Cabinet received and considered the report of the Chief Finance Officer (CFO) on the Council’s Medium Term Financial Plan (MTFP) 2022/23 to 2026/27.  The MTFP set the financial framework for the next five years and was subject to confirmation of Government funding and several other factors that might affect the Council’s finances.  The report had been scrutinised by the Overview and Scrutiny Committee (OSC) on 22 November 2021 and a copy of the Minutes arising from the OSC meeting had been appended to the report for Cabinet’s consideration.

The following salient points were noted:

·        Budget Process: The Council followed a three phased budget process.  The second phase would commence in January 2022, once the Government settlement (expected 16 December 2021) had been announced.  The third phase was to finalise the budget and incorporate the Capital Strategy and Revised Capital Programme into the MTFP.

·        Government Funding: Since 2010, the Council had seen a substantial fall in income.  The Revenue Support Grant ceased in 2019/20.  In 2021/22 net business rates income was £3.7m; a reduction of £2.9m.  The ‘Fair Funding Review’ settlement for 2022/23 was expected in December 2021.

·        Cost Pressures: The base Revenue Budget would increase by £450,000 for planning appeals, £170,000 staffing costs based on the current workforce, an increase in the borrowing interest rate of 1.93%, as well as non-pay inflation increases of between £123,000 to £148,000, as a result of the impact of the pandemic.  Members were advised that homelessness costs were difficult to predict and would be reviewed and reported back to Cabinet at a future meeting.

·        Corporate Plan: Key priority objective was to achieve financial stability by end of 2025/26.

·        Financial Stability Programme (FSP): To achieve financial stability within five years by delivering costs savings and income in the following areas: service development, invest to save, income generation and service prioritisation.  One-off budget of £750,000 approved to secure ongoing savings and income.

·        COVID-19 impact: Impact on the economy was still unknown and several areas could still be at risk from increased costs or reduced income e.g. commercial tenants, culture / leisure financial support, homelessness etc.  No additional costs had been factored in the forecast.

·        Business Rates (Non-Domestic Rates): The East Sussex Business Rates Pool enabled the Council to retain a greater share of any business rates growth.  Government proceedings on resetting how business rates were shared between councils was still awaited.  From April 2022, the Government announced 50% relief for retail; hospitality and leisure businesses with bills up to £110,000; business rate multiplier freeze; and extension to the Transitional Relief and Supporting Small Business schemes.  It was noted that the Council would be compensated for any losses suffered from these.  From 2023, the Government was committed to a triennial revaluation cycle.

·        Non-Specific Revenue Grants: The five-year forecast assumed that New Homes Bonus Grant would not be received and the COVID-19 grant would cease with effect from 2022/23.  Other grants had been increased and were subject to confirmation in the finance settlement.

·        Council Tax: 2% or £5 increase was assumed for each year of the MTFP.  Freezing the Council Tax charge between 2010 and 2016 had had a significant impact on the Council’s income; Members requested the exact figures.  The CFO agreed to email the figures to Members, as this information was not available at the meeting.

·        Collection Fund/Surplus/Deficit: The forecast Collection Fund would be updated during phase 2 once the impact of the Government’s announcements on business rates reliefs had been assessed and the Council Tax Base data reviewed.

·        The current MTFP estimated that £5.263m of reserves would be needed to support the Revenue Budget over the next three years (including £747,000 to support the Capital Programme).  By the end of 2026/27 reserves and balances would be approximately £5.752m.  The forecast level of reserves was largely dependent on the delivery of the FSP savings and if only 50% of the programme was delivered, reserves would fall to a low unsustainable level, which would lead to statutory service cuts.

·        Capital Programme: Totalled £143m and included £80m for housing development through the Council’s new housing company, £14.5m for the Property Investment Strategy and £7.3m on the Temporary Accommodation Programme. Investment would increase the Council’s exposure to borrowing which would need to be reflected in the Treasury Management Strategy.

·        Budget Consultation: Would be held between 14 December 2021 and 31 January 2022.  An interim report on the consultation would be reported to the OSC on 24 January 2022.

Cabinet agreed to maximise the annual increase in Council Tax within the Government’s referendum limit, the Council remained part of the East Sussex Business Rate Pool, and delegated authority be granted to the CFO, in consultation with the Cabinet Portfolio Holder for Finance and Performance Management to finalise the budget consultation wording.

The MTFP highlighted the challenges the Council continued to face, and a balanced budget was achievable through a combination of sound financial management and delivery of the FSP.

RESOLVED: That:

1)     the financial forecast and proposed way forward be noted;

2)     the Council maintain its policy of maximising the annual increase in Council Tax within the Government’s referendum limit;

3)     delegation be granted to the Chief Finance Officer to finalise the wording of the budget consultation literature in conjunction with the Cabinet Portfolio Holder for Finance and Performance Management; and

4)     the Council continues to be part of the East Sussex Business Rate pool in 2022/23 and that the Chief Finance Officer be granted delegated authority to finalise the necessary agreement with the Member authorities in consultation with the Cabinet Portfolio Holder for Finance and Performance Management.