Agenda item

2020 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:

Corporate Budget Context

Emily Hill (Assistant Director of Finance), gave a presentation outlining the Council’s budget proposals and noted the scale of challenges facing local government in recent years. She showed slides that outlined the funding reductions across local government and the Council.

 

It was noted that the gross General Fund budget was £525m, of which the net budget requirement of £154.3mwas funded from Council resources (such as council tax and business rates) and general Government grant. In addition, Government grant funding would 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 followed a decade of grant cuts with overall funding reducing by £68m from 2010/11 to 2020/21 which was a real terms funding cut of 54%.

 

The Council continued to face challenges to manage any additional costs that might arise outside of the budget forecast. The budget recommended a 1.99% increase in Council Tax and 2% adult social care precept levy. Each would raise £4.8m over 4 years and £1.2 in the first year. This would support investment in key services for residents and future financial resilience. Additionally, it was noted that the business rates system was changing for a fourth successive year.

 

It was assumed that the budget gap would increase in each of the next three years if no action was taken to reduce overall expenditure. The Government will undertake a ‘fair funding review’ in 2020/21. This had the remit of reconsidering how grant was distributed between authorities.

 

Departmental Budget

Kellie Gooch (Head of Finance - Environment) and Gary Hannaway (Head of Finance - Parking) gave a presentation of the Environment revenue budget for 2020/21, highlighting the following key points:

  • The Department managed a controllable expenditure budget of £70m, with a targeted income of £23m.
  • The service collected income for Council tax, business rates, land charges and also secured external grant funding from TfL.
  • The savings plan for 2020/21 aimed to reduce the existing £1.5m budget pressures, deliver new sovereign services within budget and provide £1m of new budgetary savings for the Council.

 

Councillor Victoria Brocklebank-Fowler asked what the council tax collection rate was. In response Hitesh Jolapara (Strategic Director of Finance and Governance) explained that last year the base collection rate was 97.5% and the forecast for this year remained the same.

 

Councillor Victoria Brocklebank-Fowler queried whether the forecasted spending of the reserves was significantly different compared to last year. Emily Hill provided an overview of how the reserves were spent last year - i.e. moving to a new Council system and IT investment for agile working. It was noted that the Council was very conscious that the reserves played a crucial role in good public financial management and resilience. The reserves for the Council fell into the mid-range category compared to other London local authorities. The Council was in the process of reviewing its financial strategy and had forecasted an extra contribution of £7.2m to reserves this year. These reserves would also contribute to future regeneration schemes such as the Civic Campus.

 

Councillor Victoria Brocklebank-Fowler asked how the Town Hall renovation would be funded. Hitesh Jolapara explained that it would be funded through a mixture of revenue and capital expenditure over three years.

 

Councillor David Morton questioned why there was a drop-in business rates from £123m to £78m. Hitesh Jolapara, referring to page 17 of the agenda pack, explained the changes in the business rates regime and noted that this was an assumption of what the Council would retain under the pool. It was noted that this wouldn’t have an impact on the funding as other adjustments were made. The bottom line of the table demonstrated that business rates funding for Council services changed very little, although different pilot arrangements had been introduced.

 

The Chair asked for further clarification around why there had been a fluctuation in business rates compared to last year. In response Hitesh Jolapara explained that the system had been developing since 2017, the difference related to the different rates of retention by Hammersmith and Fulham under the different pilot arrangements and that the instability in the Government’s approach to business rates made medium-term financial planning challenging. It was noted that the Council had a stable finance team in place who continued to deliver realistic forecasts.

 

RESOLVED

That the Committee noted and commented on the update.

 

Supporting documents: