Members gave consideration to the Executive Directors’ comprehensive report and appendices on the draft Revenue Budget proposals for 2020/21. The budget proposals had been scrutinised by the Overview and Scrutiny Committee (OSC) on 27 January 2020 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 to the report showed the detailed budgets over the various services the Council provided and Appendix C to the report detailed the proposed Special Expenses for 2020/21.
Since publication of the report and following the outcome of a detailed review of the likely outturn of the 2019/20 non-domestic rates (NNDR) there was expected to be a surplus of approximately £1.8m with Rother’s share equating to some £758,000. This additional income would be a one-off change in 2020/21. This figure reduced the amount of reserves required to support the Revenue Budget and a revised Budget Summary (Appendix A to the report) and projected Reserves and Balances (Appendix D to the report) had been circulated to all Members prior to the meeting.
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 and income generation. Other Government grants included £247,100 New Homes Bonus and approximately £125,000 relating to the impact of the Homelessness Act which whilst not ring-fenced, would be targeted towards homelessness.
The Council Tax and Referendum Limit that applied to the Council for 2020/21 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 £4.65 (2.6%) to £184.10 at Council Tax Band D for 2020/21. This brought an additional income of £177,000 based on the 2020/21 taxbase. Changes brought about through the Housing, Homelessness and Rough Sleeping Strategy, in accordance with legislation to increase the Council Tax premiums for empty homes from 2020/21 may also increase revenue.
The Council’s Capital Programme totalled some £62.7m with £11.8m currently without secured funding. A significant part of the programme related to the Council’s approved Property Investment Strategy, a review of which was underway and would be presented to a future Cabinet meeting. It was noted that the Council was not able to borrow to invest in property funds; this could only be financed by cash. Whilst the investments in property funds yielded a higher return, the funds may need to be drawn back to reserves to balance the budget but would be kept in the property funds for as long as possible to maximise the return.
The net Revenue Budget before Government grants and other funding was expected to be £15.602m. This included revenue support for the Capital Programme of £1.359m funded from reserves. The underlying revenue spend was therefore £14.243m. In preparing the draft Revenue Budget a number of financial issues were still uncertain, as follows:
Ø Income generation – the draft budget included the need to deliver an additional £558,000 of income over that already achieved.
Ø Managing homelessness – homelessness continued to be a considerable social and financial challenge for the Council.
Ø Waste Collection and Street Cleaning contract – the new waste collection and street cleaning contract saw an increase in contract cost of £1.5m in a full year.
Ø Delivering efficiencies identified through lean and demand project – realisation of the savings identified through this work had produced both cash and time savings and further work was continuing.
Ø Voluntary Redundancies – a total of 18 posts had been identified and accepted; it was likely that this number would reduce as the process progressed. The likely total cost of the redundancies was between £400-£500k and would be funded from reserves.
The draft Revenue Budget for 2020/21 utilised a total of £3m of earmarked reserves (net of contributions to reserves) to meet specific costs including supporting the Capital Programme. Some £1.6m 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 31 January 2020; the results of the consultation showed a small majority of support for raising Council Tax by £5 based on a Band D property.
The five year financial forecast included a number of assumptions, the main one being the future delivery of recurring savings of £1.3m in 2020/21 rising to around £3m per annum from 2022/23. For the purposes of the forecast, the taxbase had also been projected to increase over the period by 2% per annum. In addition, the forecast assumed an annual 2% increase in Council Tax each year from 2021/22. The devolvement of services and the potential establishment of a Bexhill Town Council and subsequent reduction of Special Expenses for Rother District Council were merely assumptions as no decisions had yet been taken.
Assuming the Council was able to deliver the identified savings, the forecast showed that over the five years, nearly £9m of reserves would be used including £2.5m to support the Capital Programme. 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.
The draft Revenue Budget had been balanced for 2020/21. To achieve this, the Council had set itself ambitious but achievable savings and additional income targets. 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.
1) the level of special expenses as set out in Appendix C, be approved;
2) a net expenditure level for 2020/21 of £15,602,000 be approved;
3) the amount of earmarked reserves set out at Appendix D, as amended, be approved; and
4) a Council Tax for 2020/21 at Band D be increased by £4.65 (2.6%) and set at £184.10.