Agenda item

To inform Finance, Economic Development & Corporate Services Overview & Scrutiny Committee of the Council’s forecast 2022/23 financial position as at the end of December 2022. The report covers the following areas:                                     

·                            General Fund Revenue Budget

·                            Housing Revenue Account Budget

·                            Capital Programmes – General Fund and Housing Revenue Account

The Chief Finance Officer presented the report which followed the budget report that was agreed in November 2022.

During the current financial year, Finance, Economic Development and Corporate Services Overview and Scrutiny Committee were provided with regular finance reports that monitor and forecast the budget against the current economic conditions that are facing the Council.  The latest report showed a more stable position after recent cost pressures on utilities and fuel.

The budget set by Council on 3 March 2022 was £18.247m.

The budget adjustments approved by Council on 24 November 2022 together with forecast changes since the amended budget was approved resulted in a reduction in the previously forecast overspend.  The reduction in the forecast spend, additional projected investment interest and Minimum Revenue Provision (MRP) reduction resulted in a forecasted balanced position as at 31 December 2022.  These changes may lead to a reduction in the use of reserves for 2022/23 by £765k.  However, given the uncertainty surrounding the Council’s exposure to external cost changes, this position was to remain under a monthly review.  Members were reminded that the net cost of the budget included an efficiency saving of £500k for the corporate restructure which was to be achieved in 2022/23.

The budget set by Council on 3 March 2022 for the 2022/23 General Fund Capital programme was £19.608m which was significantly reduced by the decision not to proceed with the refurbishment of Deepings Leisure Centre.

The budget set by Council on 3 March 2022 for the 2022/23 HRA Revenue Budget was £6.116m. The budgeted surplus was fully utilised to fund future investment in stock growth and property maintenance.

There was an increased surplus for the HRA of £4.298m compared to a budgeted surplus of £3.986m.  This was due to an increase in interest rates receivable on investments which was to be used to partially offset the forecasted inflationary increases (£600k) and additional budget following the Pay Award (£163k).  This was offset by increased repairs and maintenance costs (£260k) and removal of the salary vacancy factor forecasts (£136k) which would be monitored throughout the remainder of the financial year and additional costs of completing a second Tenant Satisfaction survey (£24k).

The budget set by Council on 3 March 2022 for the 2022/23 HRA Capital programme was £16.353m.  This budget was impacted by the delays to the New-Build programme and Stock Condition work following the results of the recent survey.

Council Tax collection was slightly less than originally expected as during the national mourning period in September, there was a cessation of recovery activity where reminders or summonses were not issued.  The current cost of living pressures were resulting in an increased number of Direct Debit cancellations causing delays to receipt of payments.  Business Rates were difficult to measure due to variances in the business rates collectable debit over the last 3 years.

The risk register showed the high risk of borrowing in a financial climate as red, where interest are currently at the higher end of the Council’s affordability.

The Chairman welcomed the improvement in the position of the Reserves, largely due to the increase in interest rates and asked what the implications were since the increase in base rate by the Monetary Policy Committee to 4% from 3% in mid-December 2022.

The Chief Finance Officer confirmed that the total reserves showed a sharp increase in capital receipts, largely impacted by the forecast in the sales income from the St Martin’s Park development at Stamford but this was potentially subject to variance.  The investment portfolio was governed by the Treasury Strategy and monitored by the Governance and Audit Committee.  While investment rates have positively impacted the investments held by the Council due to the increase in interest rates, this in turn increased the cost of borrowing. 

During discussion, Members raised the following points:

·            The Finance Team were thanked for their work.

·            The slippage within areas of the Housing Programme was disappointing and had happened over a number of years.  How could the Council be confident this would improve?

·            Was the increase in capital receipts solely due to the development at St Martin’s Park or based on an assumption of assets to sell?

·            Could the Council be assured that the slippages would be greatly reduced for next year?

·            What amount in Reserves had the Council used and what had they been spent on?

·            How old was the boiler at The Meres Leisure Centre that is to be replaced?  It was noted that the boiler at Bourne Leisure Centre was approaching 25 years old.

·            Of the £1.1 million funds allocated for Doors and Windows that had not been spent, only £52,000 was carried over to the next year.  What happened to the rest of the monies allocated?

·            How much was within the budget for the acquisition of properties on the open market?

·            When was the ‘Changing Places’ project going to proceed?

·            An update on the lift contract was requested.

·            Delays in asset management and maintenance was disappointing, particularly resurfacing work at Welham Street Car Park.

The Chief Finance Officer confirmed that the Cabinet had approved an Asset Disposal Strategy in December 2021 to proactively consider the Council assets that were surplus to requirements.  This, alongside other factors, including the St Martin’s Park development will increase the capital receipts monies.

The Acting Director of Housing added that contractor availability issues and increased costs and delays in supplies had added to slippage within the Housing Programme.  Contracts were now in place to deliver the works.

The Chief Finance Officer informed Members that Appendix B within the report detailed every movement in the Reserves, all of which were approved by Cabinet or Full Council, except those with delegations against them.  Reserves were available to be used as permitted and the budget could only be set for a year ahead so movements beyond that timeline were subject to change and would be reviewed.  The Officer clarified that he could send any requested information on Reserves to Members if they wished as there was potentially a large amount of information in reference to where particular reserves are being used and their specific purposes.  As an example, the Officer informed that the Local Priorities Reserve had been used to fund the LeisureSK management fee, to partly repay the Greater Lincolnshire Enterprises Partnership (LEP) and to fund workshops held by the Committee to date.  There had been a focus on disposals within the capital reserves because if capital reserves were low, revenue reserves were in turn under pressure to fund capital expenditure.  This put pressure on revenue budgets with revenue reserves being used for different purposes.  Reserve capital had started to increase which prevented the need for further borrowing at this time.

The Chief Finance Officer confirmed finances had been updated to reflect the decision taken by the Council involving the Deepings Leisure Centre and this had contributed significantly to the capital variances.  The Officer informed Members that The Meres Leisure Centre had opened in 1998 and the boiler was therefore approximately 25 years old when replaced.  Comprehensive condition surveys were completed on all the Leisure Centres within the district to identify where investment was required.

The Deputy Leader also confirmed that the boiler to be replaced at The Meres was 24 years old and the intention was to move forward following the results of the condition surveys received.  The boiler at Bourne Leisure was also due to be replaced this year.

The Cabinet Member for Housing and Property informed Members that other work carried out from the results of the condition surveys included a replacement boiler at Stamford Leisure Centre and roof repairs at Bourne Leisure Centre.  It was the intention of the Council that the survey results would prevent a situation where the assets were subject to deterioration.    The Cabinet Member confirmed that a staff restructure and a strengthening of the labour market has allowed the staff to deliver the works required and a significant improvement had already taken place.

The Acting Director of Housing informed the Committee that a replacement contractor had been selected for the Doors and Windows work with the intention to replace doors or windows of 175 properties in a year.  £1.5 million funds in total had been carried over to the Earlesfield project, including the £52,000 referred to by a Member.   Capital programme targets had been revised following data produced following the stock condition survey.  The Officer clarified that in reference to the acquisition of properties, the Council had to satisfy the capital receipt requirements for ‘Right to Buy’ properties to prevent the loss of funding.  Two properties had been purchased and another two were close to completion of sales.  Two lifts were awaiting replacement and contracts had been signed off for the work to be carried out shortly.  A separate lift maintenance programme was included in the Capital Programme.

The Chief Finance Officer informed Members that funding for the ‘Changing Places’ project was confirmed in April 2022.  Feasibility studies were undertaken on all sites identified and contractors sourced.  As the project was a national scheme and a limited number of contractors were certified to carry out the works, there had been delays in confirming a contractor.  The facilities at The Meres Leisure Centre were expected to be completed within the next two weeks.  In accordance with the timelines set by the Government, the remaining sites were due to be completed over the next two years.

A Member asked about the New-Build Programme as a significantly lower amount of houses had been built compared to expectations and the Council housing stock was diminishing. The Member also asked for confirmation that planning permission was confirmed for the Swinegate project.

The Chief Finance Officer confirmed that funds were limited within the management and maintenance of assets and the Council had to target resources and prioritise appropriately.  The Swinegate project had planning permission in place and was to go before Cabinet in March 2023.  As an average 40 ‘Right to Buy’ sales were completed each year, it was acknowledged that these properties were unable to be replaced by new-build properties each year.

It was proposed, seconded and AGREED that the Committee:

a)         Reviewed and noted the forecast 2022/23 outturn position for the General Fund and HRA Revenue and Capital budgets as at the end of December 2022.