Agenda and draft minutes

Finance, Commercial Revenue and Contracts Policy & Accountability Committee - Wednesday, 29th January, 2020 7.00 pm

Venue: Meeting Room 1 (2nd Floor) - 3 Shortlands, Hammersmith, W6 8DA. View directions

Contact: Kayode Adewumi 

Items
No. Item

20.

Minutes pdf icon PDF 348 KB

To approve as an accurate record, and the Chairman to sign the minutes of the meeting held on 23 September 2019.

Minutes:

The minutes of the meeting held on 23 September 2019 were approved and signed by the Chair.

 

21.

Apologies for absence

Minutes:

Apologies for absence were submitted by Judith Worthy, Eric Hohenstein and Councillor Fiona Smith.

22.

Declarations of interest

If a Committee member has any prejudicial or personal interest in a particular item they should declare the existence and nature of the interest at the commencement of the consideration of that item or as soon as it becomes apparent.

 

At meetings where members of the public are allowed to be in attendance and speak, any Councillor with a prejudicial interest may also make representations, give evidence or answer questions about the matter. The Councillor must then withdraw immediately from the meeting before the matter is discussed and any vote taken unless a dispensation has been obtained from the Standards Committee.

 

Where Members of the public are not allowed to be in attendance, then the Councillor with a prejudicial interest should withdraw from the meeting whilst the matter is under consideration unless the disability has been removed by the Standards Committee.

Minutes:

There were no declarations of interest made.

 

23.

2020 Medium Term Financial Strategy (MTFS) pdf icon PDF 495 KB

This report sets out the budget proposals for the services covered by this Policy and Accountability Committee (PAC). An update is also provided on any proposed changes in fees and charges.

 

 

Additional documents:

Minutes:

Hitesh Jolapara, Strategic Director, Finance and Governance, gave a detailed presentation on the national context and the Council’s Budget. 

 

The 2020/21 gross General Fund budget is £525m of which the net budget requirement of £154.3m is funded from council resources (such as council tax and business rates) and general government grant. A balanced budget is proposed for 2020/21 with a contribution to reserves of £7.2m.   Government grant funding will increase by £3.6m from 2019/20 to 2020/21 as a result of the Government’s pre-election spending round in September 2019. This increase follows a decade of grant cuts with overall funding reducing by £68m from 2010/11 to 2020/21. This was a real terms funding cut of 54%.

 

The Government’s proposed ‘fair funding review’ in 2020/21 is likely to be bad news as it is anticipated that resources will be redistributed away from inner city areas, which have traditionally received funding to address higher levels of deprivation.  Due to the continued high levels of inflation in the social care market and the government’s continued failure to propose a long-term funding solution to social care funding, the Council proposes a 2% adult social care levy for 2020/21.

 

An increase in the Council’s element of council tax of 1.99% is proposed for 2020/21. This will generate extra income of £1.2m in 2020/21 and £4.9m over a four-year period. This will support investment in key services for residents and future financial resilience.  The business rates system is changing for a fourth successive year.  Current modelling forecasts that Hammersmith and Fulham will benefit by £1.9m from the 2019/20 pilot and this is assumed within the 2020/21 budget. As the pilot has ceased, the expected benefit is a one-off sum and therefore will be moved to reserves. The actual benefit will not be confirmed until September 2020. The instability in the government’s approach to business rates makes medium-term financial planning difficult.

 

A national pay award has yet to be agreed for 2020/21. Provision is made within the budget for an increase of up to 2% (£1.7m) and this will be held corporately until a national agreement is reached on the annual pay award. Inflation of £2.6m has also been provided, on a case by case basis, to meet contractual requirements.

 

The Committee welcomed the presentation and asked some questions on the issues highlighted below.

 

The Chair asked what had accounted for the previous years’ reported underspend turning into overspends. Officers responded that resources have been going down, the increased complexity and demand for social care have all contributed to the change.  The Council is cutting spend by £10-15m annually.

 

Officers were requested to ensure that reports were written with laymen understandable terminology with figures cross referenced.  Members were happy with the trend analysis in the report but asked for more ratios in the future.

 

It was noted that £7.2m was contributed to reserves from the business rate pilot pool (£1.5m) and Council tax collection fund surplus (£1.8m) as a result of more people paying council tax than modelled.  ...  view the full minutes text for item 23.

24.

Reserves Strategy and Action Plan pdf icon PDF 726 KB

This report provides an update on Hammersmith and Fulham’s reserves and sets out the strategy for their future use.

Additional documents:

Minutes:

The meeting received an update on the Council’s reserves policy and strategy for their future use.  Officers reported that in light of the uncertainty around future funding from the Government, continued action is required to ensure that reserves remain adequate to meet the pressures facing the Council over the medium term and deal with future unexpected events. The reserves strategy acknowledges the challenges facing the Council and proposes streamlining all available corporate and departmental reserves to focus on key priorities.  An action plan is proposed to improve the medium term-outlook including actions to identify capital receipts to safeguard reserves.

 

It was noted that the Council carried forward a general balance of £19.0m and earmarked reserves of £62.3m at the start of 2019/20.  This level of balances and reserves is slightly below average for a London Borough and reduced by £32.1m in 2018/19. The most significant movement in 2018/19 was setting aside £13.6m for the historic high needs Dedicated Schools Grant funding deficit. Key council projects were also supported such as the use of £5.5m for managed services implementation and £2.0m for the Civic Campus scheme.  The Council has already committed to use reserves to fund several major initiatives and priorities. It also faces significant current and future financial risks (such as the current year forecast overspend, £9.4m at month 6 after mitigating actions) and potential costs of future service improvements.  Finally, the meeting noted the Council’s external auditors (Grant Thornton) comments on the level of the Council’s reserves that the reserves level is of concern as there does not appear to be sufficient cushion to weather the ongoing financial challenges that the Council will face over the medium term due to reductions in central government funding and forecast pressures of the DSG funding.  The Auditors strongly recommended that the use of reserves remains limited in future years other than for specifically earmarked schemes.

 

Given the on-going scale of change in local government funding, and risks facing the Council as part of the 2019/20 budget report, Hitesh Jolapara, Section 151 Officer, recommended that general balances should be maintained within the range of £14m to £20m.  The current general balance of £19m falls within this range which represents 3.6% (equivalent to 13 days spend) of the Council’s gross budget of £525m.

 

Councillor Vincent observed that the reserves balances had decreased from £81.3m to £41.4m.  He inquired how can the Council rebuild the balances back up and what is the ideal earmarked reserve figure?  Hitesh noted that there are a wide range of measures possible to raise the balances such as asset disposals, invest to save, borrowing, tighter financial management and the receipt of one-off receipts from the Government amongst others.  Councillor Schmid noted that there was no ideal earmarked reserve figure.  The level is linked to the Council’s priorities.  The Section 151 Officer and politicians make a judgement call to set the level.

 

Regarding the details of the £17.610m civic campus proposed earmarked reserves (unrestricted), Emily Hill, Deputy Section 151  ...  view the full minutes text for item 24.

25.

Section 106 Agreements - Update report pdf icon PDF 254 KB

This report provides an update of the current position regarding Section 106 (S106) balances of funds received and pending, and the proposed expenditure of S106 funds for 2019/20. It also provides a summary of the further work being undertaken, including on the governance arrangements for decision making.

Additional documents:

Minutes:

The meeting was informed that the Council had negotiated over £600 million worth of developer contributions from new developments in the borough through planning agreements since 2014.  This includes financial as well as non-financial contributions received through s106 legal agreements.  The £600m figure excluded the cost of S278 works to the public highway as well as public transport improvements negotiated separately by Transport for London which also benefit Hammersmith and Fulham.

 

There are currently 228 individual S106 agreements in the programme, containing over 1,150 heads of terms. Funds have been received for 165 of these agreements and projects to deliver on the obligations are also underway. The remaining agreements are signed and completed although funds have not yet been received as the trigger points for payments have not been reached. Trigger points typically relate to a specific stage of development, such as commencement of development works on site or the first occupation of a residential unit and are therefore outside the Council’s direct control.

 

Members noted that theavailable balance (cash in hand) at 1 January 2020 was £55m.  Most of these funds are limited to certain purposes or types of infrastructure through individual legal agreements or certain locations within the Borough.  The future receipts negotiated were £124.1m.  These are highly dependent on wider economic factors and whether development comes forward or not.  Officers indicated that the expected future funds could be received over the next 10 to 15 years.  The future funds excluded the S106 funds agreed for schemes where currently there is little prospect of the proposed developments coming forward, such as Earl's Court, Stamford Bridge, and Albert & Swedish wharves.  The proposed expenditure was £63.5m.

