Agenda item

Report attached.

Councillor Joyce Plummer, Portfolio Holder for Resources, provided a report setting out proposals for the 2020/21 General Fund Revenue Budget.  It also provided an overview of key issues arising from the Medium Term Financial Strategy.

 

The decision to set the Budget would be a principal decision of the Council.  The role of the Cabinet was to recommend a proposed Budget to the Council.

 

Councillor Plummer highlighted key points from within the report including:

 

• Predicted spending in 2020/21 of £11.3M;
• Estimated revenue available in the sum of £11.2M;
• A requirement of £116k to balance the Budget, to be financed by corporate in-year savings;
• A proposed Band D Council Tax of £250.52, which equated to around a 10p/week increase (approximately 2%) from last year’s figure;
• The majority of houses in Hyndburn were in Band A, which would be subject to a 7p/week increase;
• In setting the Budget, assumptions had been made about likely increases in salaries and non-pay expenses (both 2%);
• If any estimates were too low an overspend would result, for which in year action would need to be taken;
• There were a number of other potential threats during the year, but the Council had a good track record of financial management and usually returned a Budget surplus;
• A list was provided of the anticipated precept requirements of Lancashire County Council, Lancashire Police and Crime Commissioner, Lancashire Fire and Rescue Authority and Altham Parish Council.

 

Overall, the planned Budget gave rise to a moderate rise in Council Tax against a background of continuing pressure on public finances.

 

The report provided further details as follows:

 

The Council’s proposed Revenue Budget for 2020/21 includes net expenditure of £11,227,000.

 

Under these proposals, Council Tax for Hyndburn residents will rise for Hyndburn Council provided services by £5.00 (2.04%) for a Band D property.  (The amounts due for each band were set out in an Appendix to the report).  The increase is equivalent to 10p per week for a Band D property, but for most residents the increase will be less than 7p per week as the majority of households in Hyndburn are Band A properties that pay two-thirds the value of a Band D property in Council Tax.

 

This is the only the fourth rise in Council Tax for Hyndburn services since 2009/10 and the average annual increase over this period has been below 1%.  This is significantly below the rate of inflation over this period.  If the Council had increased Council Tax simply by inflation (CPI) over the last 11 years rather than the actual increases made, Council Tax for Hyndburn’s services would have been almost 13% more expensive at £282.83 for each average Band D property within Hyndburn which is £32.31 more than proposed for 2020/21 at £250.52.

 

The increase in Council Tax by Hyndburn Council is a result of cost pressures from wages, other expenditure inflation and the loss of income which have risen at a faster rate than the increases generated from Government Grant or Business Rates.  The level of increase in overall expenditure would have been greater except for the reduction in pension costs this year.  The Triennial Review of the Council’s employer contribution by the independent actuary to the Pension Fund has allowed the Council to reduce its level of contribution by £528,000 this year, with a further £500,000 reduction expected in 2021/22.

 

Lancashire County Council, the Police and Crime Commissioner and the Combined Fire and Rescue Authority have not yet formally taken their decisions on Council Tax Levels for 2020/21.  It is expected that the County Council will raise its Council Tax for each household by a general increase of 1.99% and a 1.99% increase to assist with meeting the cost of Adult Social Care which equates to a 3.99% increase overall.  It is expected that the Police Commissioner will increase a Band D Property by £10 and that the Fire and Rescue Authority will recommend a 1.99% increase.

 

Altham Parish Council has set a separate precept for its activities for the twelfth time in 2020/21.  This year the Parish Council does not intend to increase its precept.  The Band D charge for Altham Parish Council will therefore remain at £40.27 for the year and will precept the Collection Fund for £12,685.  (Details of the proposed position on other Bandings for properties in Altham were supplied in an Appendix).

 

In setting the Budget for 2020/21 the Council faces continued volatility around some of the most significant items within its Budget.  Major reforms of local government finance have transferred the risk of business rate revenues and Council Tax benefits to the Council.  The certainty on which the Council could budget and manage its finances has therefore decreased since 2013 and it will be important going forward to plot any deviations away from the expected figures and take appropriate action if these should start to emerge.  This might result in the need to reduce spending during the year, if revenue analysis during the year starts to indicate the amounts of funds received will fall short of the target.

 

The Cabinet intends to continue the good financial stewardship of the Council’s affairs by continuing the successful policies introduced over the last 16 years to manage costs effectively and promote appropriate service investment.  This Budget will therefore deliver,

 

• A continuation of the established approach of limiting enhancements on early retirement, continuing our rigorous approach to absence management and committing to minimising borrowing costs.  These actions have already stemmed the build-up of unproductive costs within the organisation.  In each of these cases the Council has put a stop to the costly and financially damaging policies of the past and created a healthier and more financially stable culture within the Council.

 

• While the Council is not incurring any further borrowing costs it is able to invest  just over £3.1m in total for the year on Capital Schemes, with £966,000 going to support those with medical and physical difficulties to live independent lives in their own homes, it will continue its work to improve Accrington Town Centre building upon the £2m already spent in this area with a commitment to another £1¼ m of investment into this key area and provide money to improve facilities at our Sport Halls and Council buildings to ensure services can continue to be provided from these locations for many years to come.

 

• Despite costs of over £85,000 to provide car parking in Hyndburn for residents and visitors and particularly for shoppers, the Council will continue to provide this facility free of charge and not introduce charges for parking in Hyndburn.  The Council believes this action will help bolster the town centres through these difficult economic times and provide an incentive for people to shop locally rather than drive and pay to shop elsewhere across the North-West

 

• Further reductions in accommodation costs, building on the success over the last 11 years including further rationalising the Council’s accommodation and looking at more ways of using accommodation more effectively.  The Council will also continue its actions to reduce its carbon emissions and energy costs and continue contributing to the improvements of its environmental footprint by positive action.

 

The Council intends to continue to deliver all of the above and remains committed to a radical agenda of improvement while managing within its available resources.  This will be more difficult in the years to come, given reduced resources from the Government.  However, there remains a firm commitment and absolute determination amongst Members and Officers of the Council to control the finances of the Council, drive forward on the efficiency agenda and continue to improve service delivery.  The Council wishes to continue to push forward on the drive for delivering value for money as a key priority.

 

The rewards of strong financial control remain clearly evident.  The Council has built itself back from experiencing major difficulties in controlling expenditure and a position of negative reserves in 2003/04 to a situation by March 2019, in which Balances are over £2.1m and the Revenue Budget for 2019/20 is predicting a saving of over £218,000 which will contribute to improving the strength of the underlying financial position.

 

Within the Budget for 2020/21 there are a number of areas which are subject to our best estimation.  There are therefore a number of risks around the budget, should these estimated costs or revenue amounts vary during the year. 

 

After the introduction of the Government reforms to Business Rates Funding of Local Government, the Council now carries a significant risk around the level of monies available, fluctuating substantially from this source.  In addition, as the calculation of how much funds will be available is dependent on a number of factors including debt collection rates, the size of appeals against business rates assessment and the success of these appeals, new rules around levies, safety nets and pooling, the introduction of new rules on rates relief on retail premises and small businesses, as well as predicted levels of growth or decline in business activities and the estimation of a number of figures which will only truly emerge after the end of the financial year, the imprecision in these estimates is regarded as high and could be subject to variations of hundreds of thousands of pounds.  The volatility around these forecasts is expected to remain for a number of years until the new system becomes bedded down and more robust data emerges on which to make more reliable forecasts.

