(See report at Agenda Item 7 (pages 28 to 37) of the Cabinet papers of 6 September 2016)
RECOMMENDED BY CABINET
That the Head of Finance and Governance be authorised to submit a request to the Department of Communities and Local Government for a four-year settlement and that this Deficit Reduction Plan is used as the basis for that request.
Minutes:
Mrs Hardwick (Cabinet Member for Finance & Governance), seconded by Mr Dignum, moved this recommendation from Cabinet. She stated that in May 2013 the then Cabinet had approved a Deficit Reduction Plan to yield £2.4m of savings and income, aiming to close an anticipated deficit in the then 5 year model. Since then through the hard work of officers and members the Council had achieved savings of £3.6m (over £1.2m more than expected through both revenue savings of £2.2m and additional income of £1.4m). Despite these achievements, the financial forecast remained challenging, with ongoing risks including the full localisation of business rates by 2020, New Homes Bonus likely to be reduced, a possible general downturn in the economy which would inevitably hit income streams and challenging amended waste and recycling targets. The latest five year plan model showed a predicted £2.5m deficit by 2021/22, assuming current policies are continued. If the Council recognises the further risks and cost pressures and agrees and implements the policy decisions, the predicted deficit would grow to £3.8m by 2021/22.
However Officers and Members have continued to develop plans for more savings and yet further income generation and these policies are modelled to generate savings and further income year on year rising to just under £3.9m by 2021/22. The model had assumed modest council tax increases but the need for this would be reviewed annually. In December 2015 the Government offered the Council a specific four year financial settlement if we submitted an ‘efficiency plan’ demonstrating that we could achieve a balanced budget, however if we did not take up this offer we were likely to achieve worse settlements year on year.
Mr Oakley queried the tax base growth rate of 1.1% and the level of housing delivery rate this would equate to; the costs or estimates of cultural grants when they transfer from being funded from reserves to revenue; and any other ‘unknown unknowns’ that could undermine the Council’s planned balanced budget. Mrs Hardwick advised that the model built in prudence at every level, however implicit in these figures were some uncertainties. Mr Ward confirmed that local government finance was going through a significant period of change. Moving from 50% to 100% localisation of business rates and the Government’s review of the Needs Assessment (effectively the baseline funding position) could create significant risk for the council. A prudent approach had been taken in forecasting. The tax base growth rate was not derived from housing numbers but the equivalent of band D properties and net of discounts e.g. council tax benefits. There was an item within the five year model for grants including cultural grants.
Mr Cullen queried whether it would be at the end of the four year period, when we had received our entire grant, that we could say that we hadn't achieved the savings. Mrs Shepherd (Chief Executive) responded that the model was reviewed quarterly and that there was a legal requirement that each local authority balance its books. This council had been particularly prudent. We didn’t use New Homes Bonus (NHB) which was a fairly unique position and we have money in reserves. As past records show we are able to react quickly if things change significantly. Mr Dignum added that the Council was being extremely conservative on business rates. In the current year we had earned about £3m from business rates and we were projecting ahead at a much reduced figure of £2.1m. Ever since he had held the Finance portfolio the NHB had virtually all gone into reserves. Even though we expect a sharp falling off, we were not using it for day to day spending but to support our communities.
Mr Dunn was confident that the council had laid down levels of prudential reserves and that it was comfortably in excess of the minimum requirements.
Mr Ransley, referring to the planned savings, queried whether we would be able to address not only those listed but others in future. Mrs Hardwick advised that the savings were considered quarterly and the Council’s Programme Boards were looking for new opportunities all the time.
Mr Oakley asked what incentive there was on local authorities to invest in the local economy if the return on business rates was negative. Mrs Shepherd replied that even if we can’t retain business rates we would still want to give our full support to businesses.
RESOLVED
That the Head of Finance and Governance be authorised to submit a request to the Department of Communities and Local Government for a four-year settlement and that this Deficit Reduction Plan is used as the basis for that request.