Agenda item

2019 Medium Term Financial Strategy (MTFS)

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.

Minutes:

Hitesh Jolapara, Strategic Director, Finance and Governance, gave a detailed presentation on the national context and the Council’s Budget.  The Committee welcomed the presentation and asked some questions on the issues highlighted below.

 

The Committee noted the general grant funding reduction of £3.3 million from 2018/19 to 2019/20.  The reduction was after receipt of an extra one-off social care funding of £1.5 million and winter pressures funding of £0.9m as per the Autumn Budget Statement.  The receipt of the grants was good news for the Council.  The impact of the reduction from 100% to 75% business rates retention pilot for London initially suggests a £1.2 million benefit for LBHF compared to £2 million under 100% retention.

 

In response to Tony Boys’ question regarding what had the Council done in light of the £73 million reduction in grant since 2010/11.  Councillor Schmid, Cabinet Member for Finance and Commercial Services, responded that the Council had mitigated the impact through 3 major programmes - service reconfiguration, procurement and commissioning, and commercialisation.  The reduction in resources had forced the Council to look at the way we do things differently.  The cut in Government grants had in some way made us a better and smarter organisation.  However, not all authorities have been able respond in a similar way. 

 

Hitesh noted that the Council has a higher than average dependence on government funding.  In 2010/11 the average authority funded 30% (excluding benefits) of expenditure through Council Tax.  The Council’s figure was 20%.

 

We have been harder hit by the Government’s cuts because of the higher level of spend funded through grants.  The Government is currently consulting on a Fair Funding review.  Unfortunately, every time there is such a review London loses out.  London politicians would have to lobby the Government for a better deal for London.

 

It was noted that the Government 2018/19 spending power calculation assumed that local authorities will levy a 3% social care precept and increase council tax by 2%.  The Council did not impose this levy and froze council tax.   However, in the 2019/20 budget, the Council will increase council tax by 4.7% which include a 2% social care levy.

 

Eric Hohenstein inquired if the Council was achieving the 97.5% council tax collection rate modelled by the Government.  In response, it was noted that the Council also models its collection rate at the same level and sometimes exceeds it.  The Government takes into account our council tax base when modelling its figures.  The Council currently models an increase of 800 additional homes per year.  Members asked at what point does council tax become payable on new housing developments?

 

 

 

 

Action

 

Committee asked for:

      a breakdown of borough properties by age and Council tax band.

      confirmation at what point does council tax become payable on new housing developments.

      trend data on the GLA precept.

 

Hitesh Jolapara (Strategic Director, Finance and Governance)

 

Councillor Murphy noted that many shops are closing on our High streets and asked if this has been factored into the Council tax collection calculations.  Officers noted that we do factor in the increased level of empty shops.  However, the Government had allowed the conversion of shops to homes on some of our secondary high streets increasing the number of properties which pay Council tax.

 

The meeting noted that since 2015/16 savings of £69m have exceeded the growth of £24m by £45m.  The projection into the future between 2019/20 – 2023/24 showed a budget gap of £48.7 million driven by growth and headroom, and inflation if nothing was done. 

 

Looking at the 2019/20 budget position, pay award inflation was modelled at 2% per annum (£1.7m) and inflation on external contracts as £1.3m.  Headroom of £6m per annum was assumed from 2020/21 onwards for planning purposes.  It was clarified that both the inflation and headroom figures are monetary estimates. An increase in inflation could make the situation worse.

 

The 2019/20 budget contained growth items of £10.8m and savings of £10.3m.  The Committee queried why for example Children's Services growth of £3.3m was not offset against its savings of £1.3m.

 

Steve Miley noted that the Children’s Services department had invested in a business intelligence tool PowerBI which has enabled managers to better map information for forecasting projections based on activity.  This has enabled managers to save money and better direct resources.  Members would not be able to take away the growth as it is directed at looked after children and child protection cases which are demand led.

 

Judith Worthy raised the following concerns:

·         about the use of reserves particularly that £27 million had earmarked to fund the King Street development. 

·         about the potential risk of non-receipt of the £11 million anticipated from the joint venture company. 

·         why are major expenditure like West King Street renewal programme not part of the budget?

 

Officers noted that the budget was set in line with CIPFA guidelines, and that King Street would be funded from reserves rather than the annual budget process.  By the end of May, provisional reserves figures would be ready for submission to the Committee.   Councillor Vincent asked for an understanding of all the costs associated with the King Street project to be considered by the Committee.

 

Action

 

·         It was agreed that the King Street project would be brought forward to the February meeting.  (Jo Rowland, Strategic Director of Growth and Place)

·         In future, at the planning stage, any major council development/expenditure should be brought to the Committee for scrutiny. (All Services Directors)

·         A report on the use of reserves and commitments to be submitted to the Committee after May. Hitesh Jolapara (Strategic Director, Finance and Governance)

 

Councillor Vincent asked how would the SEN overspend be funded?  Steve Miley Director for Children’s Services noted that the Department inherited a commitment to children above its budget.  This became known when we disaggregated from the Tri Borough.  The fall-back position was to fund the overspend from reserves.  However, that position would change in the medium term as H&F is one of the few London authorities that has not extracted value from its land assets.  The land redevelopment offers opportunities to provide 1st class accommodation for the schools and social housing.  Two feasibility studies will be submitted to Cabinet in March which have the potential to bring significant profit to the Council and replenish reserves.   It was explained that the Council owns maintained schools’ land and buildings while academies have 120-year leases but the Council still owns the freehold.  Opportunities to work with academies could also arise.

 

Councillor Donald Johnson commended officers for the opportunities to innovate and create income for the Council.  This innovation is a good way to show that the Council is prudently managing its finances on behalf of residents.

 

Officers noted that another option to reduce the overspend was to introduce new measures to manage fewer children going into care.

 

Councillor Murphy requested Children Services to submit a report to the Committee showing how Ruthlessly Financially Efficient (RFE) is shaping the ways they are working and what are they doing to innovate.  Officers noted that the Children’s PAC was also looking at the same issue.

 

Action

 

·         Children Services to submit a report to the Committee showing how RFE is shaping the ways they are working and what are they doing to innovate.  (Steve Miley – Director of Children’s Services)

·           The Chair to speak to the Children’s PAC on SEN funding and agree a process for joint scrutiny.  (Cllr PJ Murphy)

 

Councillor Johnson asked if there had been any independent auditing of Section 106 funds.  It was noted that the figures had been scrutinised by KPMG our external auditors and by internal staff.

 

Action - A further report on Section 106 will be submitted to the Committee in July. (Joanne Woodward – Chief Planning and Economic Development Officer and Emily Hill – Assistant Director, Corporate Finance)

 

The Chair noted the change of ownership of Western Riverside waste disposal facility and asked how would this affect H&F.  

 

Action - Frank Smith (Director of Contracts, Procurement and Transformation Resident Services)

 

The Chair thanked all officers for their hard work particularly producing a comprehensive and clear report for consideration.

 

Supporting documents: