Agenda item

The Committee is requested to:

1.  Note the financial situation facing the council;

2.  Recommend to Cabinet that £8,070,000 be released from reserves to meet the in-year cost of the pandemic;

3.  Recommend to Cabinet that in the current circumstances the minimum level of reserves be reduced from £6.3m to £4m; and

4.  Recommend to Cabinet that the Council should work towards achieving a balanced budget over the next 5 years, using reserves to help balance the intervening years.

Mr Ward introduced the report.  The Committee was asked to risk assess the financial impact of Covid 19 to the Council and make a recommendation to Cabinet who would then make a recommendation to Council. 

It was noted that the Covid 19 Recovery Plan had been debated and endorsed by the Overview and Scrutiny Committee on 30 June 2020 and recommended to Cabinet who would then make a recommendation to Council.  He reminded the Committee of the exempt element of the report, concerning the Council’s 5 year financial model at Appendix 1. 

Earlier in the day the Government had announced a further round of financial assistance to councils specifically aimed at those losing income, which included this Council.  The allocations to each individual Council were yet to be announced.  However, the Government had advised that councils would pay the first 5% of any reduction in income and receive compensation at a rate of 75p in the pound for the remaining losses, which would assist the Council in the current financial year.

During the discussion Mr Ward responded to members’ questions and comments:

·      Insert “up to”  before “£8,070,000” in recommendation 2.1 (b)

·      With regard to the income generation, since the 2008 banking crisis the Council had taken more of a commercial approach.  A lot of work had been undertaken to generate income and because the Council had been so successful in this approach this additional income generated from fees and changes was now under threat.  This year’s efficiency review with managers would look at ways to reduce the budget by identifying ways to reduce costs and increase income.  It was unlikely that generating income on its own would solve the issue.

·      The intention was to pause, not cancel, the capital programme for schemes funded by the Council only.  Concern was raised by a member about the rationale for pausing these schemes as it would result in a decrease in investment in the community.  Mr Ward confirmed that it was correct that these schemes would not impact the Council’s £22.8 million reserves.  He explained the reason for pausing was because the financial implications of Covid 19 were not currently known and could be worse than anticipated in the Council’s financial model.  It protected the Council’s reserves beyond the £22.8 million until the exact financial implications were known.

·      A list of paused projects was requested for circulation to members, as there may be some that members considered should not be delayed.  Members were advised that the Accountancy Service was currently working on a definitive list of schemes.

·      It was confirmed that the financial model was flexible and allowed the Council to match priorities against any level of resources available to determine the future shape of the Council.   It would be for members to determine the amount of time available to implement a balanced budget when the future services framework was brought before Council during 2021.  However, if the adjustment period were extended beyond the proposed five years it would run down reserves further. 

·      With regard to paragraph 12.1, clarification had been received from CIPFA who had advised that the Council has powers to borrow short term for cash management purposes.  It could also borrow for the longer term, taking the Council into debt, and must be for a capital scheme, not as a way to manage the Council’s budget.  It was unlawful to borrow for revenue or speculative purposes to generate a return.  The revenue consequences of borrowing were explained, which would bring the revenue budget further into deficit if the Council borrows instead of using reserves.

·      The financial model assumed a £5 council tax increase, the maximum amount currently permitted by the Government announced annually.

·      With regard to the Economic Impact study, recommended by the Overview and Scrutiny Committee to Council, Mr Ward undertook to provide a written answer concerning the need to use consultants.

·      It was agreed that a paper on the Council’s borrowing would be produced for all members of the Council.  The report should include advice on the rules, the repayment schedules, how they could be applied in the context of the Counciland whether or not a commitment to borrowing fit with the Council’s overall structure and what it would mean for finances, including the minimum revenue provision requirement.  It should also include examples for members.  Mr Ward undertook to produce a paper on the Council’s borrowing to the next meeting of the Corporate Governance and Audit Committee.  

A proposal to include a further recommendation to Cabinet that the Council should prioritise the identification and development of new income generation ideas was made. Mr Ward advised that the proposal was straying into the Council’s Recovery Plan.  The point was well made but the Council had always had a focus on income generation.  If a sound and robust business case for any income generating scheme was made, members would be asked if they wanted to implement it or not.  If capital investment was required to fund such a scheme in order to generate revenue it would either be via borrowing with revenue consequences or by liquidating the Council’s investments resulting in lost interest.  Risk mitigation would need to be taken into account.  However, if members felt such a recommendation should be made to Cabinet they could do so and in any case officers were already considering new income generating ideas.

A vote to include a further recommendation to Cabinet that the Council should prioritise the identification and development of new income generation ideas, as set out above, was carried.

RESOLVED

That the financial situation facing the Council be noted.

RECOMMMENDATION TO CABINET

That the Corporate Governance and Audit Committee:

1)   Recommend to Cabinet that up to £8,070,000 be released from reserves to meet the in-year cost of the pandemic.

2)   Recommend to Cabinet that in the current circumstances the minimum level of reserves be reduced from £6.3m to £4m.

3)   Recommend to Cabinet that the Council should work towards achieving a balanced budget over the next 5 years, using reserves to help balance the intervening years.

4)   Recommend to Cabinet that the Council should prioritise the identification and development of new income generation ideas.