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The Scrutiny Committee received report ES/0653 which presented a draft General Fund Budget for 2021/22 and the updated Medium Term Financial Strategy (MTFS) as at January 2021. The report was introduced by the Cabinet Member for Resources. In introducing the report, the Cabinet Member reminded the Committee that it had considered the draft MTFS at its meeting on 17 December 2020. Since that meeting, the draft MTFS (at Appendix A to the report) had, he said, been continually revised and updated including changes resulting from the budget monitoring forecasts and the Provisional Local Government Finance Settlement announced on 17 December 2020. The Cabinet Member added that the report presented a balanced position for the current year and for 2021/22. This had been achieved, he said, by the use of reserves. The Cabinet Member added that, for the current year, £2.001m was being used from the In-Year Savings reserve. For 2021/22, the budget gap of £3.167m, was being met from the In-Year Savings reserve (£2.269m) and from the Business Rates Equalisation reserve (£0.898m). The Cabinet Member stated that this did mean that all of the In-Year Saving reserve had been committed. The Cabinet Member referred to Section 6 and Appendix A6 of Appendix A of the report which provided details on the Council’s reserves position; from April 2022 to April 2025, the average total on the Council’s Earmarked Reserves would be £27m, plus a General Fund Balance being maintained at £6m.
The Cabinet Member added that, at the end of the 2021/22 budget process, the Council was required to approve a balanced budget for the following financial year and set the Band D rate of Council Tax. Covid-19 had presented significant additional financial challenges to the Council and the outlook was, he said, very uncertain at this stage for both next year and the medium term. However, the Council’s robust reserves position had enabled it to meet these challenges; develop its response to the pandemic and the objective of maintaining financial sustainability; and freeze its element of the Council tax for 2021/22.
The Chairman, on behalf of the Scrutiny Committee, wished to formally record thanks to the Cabinet Member and the Officers within the Finance team for their hard work and endeavours in a particularly complex and challenging environment.
The Chairman invited questions.
Councillor Lynch referred to the funding streams which had been available during the pandemic in support of the Council and businesses and asked how the impact on balances would be accommodated once those streams ceased. The Cabinet Member replied that funds had been made available for a certain period initially, then extended and different criteria applied as circumstances changed, including the most recent lockdown period. The Cabinet Member replied that, to date, funds had been made available to the Council based on the information it had submitted to the Government and this path had also seen the funding streams renewed. The Cabinet Member asked the Interim Chief Finance Officer to comment on future safeguards around alterations to funding once the pandemic had ended.
The Interim Chief Finance Officer stated that Covid19 support funding was allocated to the Council in three streams - support to the Council itself for lost fees and charges; direct Covid19 support funding associated with losses to the Council's income streams such as Council Tax and Business Rates; and various other measures around specific lost income or additional costs incurred, for example the opening and closing of leisure centres. A second stream was associated with support to the community for example the Council Tax hardship fund and Business Rate relief. The third stream was support to businesses in the form of grants; the bulk of this did not feature in the Council's budget but it was responsible for allocating the funding stream.
Councillor Cloke referred to paragraph 3.3 of the report and asked how many empty properties were within each category; Councillor Cloke also asked if was possible to encourage owners to rent or sell the property rather than let it sit empty. The Cabinet Member for Housing responded that numbers were monitored regularly. He added that the Council's Private Sector Housing Sector worked in conjunction with the Anglia Revenue Partnership (ARP) to contact owners and put steps in place to try and bring houses back into use, if possible. The Cabinet Member added that there were often complex reasons for non-occupancy. The Interim Chief Finance Officer further advised that Council Tax premiums were, in themselves, an incentive to bring a house back into use as they were set at the maximum level. It was agreed that the number of properties for each category would be provided to the Committee outside of the meeting.
Councillor Coulam referred to the proposal to not increase Council Tax and suggested this would result in a cumulative loss to the Council with an impact over the next two to three years. The Cabinet Member for Resources replied that the pandemic had affected everyone, that funds had been made available to help where possible and that, as a policy decision, it had felt right to share the impact which residents were experiencing. He continued to say that whilst there would be a cumulative effect, the Council had saved c£310k in travel expenses during the pandemic so, he suggested, the position would be equitable. The Cabinet Member repeated that there had been a wish to not increase Council Tax to help residents and that, therefore, the budget had been prepared accordingly.
Councillor Beavan referred to the table at paragraph 6.6 (Appendix A), which indicated the current projected position on General Fund Reserves and Balances and included use of reserves to address the updated budget gaps, and asked if the proposed reductions in ear marked reserves were prudent. The Interim Chief Finance Officer said the main reason for the reduction was usage for the purpose required. Councillor Beavan asked if reserves were not maintained to mitigate risks and questioned again if the depletion of £15m was prudent. The Cabinet Member for Resources said that reserves had been used to balance this year's budget and the forecast for the next year. He added it was incumbent on the Council to replenish the reserves in coming months and years. The Senior Accountant added that the Housing and Home Reserves were funded by external funding which were bid for on an annual basis and must be used within a year. The Interim Chief Finance Officer, in response to Council Beavan's comment about risk, stated that some reserves were associated with risk and within the table at 6.6 these were included in the General Fund Reserves, the Business Rate Equalisation Reserves and the Corporate: Contingency/Service Requirements Reserves to a total of £17.5m. He added that this was a significant amount for a District Council to have and compared favourably with other local authorities.
Councillor Beavan said that hoped for income streams were not indicated in the report and if that meant reserves would be used. The Cabinet Member replied that amounts were not yet committed to. He added that reserves were ring-fenced for specific purposes and risk. He was confident that financial sustainability would be achieved, that the Council was in a robust position and could look to the future with positivity.
