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Cabinet received report ES/0573 by the Cabinet Member with responsibility for Finance who, before presenting his report, paid tribute to officers for the immense amount of work that they had undertaken during the last few days, since the Chancellor's statement, and Councillor Cook drew members' attention to the additional Appendix B to the report which had been published at a late stage.
Councillor Cook reported that the Medium Term Financial Strategy (MTFS) provided a baseline forecast of income and expenditure and looked at the overall financial climate, including public finances and the local government financial environment.
At the end of the 2021/22 budget process, in February 2021, the Council would be required to approve a balanced budget for the following financial year and set the Band D rate of Council Tax. The report set out the context and initial parameters in order to achieve that objective and contribute towards a sustainable position.
In the MTFS, the key uncertainties over this period related to Covid-19 and the proposed reforms to the Local Government finance system – Business Rates Retention and the Fair Funding Review. Both had now been deferred by a further year until 2022/23.
On 21 October the Government announced that it would be issuing a One-Year Local Government Financial Settlement for 2021/22, which was now expected in the week commencing 14 December.
The draft MTFS for this period was attached as Appendix A. The draft MTFS would be continually revised with updates including those resulting from further budget monitoring forecasts and the provisional Local Government Finance Settlement.
Referring to Business Rates, the Cabinet Member with responsibility for Finance stated that the updated MTFS now included estimates for Business Rates income and related S31 Grant in Section 4.15 of the report. The position on Business Rates for 2021/22 was extremely uncertain due to Covid-19 impacts. This would be reviewed again following the Provisional Finance Settlement and preparation of the NNDR1 returns.
East Suffolk was in an advantageous position under the current Business Rates Retention system and deferral of the reforms would enable the Council to benefit from another year of the current regime. This was estimated to constitute a financial benefit of £3.3 million to the Council in 2021/22.
Referring to the Council Tax Base, the Cabinet Member with responsibility for Finance stated that there was considerable uncertainty at the present time regarding the Council Tax base for next year and a cautious approach had been taken to the estimates included in the updated MTFS.
As a result of Covid-19, there was likely to be a larger-than-normal deficit on the 2020/21 Collection Fund for both Council Tax and Business Rates. New regulations had been introduced for the repayment of collection fund deficits arising in 2020/21 to be spread over the next three years rather than the usual period of one year.
Section 6 summarised the forecast position on the Council’s Reserves and Balances. The table in Section 6.8 did not include use of reserves to address the updated budget gaps as presented in Appendix A3.
Finally, Section 7 summarised the latest draft of the Capital Programme, which would be the subject of a separate report to the Scrutiny Committee on 17 December and to Cabinet on 5 January.
The one-year Spending Review 2020 was announced on 25 November 2020 and contained measures in response to the financial impacts of the Covid-19 pandemic that related to local government. Supplementary Appendix B provided an update on some of these developments and their potential impact on the Council. These measures would be outlined in more detail in further guidance and the Provisional Local Government Finance Settlement.
Although at this stage details were limited in some areas, the following new measures were all welcome developments in supporting the Council in meeting the financial challenges presented by the pandemic: Covid-19 Support Funding; extension of the Lost Income Reimbursement scheme for 3 months; Tax Income Guarantee Scheme; and Council Tax Support.
In addition, the Spending Review contained announcements regarding important longer term economic and infrastructure initiatives including a new Levelling Up Fund and Flood and Coastal Erosion funding.
Overall, these developments, and the Council’s robust reserves position should enable it to meet these challenges and develop its response to both the pandemic and the goal of financial sustainability.
The Leader stressed the importance, when looking at budgets, and this he said was stage one of a significant budget setting process, to remember that not only did the budgets impact on the Council, they also impacted on residents, council tax payers and business rates payers across the whole district. It was factual, the Leader stated, that many residents had seen a reduction in their incomes and many more were worried about their future financial security due to the pandemic situation.
