Agenda item

Reserves Strategy and Action Plan

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

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 Officer, noted that the figure consisted primarily of property lease payment and relocation costs.  If the scheme is completed within 3½ years it would require £40m but if it extends to 5 years it will cost up to £45m.

 

The Committee welcomed the report and requested officers to keep the figures under review with regular June and January updates presented to the Committee.

 

Action

 

Regular June and January updates presented to the Committee.

(Hitesh Jolapara – Strategic Director of Finance and Governance)

Supporting documents: