Agenda item

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.

 

These items were linked and formed around the aim of delivering a sustainable growth strategy and acting prudently throughout the future 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 Council had been evidenced by the reserve balances and would be broadly maintained throughout the MTFS period; and
• There would be 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 Council at current levels;
• That the impact of taking and granting loans to Qualis would have a margin of profit for the Council;
• 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.

 

There would be further minor adjustments made in the coming weeks before the budget was put to the Council for approval on 25 February 2020. Furthermore, the balance sheet for the MTFS would be made available shortly, as there had been significant changes expected in asset ownership , loans and other balance sheet items before it was present to Council.

 

Councillor J Philip commented that under Efficiency, Effectiveness and Economy in the MTFS, clarification was required, as it appeared to suggest savings generated through a reduction in staff, rather than efficiencies and that it should read a minimum of 0.25%. Secondly, he felt that under Income- Housing Rents, it should be noted that the Council had only increased the housing rents by CPI and not CPI plus 1%. The Interim Strategic Director confirmed that the staff efficiencies had already occurred and that the Council had only applied the CPI following discussions with officers and members, which could be highlighted in the report to Council.

 

Councillor A Lion asked how the Council would be dealing with the general risk of the downturn in the High Street economy. The Interim Strategic Director advised that the Council was awaiting  details from the national budget and if there was a major change, it would be expected that there would be some sort of compensatory system.

 

The Interim Strategic Director advised that in conclusion, the budget had been achieved through  the changes to the staff and management structure, the proposed developments that were inline with the Corporate Plan and the income receipts from Qualis being linked to developments. Therefore the more successful Qualis was, the more developments would be produced.

 

RESOLVED: 

 

The Committee noted the following;

 

1.             That the Financial Strategy of the Council had been further developed and consisted of the MTFS, the Budget 2020/21, the Prudential Indicators and the Council Tax, which would be subject to Government announcements and final due diligence;

 

2.             That the Financial Strategy allowed for controlled changes as a result of receiving later and better information, i.e. they allow for this level of final change before presentation of the Financial Strategy to the Full Council on 25 February 2020, adjustments with a cumulative net impact of £500,000 could be made on the direction of the Leader in consultation with the Portfolio Holder for Finance and the Section 151 Officer and would be reported back to the Cabinet; and

 

3.             That any adjustments to the papers with a value more than £500,000 would be brought back to the Cabinet.

 

In regards to the Medium Term Financial Strategy;

 

(i)            The prudent estimates in the Medium Term Financial Strategy, particularly in respect of inflation of cost and charges and fees and the aim to maintain the financial strength of the Council as evidenced by reserve balances were broadly maintained throughout the period; and

 

(ii)           That there was an increased importance of the income from Qualis in respect of the Medium Term Financial Strategy and the budget.

In regards to the Budget 2020/21

 

(i)            That the approach to cost and income inflation would be 3.0%, rents would rise per the national formula by 2.7% and car parking income would not rise at all pending the outcome of the review;

 

(ii)           That the outlined 2020/21budget be noted

 

(iii)          That the list of developments for which funding would be released on  implementation and how they were prioritised and grouped be confirmed;

 

(iv)          That the general and HRA capital spend of £26,171,528 in total with the House Building Programme and the Accommodation Strategy being the largest project planned be noted;

 

(v)           That the loans to Qualis would total up to £160m in 2020/21; and

 

(vi)          That the overall funding adjustments for District Development Fund and savings and contingency were as set out, i.e. a net draw from DDF of £1,774,906 (£2m forecast last year), £500,000 of savings, the formation of a contingency fund assumed spent of £1,095,540.

In regards to the Prudential Indicators

 

(i)            That the intention was to keep the financial strength of the Council at current levels;

 

(ii)           That the impact of taking loans and onwardly granting loans to Qualis with a margin of profit for the Council be noted;

 

(iii)          That the general risk price approach to the loans granted to Qualis be noted; and

 

(iv)          That the full set of prudential indicators along with the Treasury Strategy would be presented to Council 25 February 2020.

 

In relation Council Tax Increase

 

(i)            That the council tax would be increased by 1.5% (half the predicted inflation rate) for 2020/21 and that this was below the prevailing rate of inflation and the impacts on council tax base; and

 

(ii)           That in 2021/22 the options to cease or reduce council tax rates existed although the Government expectation on what should be raised from council tax had be noted.

Reason for decision:

 

To ensure strategies were linked, robust and challenged.

 

Options Considered and Rejected:

 

A variety of options and priorities were considered during the budget setting process.

 

The papers form a set that showed how the Medium-Term Financial Strategy of the Authority, the Budget for 2020/21, the Prudential Indicators and the proposed Council Tax Increase were linked and were formed around the aim of delivering a sustainable growth strategy and acting prudently throughout the planning period.