 

The Members welcomed the report and noted that officers have taken a massive step forward in making a very complex issues very easy to understand.  The report had provided a good overview of income, proposed expenditure and the process of allocation.  Members commended the thematic approach to spend and the governance proposed to ensure that spend was in line with the Council’s priorities.  Finally, it was generally noted that the Council cannot freely spend the £55m S106 cash in hand.

 

The Chair thanked officers and the Co-opted Members for all their hard work on this issue.  He was confidence that the Council has a firm grip on this.

 

Action

 

Officers were asked to add the names of the developers against the schemes in future updates.  (Joanne Woodward – Chief Planning Officer)

 

26.

Civic Campus Programme - January 2020 Update pdf icon PDF 606 KB

This report provides the Committee with an update on the Civic Campus Programme – the redevelopment of Hammersmith Town Hall and West King Street.

 

This report has appendices containing information exempt within the meaning of Schedule 12A to the Local Government Act 1972 and are not for publication.

 

 

Any discussions on the contents of an exempt appendix will require the Committee to pass the proposed resolution identified at the end of the agenda to exclude members of the public and the press from the proceedings for that discussion.

Additional documents:

Minutes:

 

The meeting expressed its disappointment that the Deloitte report on West King Street Renewal Financial Review of Proposed Transaction was classified as exempt.  It was not happy that the requested information was not circulated to Members on time.  If the Committee was going to undertake its overview role, in future it must see all reports within a reasonable time.

 

Members expressed their concerns at the absence of any officer from The Economy department to answer questions and discuss this project.  The lack of attendance was an indication that the Council had a significant key person dependency on only two senior officers.

 

During the discussions, the Committee asked why the JV contract had not been signed, how the risks (bar financial) identified in the Deloitte’s report have been mitigated, and why the signing of the contract was not included in the progress chart.  A lack of information on these key issues raise red flags and indicated that the project was not going to be completed on-time or on-budget completion.   The Committee thanked Hitesh and Emily for stepping in and noted that they were not expected to field questions outside of their remit. 

 

The Committee were informed that the demolition was in progress and there is an expectation that the JV contract will be signed within a couple of days.  Procurement was underway and bids had been received and were being evaluated. In terms of finance, the Council is putting £25m equity into the partnership and a separate decision had been made to buy the commercial units. This will give us a better control of the development and raise income for the Council.

 

In response to Members questions, it was noted that both parties are continuing at risk without contracts signed. The critical programme stages are the decant, demolition and construction.

 

Members stressed that the exchange of contracts were critical success factors. They expressed concerns that these were not finalised.  The information given to members lacked the risk assessment or risk register.  Currently, the committee does not have the necessary information to provide the required oversight.  The committee is expected to have a comprehensive programme timeline, major dependences – suppliers, contracts, financial plans etc, and risk analysis and mitigating factors.  Without these, the programme is proceeding at risk.  Members were reassured that the council has in house experienced officers who can manage the programme.  There is an internal Member and officer governance regime. Officers are supported by external expertise provided by Currie & Brown. 

 

The Committee agreed that it needs to keep the programme under review with regular updates and briefings from officers to reassure them that the project will be completed on time and on budget as any major slippage would have a major impact on the Council’s finances.

 

Action

 

·       Officers to organise briefing meeting with the committee members to ensure they are fully briefed and up to speed on what is happening. (Dave Burns - David Burns Assistant Director - Growth)

·       The January 2020 Civic campus Full Council report be circulated  ...  view the full minutes text for item 26.

27.

Committee Work Programme pdf icon PDF 201 KB

The Committee is requested to consider the items within the Work Programme attached as Appendix A to this report and suggest any amendments or additional topics to be included in the future.

 

Minutes:

The work programme was noted.

28.

Date of Next Meeting

The date of the next meeting - Wednesday 1 April 2020.

 

LOCAL GOVERNMENT ACT 1972 - ACCESS TO INFORMATION

 

Proposed resolution:

 

Under Section 100A (4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of the following items of business, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraph 3 of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information.

Minutes:

Wednesday 1st April 2020.