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Agenda item

Medium Term Financial Strategy (2020/21 to 2022/23) and Initial 2020/21 Budget Considerations

Minutes:

Members were provided with an update regarding the Council’s latest Medium Term Financial Strategy (MTFS) forecasts for the years 2020/21 to 2022/23, including the targeting of resources to meet the Council’s priorities in 2020/21 and proposals for a range of savings required to balance the budget. 

The MTFS brought together all known factors affecting the Council’s financial position and its financial sustainability into one process.  This included the national funding context set by government.  A one year Spending Review in 2020/21 had been announced, with a primary focus on providing additional resources to local authorities with social care responsibilities.  Funding to address national homelessness, rough sleeping and town centre regeneration had also been announced.  The distribution of the additional resources to individual authorities was not yet known.  In addition, local authorities had been given powers to raise Council Tax by up to 2%, plus an additional 2% adult social care ‘precept’ before requiring a local referendum be held.  The MTFS assumed that the additional tax raising powers were fully utilised; however this had not yet been agreed by the Council.

There was considerable financial uncertainty in the forthcoming years - 2021/22 and 2022/23, particularly in relation to the arrangements for New Homes Bonus funding, the revised Business Rates retention system and the outcomes of the Fair Funding Review.  Therefore, years two and three of the MTFS had been modelled as a scenario, for planning purposes; however the position would remain under review in light of these ongoing unknown factors.

The Chair then invited comments and questions from Members.

During the course of the discussion, the following points were raised:

  • It was noted that a previous growth allocation for the street homelessness initiative had been removed, as the increased focus was on providing temporary accommodation to reduce the overall pressure on the housing service.  A Member queried how the temporary accommodation growth allocation would be funded.
  • A Member highlighted the continued roll out of Universal Credit, pressure on local food banks and welfare provision, and asked if any growth bids to address these issues would be considered. 
  • It was queried why the Housing Revenue Account had a net deficit budget of £2.871 million.  In response, the Committee was informed that this was a planned overspend and the deficit would be made up by a planned contribution from housing reserves.  Currently the income and expenditure were expected to have a neutral balance for the year.
  • Concern was raised regarding the Dedicated Schools Grant deficit of £7.2 million relating to special educational needs.  Members were advised that the Council did not have to take account of this deficit in setting its budget or when considering the robustness of its reserves.  In-line with guidance from the Department for Education, the Council did not include the deficit in the assessment of its current financial position.
  • It was noted that the Council currently had £8.2 million of General Fund Reserves and £4.2 million of earmarked reserves available.  Concern was raised that if the Council was unable to reduce the current projected overspend and was required to make a provision against the SCST’s brought forward deficit by 31 March 2020, the Council’s level of reserves would be significantly depleted.  Members were advised that if this scenario occurred, the Council could use General Fund Reserves and these would be replenished over the next few years.
  • Concern was raised regarding the level of write offs totalling £542.457.04 over the last three months.  A Member queried what actions had been taken to minimise the losses incurred by the Council.  It was explained that every effort was made to recover money owed; however sometimes the cost of recovery outweighed the value of the debt and therefore pursuing the debtor was not viable.  Write offs were requested as a last resort and as a matter of prudent auditing the Council was required to close down outstanding accounts.
  • With regard to SCST’s budget overspend and deficit, a Member asked what would happen at the end of the current contract with the Council in October 2021.  It was explained that Council officers had been working with SCST’s leadership team to support the organisation with initiatives to reduce the overspend by the end of the financial year and to ensure SCST’s finances were in a robust position at the end of the contract.

 

On behalf of the Committee, the Chair thanked the Service Lead Finance (Deputy Section 151) for the report and presentation.

Resolved – That the Overview and Scrutiny Committee noted:

(a)  The revised Medium Term Financial Strategy had been approved by Cabinet on 16th December 2019, as the basis for considering 2020/21 budget options.

 

(b)  The 2020/21 budget had been modelled on the basis of a Council Tax increase of 3.99% for 2020/21 (which included the government’s 2.00% adult social care precept) for resource planning purposes; the 3.99% was for modelling purposes only at this time.  The decision on the Council Tax to be set for 2020/21 would be made by Members in February 2020 and may not be at the maximum figure included in the MTFS once the budget work had been finalised.

(c)  The ongoing uncertainty regarding the extent to which the Council may retain a share of Business Rates growth and the way that central government assessed the authority’s need to spend in the future.  This had made medium term financial planning more difficult than usual.

 

(d)  The timing of the provisional local government finance settlement and that it would be announced later than normal (due to the 2019 General Election), so the time for scrutinising budget proposals would be less than usual.

 

(e)  The initial savings proposals (and additional income generation proposals) as they had been designed primarily to fund some of the additional 2020/21 spending pressures generated by SCST.

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