Agenda item

Decision:

Recommendation 1

That Council approve the revision to the Budget for 2016/2017 as set out in the report.

 

Recommendation 2

That Council reaffirm the Policy on Earmarked Reserves and General Fund Working Balance and the maximum balances set for the reserves as noted in the report.  

 

Recommendation 3

That Council :

 

1)     Approves the budget of £17,754,730 for 2017/2018 and notes the projections for 2018/2019, 2019/2020 and 2020/2021.

 

2)     Approves the level of Special Expenses for the Town/Parish Councils as detailed in the report.

 

3)     Approves the Fees and Charges 2017/2018 detailed in Appendix 4.

 

4)     Approves a Band D council tax of £116.87 for 2017/2018

 

Recommendation 4

That Council approve a minimum requirement of the General Fund balance for 2017/2018 of £887,737

 

 

Reason for Decision

 

The Council is obliged to set a Budget Requirement and level of council tax before the beginning of a financial year commencing on 1 April.

Minutes:

The Assistant  Director – Finance presented the Council’s Financial Plan for 2016-21. As part of the council tax setting process the Council updates its longer term Financial Plan to take account of any changes in financial settlements, inflation on service costs and revised priorities of the administration.

 

In February 2016 the Council set out a Financial Plan for 2015/2020.  The Plan reflected the significant financial challenges faced by the Council including the phasing out of Revenue Support Grant (RSG) over the course of this parliamentary term, changes to the distribution of New Homes Bonus, the impact of the Business Rates revaluation from 2017 and a 100% Business Rates Retention Scheme from 2020.

 

The Plan showed that the Council could present a balanced budget for the period 2016-2021 although there was still uncertainty in funding which was estimated to be received from New Homes Bonus and business rates growth in the period to 2020.  The significant risk was from 2020/2021.  The impact of the implementation of the new 100% Business Rates Retention scheme and the Fair Funding Review from 2020/2021 were unknown, but there was considerable downside risk.  Whilst a substantial amount of work had already been undertaken to reduce costs and generate additional income future reiterations of the cost reduction programme would require income generating options previously not supported to be re-considered.

 

In last year’s Spending Review the Government provided some financial certainty by offering councils the option to take up a four year settlement offer 2016-2020 subject to publishing an ‘efficiency plan’.    The Council took up the Government offer. The Secretary of State for Communities and Local Government announced as part of his statement on the provisional local government finance settlement delivered on 15 December 2016 that ‘97% of councils have taken up the offer and met our expectations of reform by publishing a long term efficiency plan’. 

 

The provisional local government finance settlement announced by Government on 15 December 2016 confirmed the second year of the 4 year offer.  It should be noted that the 4 year offer only included RSG and Rural Services Delivery Grant (RSDG). The ending of RSG had been clearly signaled and it was assumed that the Council would receive no RSG from 2020/2021. As with RSG it was also assumed that the Council would receive no RSDG from 2020/2021.

 

The report explained that the Government focus was on Councils’ ‘core spending power’ inclusive of locally generated resources.  The core spending power analysis tables published by the Government for each Council assumed that Councils in the lowest quartile of Council Tax levels (which included the Borough Council) would introduce the full £5 per annum per Band D dwelling Council Tax increase now permitted under the Council Tax Referendum Principles.  The additional Council Tax generated was included in the Government’s calculation of a 0.4% increase in core spending power over the Spending Review period.

 

The baseline business rates funding allocation also announced on 15 December 2016 included the impact of the Business Rates Revaluation 2017 and was broadly as anticipated in the current plan.

 

The Secretary of State also announced in the Autumn Statement that a Bill would be introduced into Parliament early in 2017 to provide the framework for the new 100% business rates retention scheme, with trials beginning later in the year.   The revised arrangements for business rates retention would not provide this Council with funding to replace the reductions announced in RSG.  Under the new arrangements there would still be a formula adjustment to redistribute business rates between two tier authorities and to address economic differences.   There would also be a reset of the baseline funding and it was not known how much, if any of the growth would be retained from 2020.

 

The Government was working with representatives of local government on a Fair Funding Review to ‘thoroughly consider how to introduce a more up-to-date, more transparent and fairer needs assessment formula’. The review was looking at all the services provided by local government and would determine the starting point for local authorities under the 100% business rate retention scheme.  The Secretary of State announced that he would update on progress to Parliament early in 2017.   It was anticipated that there would be winners and losers as a result of the funding review.

 

Under the current business rates retention scheme the Council retained 40% of any net growth in the business rates achieved and 100% of any growth in business rates from Renewable Energy facilities. In preparing the Financial Plan 2016/2021 assumptions had been made on continued growth in business rates.  There was however no guarantee that business growth would materialise as developers/businesses would respond to changing market conditions, and the added uncertainty as the Brexit arrangements unfolded.  There was therefore a significant level of risk with this approach. If the anticipated projects did not progress as planned or were cancelled the growth would not be achieved.

 

The DCLG published its response to the consultation document on New Homes Bonus which had shaped allocations for New Homes Bonus in 2017/2018 and beyond.   The savings of £240 million from the reform of the New Homes Bonus had been allocated to social care authorities through a new Adult Social Care Support Grant.   The changes in the allocation of New Homes Bonus had resulted in an estimated reduction for this Council of £6.7m in funding from New Homes Bonus over the period 2017-2021.