The Leader stated that the Council's fight against Covid-19 would not stop ESC delivering against its ambitious plans, and nor would it prevent or stifle the delivery of vital services delivered by ESC. The Leader referred to the reserves held by the Council and said that these were put in place for a "rainy day"; that "rainy day" was apparent now, not only for councils but, more importantly, for individuals, residents and families.
The Leader asked that, as ESC moved through the budget setting process, could the Council seriously look at implementing a zero rate increase in Council Tax for residents; he appreciated that this would be the district council's proportion of Council Tax and that ESC had no influence over partner organisations. He felt that it would be a huge help to many residents if ESC could look at not increasing Council Tax for the next year; however, he appreciated that this would provide some challenges. In response, the Cabinet Member with responsibility for Finance commented that he was very mindful of the comments made by the Leader and, because of that, he and officers had undertaken a piece of work to evaluate the potential cost and what it would mean for forward planning etc. The Cabinet Member stated that he would very much like to have an aspiration of announcing at Full Council in January a Council Tax freeze for the year 21/22. However, at this stage, with so many uncertainties, that would be subject to constant evaluation throughout the process. Based on those discussions, the Cabinet Member commented, he and officers were in a position to amend recommendation number 2 to include such an aspiration.
Cabinet Members welcomed the change to the recommendation and the wish to put the residents' concerns first.
Councillor Byatt, firstly, stated that he wholeheartedly supported the suggestion of a Council Tax freeze for 21/22. Councillor Byatt referred to paragraph 2.2 of the report, and fees and charges income, and asked if, in theory, £1m had been lost. In response, the Cabinet Member with responsibility for Finance commented that, in theory, that may be the case; however, the Council, through Covid, had also made some in-house savings through, for example, travel expenses and other utilities costs. Councillor Byatt, commenting in respect of the loss, added that it would be helpful if the public knew what the Council was having to deal with if there did have to be any cuts.
The Leader, in response, commented that the projects that ESC had said that it would deliver, would be delivered; the Council would continue to deliver all services, not only that it was required to deliver, but also those that it chose to deliver. As part of the budget setting process, ESC would ensure that services and projects were not cut. The Council was making benefits from savings that had been made and, where necessary, it would use reserves to ensure that any rise in Council Tax was kept as low as reasonably possible, the ideal being zero.
Councillor Byatt referred to paragraph 4.5 of the report, and that £5.2 billion had been allocated for flood relief etc, and the reference to 25 areas. Councillor Byatt hoped that ESC was one of the 25 areas.
Finally, Councillor Byatt referred back to the comments of the Leader in respect of a 0% increase and not having an influence over others, he suggested that it would be nice to suggest to towns / parishes that they might consider this in their precepts too. Officers, in response, referred to the updated appendix presented to Cabinet and the £670m that was referred to in respect of Council Tax support nationally. More clarity was required but it was currently understood that there would be a grant to councils in support of losses due to the reductions seen in the Council Tax base and it was understood that there might be the potential to pass some funding to town and parish councils. Further detail was awaited together with the quantum of funding.
Councillor Topping referred to Appendix A4 and the reference to the allocation of Government's emergency funding; she asked if this was money that had been given to the Council due to Covid-19. It was explained that that was the case. Councillor Topping referred to the unallocated amount and asked if this would need to be returned to Government; it was explained that there was a substantial amount of money that needed to be returned in respect of the first round of grants; however, the money for the second round of grants had already been sent by Government.
There being no further questions or debate the Leader of the Council moved to the recommendation in the report.
On the proposition of Councillor Cook, seconded by Councillor Gallant, it was by a unanimous vote
RESOLVED
1. That the draft Medium Term Financial Strategy attached as Appendix A of report ES/0573 be approved.
2. That it be approved that Members and officers develop proposals to set a balanced budget for 2021/22 and beyond, including a recommended freeze on the district element of Council
Tax in 2021/22 subject to further evaluation and analysis.
3. That it be approved that Members and officers develop proposals to continue the support and response to the Covid-19 pandemic.
4. That the draft Capital Programme as set out in Appendix A5 of report ES/0573 be noted.