Agenda item

Report of the Cabinet Member for Finance

The Cabinet Member for Finance and Resources introduced the Financial Impact Report. Since the budget had been agreed by Council on 2 March 2020 dramatic changes and restrictions had been put in place following the Coronavirus pandemic. He referred Members to the key income areas where there was uncertainty and the modelling that had been undertaken to assess the financial impact both in the short and longer term. An amendment to the budget framework would be presented in August or September 2020.

Two key categories were affected by the current crisis: cashflow and the budget in relation to income and expenditure. The appendices to the report highlighted the potential financial impacts on budgets especially in relation to areas such as car parks and arts centres. They also highlighted less obvious areas such as planning and land charges, markets and commercial property income and commercial waste income. Several scenarios had been modelled based on potential timelines for easing of Covid-19 related lockdown restrictions. To date there were seven weeks of known figures, and longer projections would be utilised over the coming months when more information was known, with modelling updated accordingly.

A fees and charges budget of £6.4m had been set in March 2020, however in the intervening period this had shown a loss of £365,000, with a total forecast loss in excess of £1m expected by the end of June. Depending upon the rate of recovery the full year impact could potentially be a loss of up to £3.5m. Although some costs could be offset, for example as the arts centres were closed there were no artists’ booking costs, there were several fixed costs which could not be reduced or mitigated. When the budget was originally set, £1m of savings had been included, but due to Covid-19 many programmes which would have delivered savings had been postponed.

Appendix 1 to the report provided further scenario modelling. The scenarios had been shared across Lincolnshire with neighbouring authorities and partners to ensure a consistent methodology for both the pessimistic and optimistic figures. These would be reviewed on a regular basis and adjusted as necessary.

The cashflow modelling at Appendix B had been agreed countywide with all authorities working collaboratively to ensure a consistent methodology. It showed greater detail in the main cash flow areas from both income and expenditure. The cashflow modelling had been compiled to ensure the Council continues to meet its responsibilities; specifically, contractual obligations, staffing costs, precept payments and supplier payments. Council Tax and Business Rates collections were reduced in April by £806,000 but this impact had been offset by the Government accelerating grant payments to the Council.

The modelling had been stress tested with mitigating actions being taken, and investment balances placed in easy access funds where appropriate, should access to those investments be necessary. The Government had deferred the payment from the Council of Business Rates pooling for the months of April, May and June. Creditor payments had reduced as a result of the deferral of the capital programmes so the forecast average creditor payments of £5.2m were due to reduce to £3m until the programmes restarted.

Council Tax and Business Rates were key income sources for the Council and were being monitored carefully. Council Tax income for April had been expected to be £8.501m however, the actual income was £8.137m, a shortfall of £364,000. Over 1,800 accounts had asked that instalments be deferred until later in the year. The Government had recently announced an expanded Retail Relief Scheme which meant that the number of accounts that were eligible for 100% business rate relief had increased. This had reduced the collectable amount of Business Rates from £43.319m to £27.101m, a reduction of £16.218m. The additional Section 31 grant would fully reimburse the Council for this shortfall; this was due to be received on a monthly basis. Over 50 businesses had asked for the instalments to be re-profiled for later in the financial year. The income expected from both Business Rates and Council Tax was monitored on a weekly basis so any impacts could be identified.

The report also identified additional expenditure that had been incurred due to the response to Covid-19. Attention was drawn to the increase in bed and breakfast usage following the directive to provide housing for all homeless people in the district. £15,000 had been spent in one month on an additional 346 nights of accommodation. Adaptations to Housing Revenue Account properties to accommodate more bedsits had resulted in 15 conversions at a total cost of £37,000.

To date there had been two Government funding tranches to all local authorities totalling £3.2billion. In the first tranche the Council had received £64,622 but a larger sum was received in the second tranche following a review of the methods used to distribute the grant to lower tiered councils. Over £1.4m was received in total. Further funding would be required as the wider and longer-term impact of the crisis became clearer. A survey had been distributed from central Government for local authorities to complete to better understand the impact of Covid-19 across the sector. The Council has responded to the survey.

Capital programmes for both the General Fund and the Housing Revenue Account have been re-profiled, with most schemes being deferred to later in the year. Large scale projects would be re modelled and phased in the context of the changes to the medium-term financial outlook, following the impact of the Government’s Covid-19 Recovery Strategy.

The Government had announced several schemes during April and May to help businesses during the crisis and the Council had administered the schemes with the support of InvestSK. Schemes included the Extended Retail Relief Scheme - to date the Council had awarded £17.4m in grants under this scheme to 686 businesses. Funding to help small, rural, retail, leisure and hospitality businesses with their on going business costs during the crisis had been administered between two funds, a Small Business Grant Fund of £10,000 per business and a Retail, Hospitality and Leisure Grant Fund of between £10,000 and £25,000 per business, depending upon its rateable value. To date £26m had been passed to 2,147 eligible businesses. A further announcement had been made by Government to extend the grant scheme for Councils to develop a discretionary scheme to support businesses that fell outside of the criteria for existing grant schemes.

