Decision details

Draft Revenue Budget 2021/22

Decision Maker: Cabinet

Decision status: Recommmend Forward to Council

Is Key decision?: Yes

Is subject to call in?: No

Decisions:

Members gave consideration to the Finance Manager’s comprehensive report and appendices on the draft Revenue Budget proposals for 2021/22.  The budget proposals had been scrutinised by the Overview and Scrutiny Committee (OSC) on 25 January 2021 and a copy of the Minutes arising from the OSC meeting had been appended to the report for Cabinet’s consideration.  It was noted that the budget had been prepared ahead of the finalisation of the Council’s new Corporate Plan and it was likely that the Council’s finances, staffing and physical resources may need to be redirected into new priorities and services over the coming months.  Appendix A to the report summarised the draft Revenue Budget; Appendix B the detailed budgets over the various services the Council provided, Appendix C detailed the proposed Special Expenses for 2021/22, Appendix D the Earmarked Reserves, Appendix E the Minutes from the OSC meeting held on 25 January 2021 and Appendix F the Budget consultation report.

 

Members were reminded that the Council no longer received any Revenue Support Grant from the Government and would be wholly reliant on revenue from business rates, council tax, charges for services, income generation and specific grants for discreet services. Whilst at the time of writing the settlement was still draft, it was not anticipated that it would change when it was finalised. 

 

The draft settlement did however confirm a specific additional COVID-19 grant of £519,000 to support the ongoing effects of the pandemic in 2021/22.  The announcement also included grant to extend the help for residents through the Council Tax Reduction Support scheme (CTRS).  Based on the provisional numbers, this was approximately £146,000 for Rother, £1.46m in total including preceptors.  This funding only effected the Collection Fund and did not meet the loss of income due to the increase in the number of households claiming CTRS. 

 

Other Government grants included £271,770 New Homes Bonus which was higher than the previous forecast. This had been incorporated into the draft budget to reduce the use of reserves as previously agreed by Members, however, as this was a one-year grant, no ongoing reliance of this income could be assumed, pending the outcome of the review of this grant.

 

The Council Tax Referendum principles that applied to the Council for 2021/22 allowed an increase of up to 2% or £5 whichever was the greater. To ensure the Council remained within this limit (after taking account of the increase in Special Expenses), the budget assumed an increase of £4.61 (2.5%) to £188.71 at Council Tax Band D for 2021/22. This brought a total Council Tax income for the Council of £7.1m.

 

The Council remained in the East Sussex 50% Business Rate pooling arrangement for 20201/22. An assessment had been undertaken of the risk due to the financial impact of the pandemic on the local economy and on balance it was expected that it would still benefit the County as a whole to remain pooled.

 

The Council’s Capital Programme totalled some £187m with £80m currently without secured funding. A significant part of the programme related to the Council’s approved Property Investment Strategy. To date, £14.8m had been expended or committed on seven properties/sites. Income secured to date was in excess of £911,000 per annum with a further £846,00 expected once developments at Beeching Road and Barnhorn Green were delivered.

 

The draft Capital Programme also sought to reduce the use of Revenue (including Revenue Reserves) to fund capital expenditure. For 2021/22 some £619,000 of reserves was planned to be used, which was higher than previously forecast due to slippage in the 2020/21 Capital Programme and did not represent an overall increase in the use of reserves.

  

The net Revenue Budget before Government grants and other funding was expected to be £16.374m. This included revenue support for the capital programme of £619,000 which was funded from reserves. The underlying revenue spend was therefore £15.755m. The draft Revenue Budget included inflation and necessary growth.  In preparing the draft Revenue Budget a number of financial issues were still uncertain, as follows:

 

         Other savings/income– the draft budget included a target to deliver an additional £632,000 of income and savings over that already achieved.

         Managing homelessness – homelessness continued to be a considerable social and financial challenge for the Council.

         Delivering efficiencies – the realisation of savings identified through the work of the Financial Stability Programme (see below) was essential. It was likely that to release savings would require investment in technology and ultimately may enable a reduction in the workforce.

