Agenda item

(Director of Resources) to consider and note the Financial Issues Report that initially went to the Finance and Performance Management Cabinet Committee on 20 July 2015.

The Assistant Director Accountancy, P Maddock introduced the Financial Issues Paper. This provided the initial framework for starting the 2016/17 budget and updated Members on a number of financial issues that would affect the Authority in the short to medium term. The following issues represented the greatest areas of current financial uncertainty and risk to the Authority, which included Central Government Funding, Business Rates Retention, Welfare Reform, New Homes Bonus, Development Opportunities, Income Streams, the Waste and Leisure Contracts and Transformation. The report took the Members through the General Fund Outturn for 2014/15, the updated Medium Term Financial Strategy (MTFS) and Continuing Service Budget (CSB).

·         It also went through Central Government funding, noting that over the three years of the new system, funding had reduced by £1.889m or 25.9%. The Local Council Tax Support reductions for 2016/17 were not yet available, so no figures could be recommended at this point. Therefore the same principle was applied as previous years;

·         Business Rates Retention had not gone smoothly with authorities taking on liabilities for all outstanding appeals. The deadline for appeals had been set at 31 March 2015, which had produced an influx of appeals and resulted in the provision required by the Council to be doubled to £3m. In addition a further flaw had created by where the General Fund and Collection Fund accounted for items in difference years, which created the appearance of more income in 2014/15 but in reality it was less. Therefore in 2016/17 the business rates deficit of £439,000 was significantly larger than the Council Tax surplus of £170,000, although this had been based on the provisions for appeals and could vary significantly from current predictions. This resulted in extensive financial modelling and an Essex pool was formed, which after the lower levy rate had been achieved, meant that an additional £3.431m had been retained across the pool and resulted in the Council gaining approximately £136,000. Although the late surge of appeals could effect the viability of the pool and this would have to be monitored;

·         Welfare Reforms would continue with changes to tax credits, a welfare cap, the requirement for social landlords to reduce rents by 1% each year for the next four years and the introduction of Universal credits;

·         New Homes Bonus (NHB) was approximately £230,00 for 2016/17, although it had been thought prudent to cap the NHB CSB figure at £2.2m and take any amount above that to DDF, when certainty about the future of the scheme and the figures were clearer;

·         Development Opportunities highlighted for the District were the retail park, Langston Road and the St Johns area in Epping. The income of MTFS had not been adjusted but the capital projections had, which made clear that the retail park would probably use up the available capital receipts. Therefore a different way of thinking would be required as capital would no longer be  freely available;

·         Income Streams indicated that the improved income position in the second half of 2014/15 had continued in 2015/16, although Land Charges were a concern because of the legal position and the role that local authorities would play in the service. Also the CSB estimates would be adjusted once the future income of the North Weald Market became certain and the new parking fees had been introduced in July 2015;

·         Waste and Leisure Contracts were both high profile. The initial problems with the waste contract being reorganised to a four day week had now stabilised with Biffa committing significant additional resources. They were still confident that their obligations would be fulfilled at the price tendered, which had been included with the MTFS. The Leisure Management Contract would be following a similar process to the waste contract. Although it appeared that the leisure contract would be unlikely with the required time frame, therefore further negotiations would be required and the MTFS would need to be kept under review;

·         Transformation fund had been re-phased with £75,000 in 2015/16 and £75,000 in 2016/17 with the bulk being spent on a fixed term 18 month contract for additional resource. There was also the Invest to Save budget of £0.5m;

·         DDF had a carry forward of £575,000, which represented a decrease of £107,000 on the £682,000 of slippage for 2013/14. The two largest carry forwards were the asset rationalisation programme of £111,000 and the Transformation project of £75,000. The financial forecast showed that nearly £1m of DDF would be available at by April 2020, although a financial update to the Cabinet regarding the Local Plan indicated that it would consume most of the funding;

·         Revised MTFS showed that the four-year forecast had target levels of savings close to the policy of keeping the reserves above the 25% of the NBR. The net savings included were £150,000 for 2016/17 and 2017/18 and £350,000 for 2018/19 and 2019/20, which would give a total CSB figure for 2015/16 revised of £13.348m and 2016/17 of £13.003m. Therefore DDF expenditure was at £1.844m for the revised 2015/16 and £550,000 for 2016/17, which was likely to be used up in the medium term.

·         Council Tax – There had been no mention of further incentives for local authorities to freeze the Council Tax for 2016/17. Therefore a 2.5% increase had been applied for 2016/17 and subsequent years.

In conclusion the Council remained in strong financial position as the overspend in 2014/15 had not been significant and the Council had substantial reserves. Following the General Election a greater political certainty had been created although there were a lot of funding and financial uncertainties for the Council. The Council would be awaiting the autumn spending review to find out where the £20 billion of savings were to come from and it had been clear that Local Government would be playing apart in the reduction of the deficit.

Councillor Patel commented on information he had received from a Chamber of Commerce regarding the 40% of business rates that authorities could keep, compared to the figures within the report. P Maddock advised that there was a difference between the 40% figure suggested and what the Council actually received. P Maddock advised that he would provide Members of committee with an explanation note on this matter.  

There were still concerns over the final settlement figures on the business rate appeals and whether pooling had proved a success and whether the new leisure contract and the tender exercise of the market at North Weald would prove productive.

The Committee asked when further financial details would be available. P Maddock advised that it would hopefully be around November 2015, although the Finance Portfolio Holder, S Stavrou advised that how this effected the Council wouldn’t be known till December 2015.

RESOLVED:

1.         The Committee agreed to recommend to the Cabinet the establishment of a new budgetary framework including the setting of budget guidelines for 2016/17 covering:

(a) The Continuing Services Budget, including growth items;

(b) District Development Fund items;

(c) The use of surplus General Fund balances; and

(d) The District Council Tax for a Band ‘D’ property.

2.         That a revised Medium Term Financial Strategy for the period to 2019/20, and the communication of the revised Medium Term Financial Strategy to staff, partners and other stakeholders be recommend to the Cabinet;

3.         That a reduction in parish support, in line with the reduction in the central funding that the Council received be recommended to the Cabinet;

4.         That P Maddock would provide the Committee Members with an explanatory note on the 40% business rates received by the Council.