Agenda item

To consider a report of Councillor Joyce Plummer, Portfolio Holder for Resources, on the Council’s financial position for 2020/21, in the light of the implications of the COVID-19 pandemic.

The Council considered a report of Councillor Joyce Plummer, Portfolio Holder for Finance, on the Council’s financial position for 2020/21 in the light of the implications of the COVD-19 pandemic.

The report illustrated that the current forecast of the Council’s Cash Flow until the end of the year indicated that while cash balances were dwindling, the Council would maintain a positive balance and would not need to borrow to finance expenditure during the year.

Without COVID-19 impacting on the Council this year, a Surplus of £288,000 for the 2020/21 Financial Year would have been forecast at this stage.

Estimating the cost of COVID-19 and the impact on the Council’s revenues was difficult at this stage and all figures needed to be viewed as early estimates at a time of great uncertainty.

The reasonable worst case scenario forecast was for extra spending of £2.8m and £371,000 net loss of income, assuming the Government provided a grant of around 45% of the income funds lost.  Combined with the Council’s normal budgetary activity this produced a net forecast loss for the year of £2.9m.

The above figure was reduced by £1,055,000 (less £16,000 of funds applied to expenditure in 2019/20) of additional Government Grant to assist the Council to deal with COVID-19 pressures.  The Council had also received £130,000 of New Burden Funding for the processing of Business Grants in the first 4 months of the year, which would also help to lower the overspend.

Combining all the spending pressure, net loss of sales, fees and charges income and the predicted budget surplus from the Council’s normal activities outside of the impact of COVID 19, produced a forecast net overspend position for 2020/21 of £1.75m at this stage.

In addition, the Council faced the loss of revenue from people switching from being Council Tax Payers to moving onto Council Tax Support and increased costs stemming from individuals not paying their Council Tax and Businesses not paying their business rates.  Increased Council Tax Support Costs were expected to be £130,000.  The level of failure to pay the Hyndburn Borough Council element of the Council Tax could be as much as £450,000 for 2020/21 and the Council could lose £685,000 of Business Rates in 2020/21.  This added a further £1.265m to the financial hit stemming from COVID-19.

The loss of income in relation to Council Tax Support, and failure to pay Council Tax and Business Rates would not crystallise until the 2021/22 financial year due to the statutory accounting requirement around local government finance.  This reduced the immediate impact for the 2020/21 financial year, but would produce a ‘double whammy’ in 2021/22.  In 2021/22 the Council would be required to downturn the expected revenues for 2021/22 from Council Tax, Council Tax Support and Business Rates that was used to finance the Budget, as well as adjusting for the losses in 2020/21.  Discussions were underway with the Government to change the accounting rules in those areas, to spread some of the impact over a number of future years, but details had not yet emerged and there was no certainty at this stage that any changes would be approved.

The financial impact in 2020/21 and 2021/22 from COVID-19 would therefore be challenging for the Council, but given the authority’s previous strong track record around financial management, it should be possible to manage the consequences effectively within the Council’s overall financial reserves.

The Government intended to redistribute funding among local councils from 2021/22 via their Fair Funding Review.  That might add to the financial pressures the Council would face in that year and beyond if resources were transferred away from the Council to other parts of local government.

Councillor Plummer highlighted key issues from the report, a summary of which is as follows:-

• Without COVID-19 the Council’s position would have been good, with a forecast surplus;
• Services with large negative variances, such as Housing and Regeneration, Property Services, Building Control and Planning and Transportation, were largely offset by other savings elsewhere;
• The largest single additional revenue cost was in relation to the financial support for the leisure sector (£900k).  Hyndburn Leisure was a key service supporting health and wellbeing and providing employment, but had been largely closed since March 2020, leading to loss of income.  Staff had been furloughed and other measures taken, but a loss was still expected;
• Another large cost was the establishment of the Hyndburn Hub (£488k full year cost).  If the venture was to receive government subsidy the costs would be reduced;
• Those struggling to pay Council Tax and their need for Council Tax Support presented an additional pressure in 2020/21;
• