Agenda item

Report of the Cabinet Member for Finance and Resources

Councillors were provided with a presentation on the amended budget proposals for the current financial year 2020/21. 

There was a requirement to review the budget framework due to the Covid-19 crisis and the affect the crisis had on the income and expenditure budgets set by the Council on 2, March 2020.

The presentation captured all the implications that had impacted the Council and provided recommendations for changes, that were to be presented to Council on 17 September 2020. 

The main scope of the amendments was to the General Fund revenue budgets, this area had been impacted upon directly.  There was no requirement to propose any amendments to the revenue budgets, for the Housing Revenue Account. 

The Government had provided a financial response to the crisis, which was, to date, as follows;

Financial hardship packages, which totalled £1.675m with an allocation of £924k for a Council Tax Hardship fund.  The Council had also been granted a deferral of grant repayments, due from Council Tax, for a three-month period.  This deferral had provided some short-term cash flow support.

Financial support for business within the local authority area, primarily this had been in the form of business rates relief for the hospitality and retail sector, cash grants for businesses, which the council had administered.

The Business rates reset had been deferred for a further year and would no longer take place in April 2021.  The Council had also utilised the Coronavirus Job Retention Scheme where appropriate, specifically for the Arts and Building Control Services. 

Funding had also been received for the re-opening of high streets, homelessness and New Burdens.

Further funding support packages had been announced by the Government on 2 July 2020, which included; £500m to cover local authority spending pressures, co-payment mechanism for irrecoverable sales, fees and charges income, phased repayment of Collection Fund and to support councils meet the pressures of irrecoverable tax income.

On 16 July 2020 it was confirmed that the Council would receive £194k towards spending pressures, based on population and levels of deprivation. The co-payment scheme that had been introduced by the Government to assist with irrecoverable losses in 2020-21. The Council would bear the first 5% of losses, compared to their budgeted income.  It was not yet clear as to the full scope of the scheme, also whether it would be gross income lost, or net. 

The Finance, Economic Development and Corporate Services Overview and Scrutiny Committee had been monitoring the fees and charges income since that start of the current financial year 2020/2021; this was to assess the impact of the lockdown restrictions on fees and charges received by the Council.

The first quarter of the current financial year had been completed, April – June 2020.  The adverse variance of income received, compared to a previous same period, was £914,675.  The Council relied on fees and charges as a key component of their income structure.  It was clear that the true impact, would not be known for many months. 

Given the volatility since the start of the financial year, the current budget framework was no longer reflective or accurate of the current demands. In total 37% of the budget framework required amendment, which reflected the scale of the changes that were required. 

The budget had been set by Council on 2 March 2020, was £19.157m, subsequent amendments had been made and approved.  A number of budgets had been carried over, which had been approved by the Governance and Audit Committee on 13 August 2020.  This had increased the budgets for the General Fund to £20.195m, at net cost level.

After applying the confirmed funding contributions received from the Government, the funding deficit was reduced to £2.4m.  However, the actual funding shortfall was exposed to ongoing uncertainty. 

A statutory requirement for the Council was to provide a balanced budget, it was therefore proposed to utilise the budget stabilisation reserve, in the event the Government co-payment scheme was not sufficient to meet the shortfall. 

Use of the budget stabilisation reserve was to be as a last resort, other cost avoidance and reduction initiatives had also been considered. Any impact the measures had, would be reported to Members during the remainder of the financial year. 

The budget setting proposals for 2021/22, would commence within the coming weeks, it was clear that the impact of Covid-19 would be ongoing.  The medium-term outlook would remain uncertain, for the foreseeable future. 

The Chairman invited members to raise questions on the presentation and associated report; this was in two parts, financial and budget going forward.

Financial

Members were concerned that the Housing Revenue Account had not been considered.  Only 18 of the houses had been built, from a commitment of 70, for the current year.  It was advised that 31 of the housing commitments were to be completed, contracts had been arranged to ensure this.  There would be an impact on the Housing Revenue Account, however as housing was built, there would be a delay on that impact.

