Agenda item

(Director of Resources) To consider the attached report (FPM-007-2015/16).

The Director of Resources advised that the report provided a framework for the Budget 2016/17 and updated Members on a number of financial issues that would affect the Authority in the short to medium term. The greatest areas of current financial uncertainty and risk to the Authority were;

·         Central Government Funding – the comparisons of Funding Assessment level from 2013/14 to 2015/16 showed a reduction in funding by £1.889m (25.9%) and further 10% reductions had been assumed for the Funding Assessment for 2016/17 and beyond. This would further impact on parish councils within the District with similar reductions in their support. 

·         Business Rates Retention – the deadline on 31 March 2015 for the raising of appeals against the 2010 valuation list caused an avalanche of new  appeals and with a back log from before, there would be no realistic prospect of a resolving the issue in the short term. This had been reflected by the necessity to double the provision for the appeals from £1.5m to £3m. Another flaw in the retention of Non Domestic Rates allowed for the General Fund and the Collection Fund to account for items in different years. Therefore resulting in a deficiency on business rates of £253,000 which was largely off-set by Council Tax surplus of £211,000 in 2015/16 but was more noticeable in 2016/17 where the deficiency on business rates of £439,000 was significantly larger than the Council Tax surplus of £170,000, although this had been based on the provisions for appeals, so it could vary. The Authority was part of the Essex pooling system and anticipated gaining approximately £136,000, which again could be affected by the surge of appeals and would be closely monitored in 2016/17.

·         Welfare Reform – the latest reforms were to be achieved through significant reductions in tax credits, welfare cap and the requirement for social landlords to reduce their rent by 1% each year for the next four. In addition, the implementation of Universal Credit progressed with new single claimants starting in December 2015 with the aim of full migration by April 2020.

·         New Homes Bonus – the  Council would approximately receive £230,000 in 2016/17, which took the Continuing Service Budget (CSB) to £2.33m although it may be prudent to cap the New Homes Bonus at £2.2m and place any excess amount in the District Development Fund as the current trend predicts a reduction in the NHB.

·         Development Opportunities – The retail park at Langston Road continued to progress, although the re-development of St Johns area in Epping had taken much longer than anticipated. The MTFS had not been adjusted but capital projections had and this would affect the availability of capital funds which would no longer be freely available, therefore borrowing costs would need to be considered as part of any options appraisals.

·         Income Streams – The indications were encouraging and the improved income position in the second half of 2014/15 had continued into 2015/16. The Council had decided to look at other income generating opportunities on the North Weald Market with the current operator being given notice which would end December 2015. The Off Street Parking income would also be monitored with regards to the new parking fees introduced in July 2015. 

·         Waste and Leisure Contracts – The Waste contract received considerable difficulties when re-organised to a four day week basis in May 2015, which had now been stabilised with Biffa committing significant additional resources staying in place until the transition was completed. The Leisure Management contract would expire before the renegotiation of a new contract was completed, resulting in a need to be extend. This calls into question the CSB savings of £125,000 in 2016/17 and 2017/18 and would have to be kept under review.

·         Transformation – The budget had been split between 2015/16 and 2016/17, with the bulk being used for a fixed term 18 Month contract for additional resources at Assistant Director level. The Invest to Save Budget of £500,000 had been set up to finance schemes which could produce reductions to the net CSB requirements in future years.

The Director of Resources reported that the Council remained in a strong financial position as the overspend in 2014/15 had not been significant. After the General election in May 2015 a political certainty had been resolved but a greater uncertainty remained on funding and finance. The Autumn Budget and Spending Review would give clearer indication of the savings to come, which Local Government would play a role in. There was also uncertainty over the final settlement figures for business rate appeals and whether the Essex pooling would prove successful. The updated MTFS set out the programme of necessary savings over the medium term and this process would be assisted by the Invest to Save fund helping with initial funding or investment, allowing for more creative solutions to be developed.

The four-year forecast would give the total CSB figures for 2015/16 revised of £13.348m and 2016/17 of £13.003m, which set the net DDF expenditure at £1.844m for the revised 2015/16 and £550,000 for 2016/17 and it was likely that the DDF would be used up in the medium term. Over the period of the MTFS, the balance on the Capital Fund would be used up entirely.

The Director of Neighbourhoods advised that the Licensing Regulations around renewing Taxi Drivers licenses had also changed from annual cost of £88 to every 3 years, which would also have an impact on the Licensing Income. Further consideration would also be needed with the potential change to increase from 3 to 4 years for MOT’s, which could affect the Fleet Operations income as well.

Councillor Mohindra enquired whether the extension to Leisure Contract would raise any concerns. The Director of Neighbourhoods advised that the current company had been accommodating to the Council and would look to extend the contract, which would probably be a further 9 months.

Councillor Waller advised that ideas had been suggested around LED lighting within the Council’s car parks and which would use the Invest to Save fund. Other suggestions hopefully would come forward for the Invest to Save fund.

Recommended:

(1)          That the establishment of a new budgetary framework including the setting of budget guidelines for 2016/17 be set including;

(a)              The ceiling for Continuing Services Budget net expenditure be no more than £13.003m including net growth;

(b)              The ceiling for District Development Fund expenditure be no more than £550,000;

(c)              The balances continue to be aligned to the Council’s net budget requirement and that balances be allowed to fall no lower than 25% of the net budget requirement; and

(d)              The District Council Tax be increased by 2.5% with Council Tax for a Band ‘D’ property at £152.46.

(2)          That a revised Medium Term Financial Strategy for the Period to 2019/20 be developed accordingly;

(3)          That communication of the revised Medium Term Financial Strategy to staff, partners and other stakeholders be undertaken;

(4)          That reductions in parish support, in line with the reductions in the central funding this Council received be taken forward.

Reasons for Decisions:

By setting out clear guidelines at this stage the Committee established a framework to work within in developing growth and savings proposals. This should help avoid late changes to the budget and ensure that all changes to services had been carefully considered.

Other Options Considered and Rejected:

Members could decide to wait until later in the budget cycle to provide guidelines if they felt more information, or a greater degree of certainty, was necessary in relation to a particular risk. However any delay would reduce the time available to produce strategies that complied with the guidelines.