Members received and considered the report of the Assistant Director Resources on the Council’s Medium Term Financial Plan (MTFP) 2021/22 to 2025/26, which had been considered by Cabinet at their meeting on 2 November 2020.  The MTFP set the financial framework for the next five years and would be modified as the financial situation of the Council changed during that period.  The following salient points were noted:

•           Budget Process: The Council followed a three phased budget process.  The third phase would commence in January 2021, once the Government settlement had been announced.  Any proposed savings would need to be agreed and the Capital Strategy and Revised Capital Programme would be prepared and incorporated into the MTFP.

•           Government Funding: Since 2010, the Council had seen a substantial fall in income.  With the loss of Revenue Support Grant in 2019/20 and net business rates income of £3.5m, this was a reduction of £3.1m in income over 2010 levels.  The East Sussex Business Rates Pool enabled the Council to retain a greater share of any business rates growth.  Members were advised that, in 2021/22, the Government was scheduled to reset how business rates were shared between councils.  This could result in a reduction of income in excess of £1m per annum for the Council if related to the current baseline.

•           News Homes Bonus Grant (NHBG): The five-year forecast assumed that the NHBG would reduce so it may not be possible to rely on this funding in the future.

•           Council Tax: If Council Tax was increased by 2% (maximum below the referendum rate) then an additional £140,000 of income would be achieved in normal circumstances.  With the ending of the furlough scheme, it was expected that the number of council tax relief (CTR) claimants would rise.  Therefore, it was assumed that the taxbase would fall by 750 Band D equivalent properties in 2021/22 but would improve over the subsequent years to pre-pandemic levels by 2024/25.  The additional amount of council tax income raised by a 2% increase would likely reduce to £70,000.  The Anti-Poverty Task and Finish Group had been tasked with considering options regarding the future of the Council’s CTR Scheme.  Changes to the scheme would not take effect until April 2022, therefore it had been recommended and agreed by Cabinet that the current scheme be affirmed for 2021/22. 

•           Cost Pressures: It was predicted that the base Revenue Budget would increase by £648,000 for homelessness demands, £190,000 staffing costs based on the current workforce, £51,000 on major service contracts, the impact of COVID-19 across all services including £730,000 on leisure / sport services (De La Warr Pavilion and Freedom Leisure), as well as projects identified within the new Corporate Plan.

•           Cost Saving and Income Generation: There were five main workstreams designed to deliver the income and savings required to minimise the amount of reserves used to balance the budget over the next five years, namely Business Transformation Programme; Devolvement and Service Prioritisation, Income Generation (Property Investment Strategy and off-street car park income), reduced staffing structure, and shared services.

•           Reserves and General Fund Balance: The latest financial monitoring suggested an overspend of £1.9m at outturn, reducing Reserves to £12.7m after funding capital expenditure.  The current MTFP estimated that £11.5m of reserves would be needed to support the Revenue Budget over the next five years (including £2.3m to support the Capital Programme).  By the end of 2025/26 revenue reserves and balances would be approximately £3.5m depending on the final outturn for 2021/22.  If business rates growth was reset to the 2020/21 baseline reserves would be completely depleted by 2024/5.

•           Capital Programme: Totalled £186m and included £80m for housing development through the Council’s new housing company.  Investment would increase the Council’s exposure to borrowing which would need to be reflected in the Treasury Management Strategy.  Through the East Sussex Rough Sleeping Initiative, the Council had received positive feedback that £430,000 of government funding (60% match-funded) would be granted to provide accommodation in Rother during 2020/21.  The Council would be required to fund the outstanding 40% capital contribution which equated to £285,000 and could do this from within the £3m already allocated to the Temporary Accommodation project.

•           Treasury Management: The level of borrowing was expected to peak at £93m excluding housing development.

•           Budget Consultation: Would be held between 1 December 2020 and 31 January 2021.  An interim report on the consultation would be reported to the Overview and Scrutiny Committee on 25 January 2021.

Cabinet had been supportive of the Council maintaining the current CTR Scheme for 2021/22 and had agreed to maximise the annual increase in Council Tax within the Government’s referendum limit, additional NHBG funding be used to reduce the amount of drawdown from reserves, the Council remained part of the East Sussex Business Rate Pool, and delegated authority be granted to the Assistant Director Resources, in consultation with the Cabinet Portfolio Holder for Finance and Performance Management to finalise the consultation wording.

The MTFP highlighted the challenges the Council continued to face due to the reduction in central Government support, the impact of COVID-19 and both lockdown periods.  Motivation and reorganisation of resources were required to ensure the Council was focused on delivering the MTFP.

RESOLVED:  That the report be noted.