Programmes within the HRA had been detailed within Appendix E of the report, which showed that there had been some deferrals, to later years.  There was already a “bad debt” provision with the HRA and officers had been contacting customers and discussing payments plans.  It was not felt that the HRA needed to be re-set at that time. 

Concerns were raised regarding InvestSK, had its budget been impacted by the current situation? Funding for InvestSK had already been transferred to that budget.  It was possible that there would be some discussions with InvestSK regarding amendments, however that was not part of the considerations of the General Fund.  Members agreed that it would be useful to have knowledge of what InvestSK was spending their budget on. 

Attention was drawn to Appendix C of the report, Risk Matrix.  Members were interested in what the Council would do if the Council Tax recovery fell considerably.  The Risk Matrix showed that this was at level 9 in risk, with only some tolerance to that risk.  It was queried if the Budget Stabilisation Fund would be used, should Council Tax recovery fall considerably.  Officers advised that the Council Tax collection Fund sits in isolation of the budget.  The precept payments that were required to be made to the Police and Lincolnshire County Council were set out in law as a requirement.  The Government had allowed councils to manage their deficit over a longer period, for the collection fund.  The Council Tax Support Scheme could also be utilised by residents, which would therefore reduce the council tax base within the District. 

The Budget setting in March 2020 was refenced by members, specifically £300k of efficiency savings to be made to corporate staffing.  Members asked if there was an update on any progress that had been made.  Officers advised that this was efficiency savings within the Management Team and the proposals were due to be considered at the October meeting of full Council. 

It was also queried if non-disclosure agreements were detailed within the Budget and what provision had been made. Non-disclosure agreements were detailed within the Final Statement of Accounts, which were published annually.  Any agreements that took place in the financial year 2020/21, if any would be published in the accounts in 2021. 

Members were concerned about how the residents of South Kesteven had been communicated with throughout the pandemic and asked what support had been offered.  Residents and Businesses had been contacted directly by officers, rather than via written communication.  Feedback from those who had been contacted, had been positive and felt that South Kesteven had been proactive with its support. 

Budget going forward

Councillor Knowles referred to Appendix E of the report, the appendix showed that most capital projects were scheduled to be completed.  It was agreed that it was excellent that few projects had been deferred.  It was of great concern that the Bourne Corn Exchange was receiving less allocated budget, than had previously been set. Councillor Knowles highlighted that £70k from the Bourne Corn Exchange renovations had been re-allocated to Stamford Arts Centre and queried why that had been done.  He felt that this was unfair to Bourne, members local to that area had not been consulted on the matter.

Officers and Councillor Stokes explained that re-allocation of budget was due to Stamford Arts Centre roof repairs costing more than had been anticipated.  More detailed works had taken place, it became apparent that more budget was required to complete the works. Assessment of the renovations of the Bourne Corn Exchange had revealed that the project could be carried out in one phase, rather than two, which meant that an efficiency saving of £70k had become available.  That budget was then re-allocated to the Stamford Arts Centre project, to help support the works. 

Further queries were raised regarding the Capital Programme.  Members asked if, given the current financial climate, the resurfacing works at Welham Car Park were necessary.  It was explained that for safety reasons the works needed to be carried out, the car park was a paid car park and that should be invested into its maintenance accordingly. 

The Budget Stabilisation reserve was referenced by members, who asked what provision would be made to recoup the reserve, should it be used.  It was advised that potentially Business Rates, which had a higher working balance, could be re-directed to that reserve. 

Deeping weather pitch.

The Chairman asked what circumstances would need to occur for the Capital Programme to be reviewed further.  Officers noted that if the current financial climate, due to the pandemic, deteriorated considerably, further interventions would be explored. 

Members were all in agreement that the proposals be put forward, as recommended.  Any further points members had, would be raised at the meeting of Cabinet on 8, September 2020.