 

Currently for the Council Tax part of the Collection Fund, a deficit was predicted for 2020/21 with the Council’s share estimated to be £81,000.  As a result of the Government extending the amount of business rate relief during 2020/21 there was an £11.5m deficit predicted for Business Rates in 2020/21. However, after taking account of the additional compensating grant funding received from the Government, the Council’s share was estimated to be £322,000.  As these losses were greatly affected by the pandemic, the Government had also allowed Councils to spread the impact over three years. For Council Tax, this equated to a Rother share of £27,000 per annum and for Business Rates this was £107,000 per annum.

 

The draft Revenue Budget for 2021/22 utilised a total of £3.3m of earmarked reserves (net of contributions to reserves) to meet specific costs including supporting the Capital Programme.  Some £2.7m of this was estimated to be used to balance the overall Revenue Budget. Details of the use and contributions to reserves were set out in Appendix D, as amended, to the report.

 

The Council’s budget and council tax consultation with residents and businesses closed on the 18 January 2021. There was a total of 343 responses, of which 333 were from residents.  A summary of the results was shown at Appendix F. The full detail and analysis of the consultation would be available to Members separately.

 

The five year financial forecast to 31 March 2026 included a number of assumptions, the main one being the future delivery of recurring savings of £632,000 in 2021/22 rising to around £2.2m per annum from 2024/25. For the purposes of the forecast, the taxbase had also been projected to increase over the period by 2% per annum.  This may have been optimistic and the actual change largely depended on the delivery of new developments in the north of Bexhill.  This would continue to be monitored closely and the financial forecasts updated as necessary.  The forecast did, however, assume that the New Homes Bonus would be phased out by 2022/23.  In addition, the forecast assumed an annual 2% increase in Council Tax each year from 2022/23.  Clearly this would be affected by local and central government policy and therefore may not have been achievable.     

 

Assuming the Council was able to deliver the identified savings, the forecast showed that over the five years nearly £7.4m of reserves would be used including £1.5m to support the Capital Programme.  However, if delivery of income and savings was achieved in line with the forecast (both timing and amount), by 2024/25 it would be possible to make small contributions to reserves.  If further savings or income could be achieved over the period, then this would reduce the call on reserves. It was proposed that the Council’s Medium Term Financial Strategy be updated to reflect the latest financial forecast.

 

To ensure organisational focus was maintained on the delivery of extra income and cost savings, a financial stability programme was being finalised. This replaced the previous Rother 2020 Programme and would be supported by a small board of Members and officers to consider proposals, oversee progress and to manage any hurdles to achieving the Corporate Plan objective of financial stability for the Council by March 2026 financial year. The programme board would report progress regularly to Cabinet.

 

The draft Revenue Budget had been balanced for 2021/22.  To achieve this, the Council had set itself ambitious but achievable savings and additional income targets.  However, in addition, £2.7m of reserves were expected to be needed to achieve a balanced budget. Without action, the financial forecast showed reserves would be under considerable pressure and may fall below acceptable levels over the next five years.  This also increased the Council’s vulnerability to being able to cope with unexpected costs that arose.

 

RECOMMENDED: That:

 

1)         the level of Special Expenses as set out in Appendix C be approved;

 

2)         the net expenditure of £16,374,225 for 2021/22 be approved;

 

3)         the amount of reserves set out in Appendix D be approved, and;

 

4)         the Council Tax for 2021/22 at Band D be increased by £4.61 (2.5%) and set at £188.71.

 

(Councillors Byrne, Drayson and Timpe declared a Personal Interest in this matter in so far as they were committee members of Light Up Bexhill and in accordance with the Members’ Code of Conduct remained in the meeting during the consideration thereof).

 

(Councillor Drayson declared a Personal Interest in this matter in so far as he was a member of the Police and Crime Panel responsible for setting the Police council tax precept, and in accordance with the Members’ Code of Conduct remained in the meeting during the consideration thereof).

Report author: Robin Vennard

Publication date: 11/02/2021

Date of decision: 08/02/2021

Decided at meeting: 08/02/2021 - Cabinet

Accompanying Documents: