Agenda item

Draft Financial Strategy 2020/21

(Interim Strategic Director) To consider the attached report.


The Interim Strategic Director (Finance), N Dawe introduced a report on the draft financial strategy for 2020/21 which included;


·         the Medium-Term Financial Strategy of the Authority;

·         the Budget for 2020/21;

·         Prudential Indicators; and

·         the proposed Council Tax Increase.


All of which were linked and formed around the aim of delivering a sustainable growth strategy and acting prudently throughout the planning period. The final figures were awaiting the Governments announcements and allowed for a cumulative net impact of £500,000 on the direction of the Leader and in consultation with the Portfolio Holder for Finance and the Section 151 Officer. Any adjustments that required a value more than £500,000 would be brought back to the Cabinet before being agreed by the Council on 25 February 2020.


The Interim Strategic Director gave further details on the following elements of the Financial Strategy;


Medium Term Financial Strategy


·         The prudent estimates in the Medium Term Financial Strategy, particularly in respect of inflation of cost, charges and fees, and the aim to maintain the financial strength of the Authority had been evidenced by reserve balances and would be broadly maintained throughout the MTFS period; and

·         There was an increased importance on the income from Qualis in respect of the MTFS and the budget.


Budget 2020/21


·         That the approach to cost and income inflation would be 3.0%;

·         That rents would increase as per the national formula by 2.7%;

·         That car parking income would not rise and awaited the outcome of the parking review;

·         That there was a confirmed list of developments for which funding would be released on implementation with details on how they would be prioritised and grouped;

·         That the General and HRA capital spend was £26,171,528 with the Council House Building Programme and the Accommodation Strategy being the largest projects planned;

·         That the loans to Qualis totalled up to £160m in 2020/21 which were reliant on income from Qualis and the prudent reduction of the estimates in the first year of operation; and

·         That the overall funding adjustments for District Development Fund (DDF), savings and contingency were a net draw from DDF of £1,774,906 (£2m forecast last year), £500,000 of savings and the formation of a contingency fund which assumed a spend of £1,095,540.


Prudential Indicators


·         That the Council intended keeping the financial strength of the Authority at current levels;

·         That the impact of taking and granting loans to Qualis would have a margin of profit for the Authority;

·         That there was a general risk price approach to the loans granted to Qualis; and

·         That the full set of prudential indicators along with the Treasury Strategy would  be presented to the Full Council on 25 February 2020.


Council Tax Increase


·         That council tax would increase by 1.5% which was half of the predicted inflation rate for 2020/21; and

·         That the options to cease or reduce council tax rates existed although there was an accepted Government expectation on what should be raised from council tax.


Councillor R Bassett asked what the current growth rates were in the District and what were the effects of the delay to the sustainable housing and business growth set out in Local Development Plan(LDP), following the continued discussions with Natural England around the air quality and forest. The Interim Strategic Director advised that the MTFS had been completed on a prudent basis with previous information from the Council’s housing and business rate collections being projected forward. The figures were currently below the Council’s LDP although it was expected that the figures would improve. The Planning Services Portfolio Holder advised that the Council hoped to go out to consultation on the main modification in the summer, which would hopefully allow the growth to increase.


Councillor R Brookes asked whether the Council would borrow entirely from the Public Works Loan Board(PWLB) or partly from the Council’s reserves for Qualis. The Interim Strategic Director advised that all the figures assumed that the Council would borrow at PWLB Fund Rate and the Council would supply Qualis with loans at the market rate, which the Council would be obliged to do so by law. There would be some loans from current cash flows and not the reserves and other sources were available although still being considered.


Councillor R Bassett expressed concern over the rent increase of 2.7%. The Service Manager (Housing Management & Home Ownership Team), D Fenton advised that officers were working with tenants to sustain tenancies with the help of Tenancy Sustainment Officers and working with tenants who were experiencing problems.


Councillor R Bassett asked whether the outstanding Business Rate appeals were of concern, as well as the Governments indicated review of the Business Rate system. The Interim Strategic Director advised the funds to set aside for appeals and liabilities  were appropriate and prudent. In regards to the review, the figures had been set out in the budget as neutral until further information was received.


Councillor S Rackham asked what the reference ‘from’ and ‘to’ in the reserves columns  meant and why there were minus figures. The Interim Strategic Director advised that each year expenditure and income did not match exactly, and the minus figures represented the figures going in and out of the reserves, which was normal practise so long as the reserves were not depleted.


Councillor J M Whitehouse asked what the differences was between the figures set in the three Revenue columns for 2020/21 contained in the Development Summary. Also whether the plus and minus figures reflected an item that was not continuing into future years. The Interim Strategic Director advised that the Development Summary was a detailed summary mainly for finance officers use and represented items submitted by officers. The figures represented a change in-year as well as non-concurrent items.

Councillor J M Whitehouse asked when the changes for the next four year period on the balance sheet would be available. The Interim Strategic Director advised that it would be available shortly.


Councillor R Bassett asked whether the detailed Development Summary could be enlarged, to enable members to understand the detail. The Interim Strategic Director advised that the Development Summary had been intended for internal use and that the individual items, which had been grouped into the three corporate objectives would have detailed information when presented to Council in February. Members were welcome to request this information beforehand if required.


Councillor R Bassett asked whether the Council had any indication of the how the review of business rates would affect the Council’s recent purchases and new development sites within the District. The Interim Strategic Director advised that where developments had happened, and purchases had been made, these would be included within budget. As for other items, officers had used previous trends and were awaiting national policies but were being neutral but prudent with the figures.


Councillor J M Whitehouse asked what the additional £3m was for in relation to the Ongar Leisure Centre and why there were no future costs for the Epping Leisure Centre. The Interim Strategic Director advised that the figure of £11m had been provided for the complete replacement and rebuild of Ongar Leisure Centre, which had been indicative figures, as a decision had not been made. The figures of between £1m and £8m were indicative of a refurbishment to the pre-existing leisure centre. Regarding the Epping Leisure Centre, a report would be returning to Cabinet in March 2020 with the current leisure centre remaining in place until the new leisure centre had been provided. The budget included funding for general maintenance and the new leisure centres costs had been included in the loan to Qualis, for St John’s Road Development.


Councillor S Rackham asked what the further cost implications for the Council would be in relation to the pension contributions as a result of the review. The Interim Strategic Director advised that the Essex’s Pension Fund periodically carried out  reviews and the Council had assumed that the contribution rate would increase inline with inflation. The pension fund had recently done slightly better than expected and no unforeseen pressure, changes to national legislation or audit approaches had been expected.


Councillor H Kane asked when the Council would be expecting the outcome of the car parking review. The Interim Strategic Director advised that it would not be in time for the budget.


Councillor R Bassett asked what the benefits, risks and governance arrangements of Qualis would be for the Council. The Interim Strategic Director advised that  Cabinet would be receiving a report in February/March 2020 which would set out the governance arrangements, benefits and risks of Qualis. Councillor R Bassett requested that these details were supplied to the Select Committee as soon as they were available. The Planning Services Portfolio Holder advised that Cabinet would consider the details first as Qualis was still in its infancy and that if it required further scrutiny, it may be better placed at the Overview and Scrutiny Committee.




That the Committee noted the draft financial strategy for 2020/21 including the Medium Term Financial Strategy, the Budget 2020/21, Prudential Indicators and the Council Tax Increase.

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