Agenda item

Budget Update Report 2021/22

To consider and provide a recommendation to Cabinet on the proposals set out in the attached report.

Minutes:

Lee Colyer, Director of Finance, Policy and Development introduced the report that provided an update to the budget projections for the 2021/22 budget and subsequent years.

 

Discussion and responses to Members questions included the following:

 

-       This was the second report in the process of setting the 2021/22 budget.

-       In the absence of Government financial information for the next year, the projections had been made in something of a vacuum against the constantly fluid impact of the Pandemic.

-       The Council was financially self-sufficient and received no revenue support grant from Government. 

-       To function without Government support the Council operated more as a business and generated its own income to fund local services.

-       The most significant impact on the Council’s finances was the reduction in income from sales, fees and charges. 

-       The Council experienced income losses that reached £1m per month in May with a recovery as the economy started to open up but then a reduction in September as health concerns returned. 

-       Current projections were that by March 2021 the monthly loss of income would be £250k per month and this would indicate a total loss of income of £3m over the original budgeted levels for the financial year 2021/22. 

-       The latest current lockdown and with the potential for further restrictions going forward would likely increase the losses of income. As such it was also more likely that Government would extend the compensation scheme to support Councils. 

-       Locally, unemployment had quadrupled.  The collection of Council Tax and Business Rates were already below target.  However, they were nowhere near below target as first feared.

-       The Government furlough scheme had now been extended until the end of this financial year.

-       One way the Council had been generating income was through promoting economic growth and sharing in the process of additional Business Rates.  This scheme was expected to continue for another year so might provide some help with funds that would help fund the Capital Programme.

-       Projections were also on the basis that Council Tax would increase by £5 a year – as expected by Government.

-       To avoid drastic cuts to services at a time when residents were most reliant upon them, it was proposed to temporarily use reserves to balance the budget.  This could be afforded in the short term, but when able to do so, reserves would need to be replenished.

-       Fortunately the Council entered the Pandemic in a healthy financial position with a track record of being able to balance its budget, maintaining healthy levels of cash reserves and with no external debt.

-       However, the gravity of the situation was such that the Pandemic would result in  fundamental changes to the economy and to the Council’s income streams.  This would require the Council to review which services it could afford to deliver, how it worked and the cost and effectiveness of its large numbers of property assets. 

-       The budget update allowed for the immediate attention to be focused on continuing to help the community and the economy through the Pandemic. 

-       Being self sufficient the Pandemic had significantly hurt the Council’s income streams. It was important that the Council led the recovery and this would involve some investment and cost.  A detailed cost plan would be paramount to ensure the Council fully understood the financial resources and risks it was putting into any priorities identified.  

-       The Council had for some time invested in digital technology to make the way it interacted with the public and the services it provided to be as efficient and cost effective as possible.  It the Pandemic continued those efficiencies alone would not be sufficient to close the budget gap if the Council wanted to continue to provide its current wide range of services and if the Government didn’t come in with additional financial support. 

-       The current approach was not to make any drastic decisions but to support residents and local businesses whilst the Council reviewed its asset base which consumed much of the revenue budget.

-       The Council’s net revenue budget was £12.8m.  The Council spent £1.3m paying Business Rates to the Government and another £900k a year on planned repairs and maintenance on properties.  Another £2-3m call on Capital Reserves on its assets.

-       There was no risk to the Council’s finances either this year or next year as the level of reserves were sufficient. 

-       The Council maintained contact with MHCLG providing data on a monthly basis.  The Council continued to highlight its concerns regarding its ability to manage the additional expenditure with reduced income and increased demands. 

-       The Council had large amounts of headroom should it wish to externally borrow.  It therefore remained an option for investment for the right schemes.

-       Contracts would go up by the level of inflation.  They were linked to the cost drivers associated for those contracts, e.g. cost of fuel, mechanical engineering and labour costs.  Labour costs in the Tunbridge Wells area were some of the highest in the country.  The 4% increase also took into account increase usage e.g. take up of waste. 

-       Car park charges were a contentious issue.  It was felt that now was not the right time to introduce any increases.  A lot of car park income came from season ticket sales which were predominately from office workers.  Renewal of season tickets usually happened in April so the Council would need to see what happened at that time and then determine next steps. 

-       Unemployment levels in Tunbridge Wells were just over 3,000 which were the lowest in Kent.   

-       The use of reserves, projected over 5 years would still be over £8m.  The minimum level of reserves the Council needed to hold was £4m.

-       Over a 5 year period the Council spent £10.8m on the Calverley Square project.  Over the same period the Council also embarked on an asset disposal programme which generated £15m worth of income.  The issues associated with Calverley Square still remained.  The Town Hall and the Assembly Hall still consumed a disproportionate amount of cost in terms of planned and response to repairs.  There was also considerable capital expenditure required on the buildings. 

-       The date of the Autumn Spending Review was 25 November 2020.  The provisional Local Government Settlement was expected 2-3 weeks afterwards i.e. just before Parliament rose for the Christmas recess.

 

RESOLVED – That the recommendations to Cabinet as set out in the report be supported. 

 

 

Supporting documents: