Members gave consideration to the report of the Executive Directors on the draft Revenue Budget, which outlined the likely financial position and key issues that Members needed to consider as part of the budget setting process. The Committee had been requested to consider the draft budget and make recommendations to Cabinet, to be considered at its meeting on 10 February 2020. To ensure that Members were provided with a clear identifiable core cost for each service, all budgets were shown on a departmental basis at “Net Operational Expenditure Levels”, excluding capital charges, central costs and support service recharges.
The Assistant Director Resources provided an updated outline of the budget and Members noted the main considerations, constraints and variations within the budget setting process.
For 2020/21, the Council would no longer receive the Revenue Support Grant and would be reliant solely on income from business rates, council tax, charges for services and income generation. As part of the settlement announced by the Government on 20 December 2019 indicative New Homes Bonus grant of £247,100 was expected, although no ongoing reliance of this income could be assumed as this was a one year grant.
The Council would revert to a 50% Business Rate pooling arrangement from April 2020 with the other East Sussex local authorities with a projected income for next year of nearly £3.5m.
The 2020/21 council tax base was calculated at 38,124.6 and showed an increase of 70 Band D equivalents over the equivalent December 2018 figures. The calculation made little allowance for potential growth during 2020/21 but for future years’ average growth of 2% per annum had been assumed.
The confirmed 2020/21 council tax referendum principles for Rother allowed an increase in council tax of £5 or 2% whichever was the highest. The draft Revenue Budget and forecast assumed that the Council would increase council tax by £5 to £184.45 for a Band D property which would result in an increase of income from council tax by £190,600 to an estimated total of £7,032,000.
The financial risks that may affect the Council’s finances were detailed in the report and these included increased costs for the Waste Collection and Street and Beach cleaning contract, which represented a significant proportion of the overall budget; homelessness demands; staffing costs and the provision for vacancies; non-pay inflation for contracts and unsecured projected income.
The section 151 Officer had made the following assumptions when calculating the draft budget:
a. Inflation – 2% for CPI had been applied to contracts.
b. Salaries – a 2% staff salary increase from September 2020.
c. Growth – as detailed at Appendix C to the report.
d. Transfers – the use of transfers between existing budgets had been encouraged to help enable funding to be re-directed into priority areas.
e. Income – where the Council had discretion, increases would be in line with the increase in costs.
The net Revenue Budget before Government grants, use of reserves and other funding was expected to be £15.5m; this was an increase of £161,000 over the revised 2019/20 Revenue Budget. Appendix A to the report summarised the Budget and the Council Tax calculations. The Budget utilised £3.3m of reserves in order to meet specific costs. Of this £1.4m would be used to support capital expenditure with the remaining £1.9m being used to support service expenditure. To aid the OSC deliberations it had been requested and agreed by Cabinet that two additional columns be added to Appendix A namely, the original budget and the end of year forecast and this had been provided to Members in advance of the meeting.
The total earmarked reserves by the end of March 2020 was estimated to be £13.8m plus a £1m General Fund balance. Over the five year financial forecast previously reported, earmarked reserves were predicted to fall to £6.8m. The minimum level of cash backed reserves and balances were considered to be £5m.
The previously approved budget consultation had now closed; 390 responses had been received. Results of the consultation would be reported to Cabinet and then Council at their meetings in February.
The draft Revenue Budget showed an increase of nearly £161,000 in the cost of services over the 2019/20 position. As explained in the report, the budget included a number of assumptions relating to income generation and savings, which if not delivered would result in an increased call on reserves.
Members had an opportunity to put forward questions and the following points were noted during the discussion:
• 23 expressions of interest had been received in respect of voluntary redundancies which had now been assessed. It was likely that five would not be progressed any further due to their impact on services and Council objectives. The remaining 18 may be reduced further once staff members received redundancy figures. It was hoped that the process would result in the required savings and the delivery of notices would take place within the current financial year. Redundancy costs would be met within a year with the savings realised over four years;
• Members were reassured that key service areas would be prioritised when considering staff savings and were keen to ensure that knowledge and resilience of staff would be maintained. Members thanked staff within the Council for their work;
• the Council had a clear process for dealing with staff redundancies and restructuring, which included triggering a process of consultation involving individual members of staff, Unison and Staff Side; and
• it was clarified that Recommendation 2 concerning the administrative building requirements of the Council would involve a report to Cabinet, having regard to the issues such as Environment Strategy, climate change, and the emerging Corporate Plan.
The Council faced major challenges with the significant reduction of Government funding and volatility in business rate income. To ensure a sound financial future, Members noted that the Council would need to uphold a robust financial strategy.
1) the comments of the Overview and Scrutiny Committee be considered by Cabinet when setting the 2020/21 Draft Revenue Budget at its meeting on 10 February 2020; and
2) a further report be presented to Cabinet on the options for meeting the future administrative building requirements of the Council with the objective of improving energy, operational and financial efficiency.