Agenda item

The Council’s Medium Term Financial Strategy (MTFS) covering the period up to 2025/26 rolls forward the data in the existing approved MTFS. The strategy amends certain assumptions contained in it to reflect changes in the Council’s circumstances and other issues that have a strategic bearing on the Council’s financial prospects.

The Cabinet

            RESOLVED – That

(1)          The core assumptions set out in the Medium-Term Financial Strategy and the current financial position be agreed;

(2)          The significant risks to local government finance that have been clearly outlined in the report be noted and agreed;

(3)          The Medium-Term Financial Strategy be approved and be used to set up the Budgetary framework in preparing the 2021/22 Budget.

The Deputy Leader of the Council and Cabinet Member for Corporate Support introduced the Financial Prospects report covering the financial forecast for the next 5 years.

            He outlined that the Council was facing significant financial challenges as core Government grant funding was being eroded and replaced with more volatile and uncertain funding based around the growth of the District.

The Group Head of Corporate Support then worked through aspects of the report that needed to be brought to Members’ attention.

The huge uncertainty that the Council was facing over Government funding was unprecedented coupled with significant issues connected with the Covid-19 crisis. The key areas brought to the Cabinet’s attention were:

·         The Government had confirmed that there would be no return to austerity yet the redirection of resources within the public sector would most likely mean that there would still be cuts in lower priority areas.

·         There was endless speculation in the media in terms of how Covid-19 grants the knock-on effect was still unknown.

·         The reset of business rates needed to be flagged. Over the last 7 years the Council had benefited from growth in this area due to the proliferation of supermarkets in the District which had been a stimulus for the Council’s finances.  Government had been threatening to remove this for some time and this had been delayed due to Brexit and now Covid, but it could not be ignored that this reset would occur eradicating a lot of growth in 2022/23. 

·          Looking at the capital programme, the Council had not been able to complete a majority of this and there could be the need to reduce next year’s programme to allow catch up to take place on all repairs and projects. 

·         It could be confirmed with certainty that the New Homes Bonus would be reduced to zero in the future and that this had been a buoyant source of income for the Council. 

·         There were further risks for the Council to be aware of.  One was the collection rate from Council Tax as the potential effect of unemployment including the winding down of the furlough scheme was likely to result in an increase in arrears which could be permanent or just delayed.

·         Particular attention was focused on mitigations and the need to do this as and where possible. This came with a stipulation that any proposed scheme or project had to be supported by a robust business case as it was imperative to preserve the scare resources that the Council had available.

·         The effects of the assumptions outlined had been set out in Table 2.2.1 of the report and this showed an increasing deficit but also declining balances. Steps were being taken to address the sizeable deficit but the reduction in New Homes Bonus to zero in the future and business rate reset, as mentioned earlier, would this make very difficult to achieve.

·         Officers were actively working on a comprehensive savings exercise which although would assist the indicative projections, would not be able to tackle the deficit in next year’s budget and so it was recommended that the Council should develop a Strategy to address the savings target illustrated.

Before inviting Cabinet Members to ask questions, Councillor Dr Walsh asked if there was place for prudential borrowing in any financial recover strategy?  The Group Head of Corporate Support confirmed that this was always possible, but that the Council had to be mindful that any such borrowing had to be repaid and supported by a concrete business case not speculation.

In looking at wider impacts for the Council, the end of the furlough scheme was identified as something that could cause problems.  This was because local businesses had confirmed that they saw this as the biggest issue that they currently faced and that they needed more support from central government.  The potential closure of or restrictions of hospitality venues could increase the furlough problem and have impacts for the Council in terms of a reduction in council tax collected. It was hoped that the Government would look further at creating some form of tailored furlough scheme for those sectors.   The loss of recycling credits and New Homes Bonus were issues of concern and the Group Head of Corporate Support was asked if he could provide any further update on these declining areas of income. The Group Head of Corporate Support confirmed that these reductions were not new news and had been expected for a long time.  The Business Rates reset had been deferred three times but would certainly take place and would have a detrimental impact on the Council.

The Chairman asked the Group Head of Corporate Support if, as part of his discussions with the other finance officers and through the Local Government Association, there were any signs of any further Government grant to bail out local government. The response provided was negative.  There were no new schemes to assist the leisure sector in addition to the funding that the Council had already received and what had been set out in the previous report.  The latest news focused on the distribution of the £500 per person self-isolating payment, which although would not cost the Council money, would be an additional administrative burden on Council staff.

Having congratulated the Council’s finance team for the prudent way it had dealt with the Council’s finances,

            The Cabinet

                        RESOLVED – That

(1)          the core assumptions set out in the Medium-Term Financial Strategy and the current financial position be agreed;

(2)          the significant risks to local government finance clearly outlined in the report be noted and agreed; and

(3)          the Medium-Term Financial Strategy be approved and used to set the Budgetary framework in preparing the 2021/22 Budget.

The Cabinet confirmed its decision as per Decision Notice C/008/210920, a copy of which is attached to the signed copy of the Minutes.