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.




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.  Parking revenue and fines are set in line with parking policy rather than to generate revenue.  Any surplus income generated must be spent on specific expenditure including transport infrastructure, concessionary fares and environmental improvement projects.  The Committee asked for further information to be provided on this as there is a misconception that the Council can use parking revenues on any council activity.


Members inquired how will officers reduce the £9.449m overspend reported in CRM 6. If at the end of the year, the outturn is more favourable than reported now, should members be concerned about the Council’s budget and financial management.  The meeting was informed that officers were generally cautious at this time of the year. There will be some movement but children’s placement costs, and transports and care arrangements continue to be high pressure areas with significant demand growth and increased costs.  Mitigation plans are consistently reviewed.


The council at any time is supporting 1,100 children in need.  Around £18m is spent on looked after children.  Jacqui McShannon (Director of Children’s Services) noted that there has been an increased demand in the number of children and young people in care from 239 to 264 and rising. The reasons for children coming into care has changed.  The complexity of needs is forcing children into high costs places.  Statutory responsibility changes extending responsibilities up to age of 25 has also put pressure on the budget. 


The council benchmarks itself against other local authorities.  Nationally, the number of children in care is going up. Local authorities in West London are seeing changing trends particularly due to increased teenage violence.   Unfortunately, it is higher here compared to other boroughs.  The council is looking at early year intervention measures.


The placement costs are rising because of the national pressure on placements with the very complex needs, changes in statutory responsibility and high levels of youth violence.  In response to a query whether the £8.9m overspend on month 7 includes the £5.7m high needs block provision, it was noted that the reserve forecast assumes provision for the DSG deficit.  The Education and Skills Funding Agency is engaging with local authorities to find a solution to this national problem.


Members asked how much of the savings identified can be attributed to Zero based budgeting (ZBB) and are we obtaining value for money from team.  Officers reported that the ZBB team is working in collaboration with finance and service teams to identify and deliver savings.  Councillor Schmid was of the view that the team was providing value for money.  There are some bigger ideas in the pipeline which are not yet in the budget such as the residents’ access programme.  The team was good at using data and producing evidence to challenge how we do things.  For residents, the budget is good news as the council is keeping and improving levels of service.


Councillor Quigley asked for clarification on the street lighting savings.  Officers responded that the installation of sensors on street lighting (street lamps, illuminated signs and bollards) to remotely control hours and levels of illumination would be in line with residents’ feedback and was also in response to the Council’s climate change agenda.


The Committee once again thanked the officers for a very good job in ensuring that the Council produced a balanced budget.




·       Copies of the Departmental presentations to be circulated to Members (Kayode Adewumi – Head of Governance)

·       Officers to provide more information on the use of parking income. (Gary Hannaway – Head of Parking Finance)

·       Officers to let Members know where the installation of sensors on street lighting has been used in other boroughs.

(Kellie Gooch – Head of Finance – Environment)

·       Officers to circulate the High Needs Block presentation to the Committee. (Tony Burton - Head of Finance – Education)



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