The Council had also been allocated £924,000 to provide financial support to working age claimants who were eligible for Council Tax support under the Council Tax Hardship Fund, with eligible claimants receiving £150. The remainder of the grant would be used for the discretionary hardship fund as it was anticipated that there may be an increase in applicants during the financial year.

Members raised several comments and questions in discussion of the report, with additional information provided in response:

·       InvestSK worked with the Council to distribute business grants, using their business intelligence knowledge. The Council administered the grants whilst InvestSK encouraged and supported businesses to apply for the grants.

·       The Future High Street Fund submission would be presented to Council in July 2020 for approval ahead of it being presented to the Ministry of Housing, Communities and Local Government for consideration. It was noted that currently the Future High Street Fund bid was in relation to Grantham although colleagues were working in partnership on how this could be used to help with other towns.

·       Officers confirmed that the Council Tax precept had already been set for the year, and the budget amendments would consider spend against available income – the Council Tax rates for the current year would not change from those previously agreed.

·       The Cabinet Member for Finance and Resources confirmed the Council’s commitment to leisure centre provision and the continuation of the project to refresh leisure provision in the district. He had also written to Robert Jenrick MP, Secretary of State for Housing, Communities and Local Government, outlining concerns with funding considering the crisis and would keep the Committee updated.

·       South Kesteven District Council was in a better financial position than many other authorities, however lobbying of Central Government to offset costs associated with the Covid-19 crisis would continue.

·       An updated report on the financial position would be presented to the Cabinet at its meeting scheduled for 16 June 2020. The impact on the Arts Centres was unknown at this point and the assumptions made in the report were reasonable but would be kept under review.

·       All local authorities were being encouraged by the Government to log every cost both indirectly and directly attributable to the Covid-19 crisis, however there was no guarantee that every single cost lost through Covid-19 would be reimbursed. Sectors were being supported where possible, so they were not currently disadvantaged. Work was ongoing with the Government who had recognised that lower tier authorities, which were billing authorities, had been significantly impacted in key funding streams such as planning, car parking, leisure and land searches, and had amended the funding criteria accordingly to benefit lower tier authorities.

·       The Council had discretionary reserves of £12m, however if reserves were used to offset losses this would impact choices that the Council could make going forward.

·       A cost of £675,000 associated with the Grantham cinema was a one-off cost to reimburse the cinema for furniture. A commercial lease arrangement was in place with the Grantham cinema. The Council was supporting specific commercial tenants with deferred rentals for the period April to June 2020, which would be reviewed and reprofiled. The longer-term impact was unknown.

·       84% of businesses had applied for and received grants totalling over £26m so far. The remaining 16% of business either did not apply or were not eligible; a 100% response was not anticipated. Unspent grant funding would be returned to Government.

·       The Cabinet Member for Finance and Resources shared with the Committee that the Cabinet Member for Communities was keen to continue the Community Hub and discussions were taking place to see how the Hub could work in the future.

·       In connection with the deferral of rents it was confirmed that the rents were only suspended for the period April to June 2020, and the amount would be due later in the year. The funding provided by the Government contained no caveats as to how businesses used the money.

·       The work to Housing Revenue Account (HRA) properties which had seen them converted to bedsits could be reversed if necessary.

·       Members raised concerns regarding the continuing financial viability and pressure on funding streams for arts centres, car parking and commercial income should social distancing continue. Further comments were made about the income deficits and the cash flow, referencing the business rates and pressures on the HRA and capital schemes which may need to be deferred. It was felt that more clarity was needed to understand the underlying financial risk and the future viability of services.

·       The assumptions contained in the modelling had been used following consultation with Section 151 Officers in Lincolnshire and the Section 151 Financial Officer Group.

·       Examples provided in modelling could not be absolute as the impact and ongoing recovery was unknown at the present time.

Members requested clarification on costs relating to personal protection equipment (PPE). The Interim Director of Finance would circulate detail in relation to PPE to Members after the meeting.

The Chairman thanked the Interim Director of Finance and his team for their work in administering and distributing the grants. The Chairman asked for more information on the impact that Covid-19 would have on larger projects such as St Martins Park and he asked for a register indicating what projects would not be happening going forward and what costs were involved with delaying projects.

The Interim Director of Finance was thanked for answering Members’ questions and was asked to provide a more detailed updated cashflow at future meetings of the Committee. The Cabinet Member for Finance and Resources extended his thanks to the Finance Team for its work

ØAction points

·       More detail on costs associated with Personal Protection Equipment (PPE) to be circulated to Members.

·       A register was requested detailing which large projects would not be progressed at the current time and what costs would be incurred from any delays.

·       A financial and operation risk register and a detailed cashflow position were requested.