Councillor Deacon referred to paragraph 9 of the report which stated no other options had been considered appropriate to achieve the statutory requirement of a balanced budget. He asked if other options had been fully considered. The Cabinet Member said that in the exceptional circumstances prevalent at the moment, when the Council was unable to increase its income or reduce its costs, there were no other viable options to achieve a balanced budget. The Interim Chief Finance Officer said that setting the budget was a statutory requirement and so there were no alternatives.
In response to a question from Councillor Coulam, the Cabinet Member said the General Fund Balance had been set at £6m and there was no need to increase it because it was over and above the funds earmarked for projects.
Councillor Gooch asked how the Council monitored changes in business projections and the overall percentage of business growth and shrinkage and if there was a likely impact on the retention of business rates. The Cabinet Member replied that the business world had been changed forever by Covid19; he said that business rates were subject to variances at the behest of Government. However, the Council undertook very regular reviews and the Officer team were fully aware of the need to effectively risk assess. The Interim Chief Finance Officer said that the mechanisms for monitoring and managing forecasting were regularly and extensively reviewed internally as well as nationally by the Ministry of Housing, Communities and Local Government. He continued to say that mechanisms existed to undertake effective horizon scanning to identify which sectors were in decline and which were growing, for example renewables. In response to a further question by Councillor Gooch, the Interim Chief Finance Officer confirmed that key economic factors were also being taken into consideration
Councillor Robinson, with reference to the Council's maintenance of General Fund balances at around 3-5% of its budgeted gross expenditure, asked if this was sufficient and how the figure had been arrived at. The Interim Chief Finance Officer said the parameters were at recommended levels set by CIPFA. He added that the 3-5% figure was dependent on the Council's exposure to expenditure levels.
The Chairman referred to paragraph 4.31 of the report which summarised the current position on the New Homes Bonus (NHB) Reserve and proposed use of NHB funding over the period of the Medium Term Financial Strategy - he asked if the indicated projection for 2024/25 of £3,606,000 was earmarked NHB monies or contingency in the event of risk. The Interim Chief Finance Officer referred to Appendix A3 which he said illustrated the areas which would be used for contingency; he added that the NHB reserve would be retained, in part, in case it was needed to support the budget.
Councillor Deacon referred to paragraph 8.1 and asked if the findings of the budget consultation survey on future financial sustainability had featured in the budget process. The Interim Chief Finance Officer said the short survey had focussed on general aspects of financial sustainability; the survey had been sent directly to town and parish councils and representative business organisations. He added that no specific budgetary proposals had been included. The Committee was advised that the issue of delivery of extra grant funding to the business community had been referred to in the budget consultation process. Councillor Deacon asked if the consultation had then made little difference. The Interim Chief Finance Officer said there was room for development and refinement in order to improve the consultation process so that it 'flagged' themes and specific proposals.
Councillor Topping referred to the proposal to freeze the Council's element of the Council Tax for 2021/22, she said that the proposal would be welcomed by many residents who had been badly affected financially by the pandemic and asked if the Council's shortfall as a result of the proposed freeze would be met from reserves next year. Councillor Topping also asked if a small increase, of say 1%, would help to protect reserves and suggested that the public would understand the need to protect front line services in future years. The Cabinet Member for Resources said other options had been considered. He added that there would be budget gaps in years 3, 4 and 5 but several areas were subject to Government legislation for which the figures were not yet known.
Councillor Beavan referred to Appendix A5, the summary of the General Fund Revenue Budget, and expressed his concern at the on-going gap; he asked if there was confidence that the gap of £6m per annum would be found to balance the budget each year. The Cabinet Member for Resources said it was not unusual to see such significant figures that far ahead and repeated that Government grant funds were as yet unknown. The Interim Chief Finance Officer added that the summary presented a worse case scenario with areas of uncertainty factored in; he added that assumptions had also been made about the regime for renewables. In the next couple of years the figures would be refined and he was confident would not be as bleak as the appendix perhaps indicated.
The Interim Chief Finance Officer said that within the 2021/22 budget some figures around Business Rates would need to be added before the Full Council meeting in February and he anticipated that this would significantly improve the position presented. The estimated calculation for this was c£1.5m.
The Chairman asked if the Government could amalgamate the various elements of grant funds at the point of allocation to Councils. The Interim Chief Finance Officer replied that it was anticipated that the Fair Funding Review might consider this.
Councillor Deacon, with reference to Appendix A1 Risks and Mitigating Actions, asked if there was a cumulative impact of the risks indicated and how this was being mitigated. The Cabinet Member for Resources said each individual risk was monitored by the Council's internal and external audit teams. The Interim Chief Finance Officer added that Reserves were the biggest mitigation of financial impact.
There being no further questions, the Chairman thanked the Cabinet Member and the Officers for a well-thought through and balanced budget in unprecedented and difficult times.
The Chairman moved to the recommendations which were proposed by Councillor Robinson, seconded by Councillor Coulam and by a majority vote it was
RESOLVED
That it be recommended to Cabinet and then to Full Council to:
1. Approve the General Fund Revenue Budget as set out in this report and summarised in Appendix A5 and notes the budget forecast for 2022/23 and beyond;
2. Approve the Reserves and Balances movements as presented in Appendix A6;
3. Approve that no further changes are made to Council Tax Discounts and Premiums for 2021/22;
4. Approve the Efficiency Strategy attached as Appendix B; and
5. Approve a Band D Council Tax for 2021/22 of £171.27.