 

The report reminded Members that over recent years the Council had adopted a policy of seeking efficiencies and different ways of delivering services producing significant levels of savings.  A robust process to identify proposals to address the continuing budget deficit had been underway since the autumn 2015.  In taking up the offer of a four year funding settlement the Council was required to publish an efficiency plan and monitor progress on delivery of savings.

 

It was noted that work was underway to produce the changes required to deliver the savings identified, before 2019/20.  The work being completed, and therefore the savings being generated, were monitored closely and reported in the monthly monitoring reports.  Where savings were achieved in advance of 2020/2021 these would be transferred to reserves to fund investment in major capital projects which would provide future revenue income.  As at the end of November 2016 the Council had achieved 81% of actual savings against the target for 2016/2017.

 

The costs of services of the Council had been updated. In terms of containing spending a number of service budgets had been held at 2016/2017 levels and increases had been made only where known price increases have occurred.  Growth items had only been included where there was a statutory requirement including minimum pay pledges and the apprenticeship levy.

 

It remained difficult in the current economic climate to estimate levels of income in certain services including planning, car parks and industrial estates and a cautious approach had been taken in projecting forward into 2017/2021.

 

Fees and charges had been reviewed as part of the estimates process, car parking charges were increased last year and it was proposed that there would be no increase in 2017/2018 with current charges held for 1 April 2017. 

 

The report explained that the Council had a planned approach to the use of the general fund balance.  As in previous years the Council continued to make use of working balances and reserves to protect against volatile changes in the cost of services, receipt of income and more significantly funding levels from business rates growth.   At no time did the Plan take working balances below the minimum level as stated in the Policy on Earmarked Reserves and General Fund Working Balance of the Council.

 

The figures shown in the Financial Plan for 2017/2021 included a £4 per annum per Band D dwelling increase in council tax for 2016/2017 with a £4.50 increase each year from 2018/2019.  The increases were in line with the Council’s published efficiency plan. The overall £5 increase permitted under the Council Tax Referendum Principles included increases in special expenses and the Borough precept. 

 

The Financial Plan 2016/2021 showed that the Council could present a balanced budget.  The current general fund balances would be required to support the budget in the event that income levels were not achieved and/or delayed, whilst further cost reductions were made.  The savings required by the end of the Financial Plan were £2.6m and may be even higher depending on the impact of the new 100% Business Rates Retention scheme and the Fair Funding Review.

 

The funding for the period to 2019/2020 was presented with a degree of certainty in respect of RSG and RSDG funding as the Council had taken up the 4 year offer.  However there were still potential further changes to New Homes Bonus and uncertainty if the Business Rates growth included in the Plan did not come to fruition. 

 

The report showed that the significant risk was from 2020/2021.  The detailed arrangements for the implementation of the new 100% Business Rates Retention scheme were not known and the re-set of the baseline may mean that the Council did not retain all the growth currently included in the Plan.  The Fair Funding Review would determine the starting point under the new 100% Business Rates Retention scheme.

 

In discussing the report and recommendations explanations were given on the planned approach for the retention of balances to make savings in future years, and the changes in the New Homes Bonus allocation which would reduce over the coming 6 years.  Concern was expressed both about the retrospective reduction in the allocation of New Homes Bonus as it was considered a disincentive to build new homes and the potential for the reduction in funding with the Business Rates Review.

It was noted that the proposals were prudent and the increase was in line with the Government’s expectations of local authorities.  Attention was drawn to the small increase in Council Tax since 2005 which now totalled £2 per week for the services provided.  Support was expressed for locally run and accountable Business Rates Scheme.  Congratulations were given to officers for the work carried out to date and the proposals for the budget. 

 

Under Standing Order 34, Councillor D Pope expressed disappointment that there was only a briefing for Members on the budget rather than a formal meeting.  He drew attention to the high reliance on borrowing in the document, which he felt that with the forthcoming potential years of financial upheaval was a risk.  He also considered that any increase in Council tax was against the manifesto pledge.

In response it was noted that the Manifesto pledge was made at a point in time 2 years previously, and the Government had now included an increase by Councils into their settlement figures.

With regard to the borrowing element of the Plan it was explained that it related to the Capital Accounts, not the Revenue Accounts.  The Reserves had been built up in a planned approach to deal with the future uncertainty.  Attention was drawn to the fact that the Borough’s Council Tax was now half that of the Police precept to which it had previously been equal.  In real terms the Borough’s Council Tax was a reduced significantly less than RPI or CPI since 2005. 

 

Recommendation 1

That Council approve the revision to the Budget for 2016/2017 as set out in the report.

 

Recommendation 2

That Council reaffirm the Policy on Earmarked Reserves and General Fund Working Balance and the maximum balances set for the reserves as noted in the report.  

 

Recommendation 3

That Council :

 

1)     Approves the budget of £17,754,730 for 2017/2018 and notes the projections for 2018/2019, 2019/2020 and 2020/2021.

 

2)     Approves the level of Special Expenses for the Town/Parish Councils as detailed in the report.

 

3)     Approves the Fees and Charges 2017/2018 detailed in Appendix 4.

 

4)     Approves a Band D council tax of £116.87 for 2017/2018

 

Recommendation 4

That Council approve a minimum requirement of the General Fund balance for 2017/2018 of £887,737

 

 

Reason for Decision

 

The Council is obliged to set a Budget Requirement and level of council tax before the beginning of a financial year commencing on 1 April.

 

 

Supporting documents: