the agenda report.
2. that the Council maintains a minimum level of reserves of £4m for general purposes.

The Committee RESOLVED to

3. note the updated 5-year Financial Model in appendix 2 (Part 2) and the resources statement in appendix 3 to the agenda report; and,
4. nominate Cllr Barrie, Cllr Brown and Cllr Palmer of the Committee to attend the Budget Briefing Task and Finish Group.

Cllr Palmer left the meeting.