 

The threat of significant pay inflation during 2020/21 is viewed as low.  An assumption of a 2% pay award has been included in the roll forward figure.  As yet there is no formal agreement between the Employers’ side and Trade Unions over a pay settlement for 2020/21.  However, with a limited increase in funding from Government this year and continuing strong pressures on expenditure there appears little room for wage increases substantially above the current level of inflation.  Any increase in wages agreed at a national level beyond the 2% built into the roll forward position will increase in-year financial pressures making it more difficult for the Council to avoid overspending and will increase the need for more savings to be generated in future years, with the pressure to reduce staff numbers growing in such circumstances.

 

With inflation likely to be low over the period and our strong past record on tracking in-year spend, plus the level of our Reserves, the Council should have confidence going into the year ahead that it will be able to deliver its Budget.

 

The detailed report included further information on the following matters:-

 

• Medium Term Financial Strategy;
• Continuation Budget;
• Growth Pressures;
• Available Resources (Core Government Revenue Support Grant (RSG); Business Rates; Council Tax; New Homes Bonus);
• Budget Proposals 2020/21 (General Financial Pressures; Budget Saving Proposals);
• Reserves;
• Risks and Risk Management; and
• Consultation

 

In summary, the Budget for 2020/21 will be £11,227,000 and will be supported by a Council Tax levy of £250.52 for a Band D property—translating into a revenue source of £5,247,000 to meet services to the local community.  The Budget has been determined in light of continuing upward pressure on costs, previous financial difficulties that continue to overhang the Council, the available funding from Government and the Council’s strong desire to provide high levels of service to the Community in line with its priorities.

 

Councillor June Harrison expressed concern for elderly residents who, on top of having to deal with numerous annual price increases, now had to contend with the planned removal of free television licences for over 75s.

 

Approval of the report was not a key decision.

 

Reason for Decision

 

The recommendations in the report provide an appropriate platform on which the Cabinet can recommend a Budget to the Council which meets the objectives and key priorities of the people of Hyndburn.

 

Alternative Options considered and Reasons for Rejection

 

There have been a wide number of individual proposals put forward to produce a Balanced Budget.  Options have been rejected on a variety of grounds including policy objectives, practicalities and the potential for additional costs to be incurred.  Further options may be presented at the Council meeting.

 

Resolved                        (1)   That Cabinet proposes to Council an increase Council Tax for 2020/21 of £5.00 per year for a Band D property.  This is equivalent to less than 10 pence per week and as most households in Hyndburn are Band A rather than Band D properties, the vast majority of households will only see a rise of 7p per week.  This is only the fourth increase in Council Tax by Hyndburn Council in 11 years.

 

(2)    The Budget for 2020/21 will therefore be £11,227,000 as detailed in Appendices 1 and 2.

 

(3)    That Cabinet recommend approval of the savings approach outlined for 2020/21 as set out in Appendix 3 to ensure the Council has a balanced budget.

 

(4)    That Cabinet notes the significant improvement made in relation to budget monitoring and cost reduction within the Authority over the past 16 years and confirms its commitment to continuing this approach in the year ahead.

 

(5)    That Cabinet recommends during the financial year 2020/21, the Deputy Chief Executive be delegated responsibility to amend the Budget (following consultation with the Leader of the Council) for technical reasons, such as the restructuring of cost centres, the re-apportionment and re-allocation of overheads etc., provided such amendments have an overall neutral impact on the Budget.

 

(6)    That Cabinet recommends during the financial year 2020/21, the Deputy Chief Executive be delegated responsibility to amend the Budget (following consultation with the Leader of the Council) should the estimate of Business Rates not be sufficiently accurate, by drawing on reserves if needed or paying over additional contributions to reserves.

 

(7)    That, to aid future financial management planning, any surpluses generated during 2020/21 are set aside to help the Council reduce its cost base over the next three years, support its long term capital programme or strengthen its overall reserve position.

 

(8)    That Cabinet recommends that the New Homes Bonus and any additional funds from Government that are not ring-fenced funding as well as any further surplus on the Collection Fund can be used if required to support capital expenditure as determined by the Deputy Chief Executive in the overall financing of capital expenditure or be transferred to reserves.