Agenda item

To consider the attached report.

This report originally went to the Finance and Performance Management Cabinet Committee in July 2018.

The Assistant Director, Resources introduced the Financial Issues Paper 2019/20 that had originally gone to the Finance and Performance Management Cabinet Committee in July of this year.

This report provided a framework for the Budget 2019/20 and updated Members on a number of financial issues that would affect this Authority in the short to medium term.

In broad terms the following represented the greatest areas of current financial uncertainty and risk to the Authority:

·         Central Government Funding

·         Business Rates Retention

·         Welfare Reform

·         New Homes Bonus

·         Development Opportunities

·         Transformation

·         Waste and Leisure Contracts

·         Miscellaneous, including recession and pay awards

Since the last report was issued last year we have had a general election and the country was involved in preparations for the uncertainty of Brexit when we will officially leave on midnight on 29^th March 2019. It would be a while yet before the Council could fully evaluate the effects of the Brexit but what we could see at the moment is that for district councils it has increased political uncertainty and reduced funding prospects.

Low interest rates continued and had been with us for nearly a decade, falling to an historic low of 0.25% in 2009.  There was no evidence to suggest that things would change dramatically in the future.

Since 2016 the budget had been moved from the Spring to the Autumn so there was a little more uncertainty at this point in the year than previously but it is hoped that more clarity on the two big issues of the Fair Funding Review and Business Rates Retention would be provided in this year’s budget.

Councillor Bedford asked if any work had been done on the assumption that there would be no Brexit plan and how it would affect this council. Mr Maddock said that there was a project on this in the planning stage. There have also been officer discussions at the risk management group and this had been put on the ‘risk watch list’. However, it was difficult to assess what the effects would be.

The meeting then considered the updated medium term financial strategy. They noted that for some time Members had aligned the balances to the Council’s ‘Net Budget Requirement’ (NBR), allowing balances to fall to no lower than 25% of NBR. The predicted balance at 1 April 2019 of £6,389,000 represented just short of 50% of the anticipated NBR for next year (£12,902,000) and was therefore somewhat higher than the Council’s current policy of 25%. However, predicted changes and trends mean that by 1 April 2022 the revenue balance would have reduced to £4,755,000. This still represented over 36% of the NBR for 2020/21 (£12,933,000).

Councillor Owen asked what would happen if it went below 25%. Mr Maddock said that this was just for guidance, we have never been anywhere near 25% but were now getting closer.

It was observed that for the first time last year officers had to top up the DDF from the General Fund balance. This would be kept under review from now on.

Councillor Pond asked if the Council had to do any borrowing so far. She was told that the council had not done any as yet and hopefully there would not be any need to borrow until 2019/20. There were many ways a Local Authority could borrow money, but it was mainly from the Public Works Board at preferential rates. We could also take out short term loans from other Local Authorities (better short term rates). We have loaned out to other authorities in the past.  Also, the LGA was setting up a bonds scheme and officers would have to research this.

The Government had previously announced a Fair Funding Review (FFR). The FFR would affect allocations and distributions between local authorities from 2020/21 onwards. A consultation paper was expected between now and mid 2019 with indicative figures for 2020/21 and beyond available from summer 2019 for implementation in April 2020. FFR will not apply to funding outside the Local Government Finance settlement such as schools and policing but for this Council it was likely to affect the New Homes Bonus, Housing Benefit Admin grant and more importantly how Business Rates retention was going to evolve over the next few years.

The council was now into the sixth year of business rates retention. Since the introduction of business rates retention this Council has done rather better than the DCLG has predicted.

It should be noted that a lot of the earlier business rate appeals had still not been settled. Progress on clearing these appeals had been extremely slow, but we were now down to a little over 100, and calculating an appropriate provision for appeals remained extremely difficult and provision needed to be set aside for these appeals.

It had been mentioned that the Council had benefitted significantly from being in a business rates pool and consequently it had remained in a pool for 2018/19. Monitoring so far indicated that this would still prove beneficial but we were reliant on the outcomes from the other pool members. If it became evident through the monitoring for 2018/19 that this Council would not benefit financially from pooling, a recommendation will be made not to pool for 2019/20.

It was noted that recent comments by the government meant that Universal Credit was currently on hold for its planned roll out in December.

Also, during 2017/18 significant changes were made to the way New Homes Bonus (NHB) was allocated and the reductions in grant were far greater than had been anticipated.

The retail park was now operational with only one unit still under negotiation.  Once all units were operating, income from leases should be just over £2,500,000, however, due to rent free periods the amount shown in the accounts each year would be slightly lower.

The Council’s single largest cost was its annual pay bill of around £24million and the pay award for 2018/19 averaged out at around 2.3%.

When the adoption of the local plan occurs there would be 11,400 properties built within the district over the period of the plan generating additional Council Tax income. It was difficult to assess what effect this would have on council services other than additional waste collections.

Councillor Lion asked if the income of Corporate Fraud was reflected in the report. He was told that it was not showing in the monitoring report but could be put in. The Council was also getting income from its shared services and from the right to buy, these could also be put on the monitoring report.

Councillor Lion then asked if the Council had car parking enforcement on its estates. Councillor Bedford replied that this was being looked at for the Debden area and was currently under negotiation.

Councillor Patel asked if there was any way the Council could reduce its liability in regards to Business Rates appeals such as an insurance policy. Mr Maddock said that he did not know of any, but could ask about it.

Councillor Bedford asked if the £24million pay bill included pensions. He was told that it did include payments to pension schemes.

RESOLVED:

That the Financial Issues paper be noted.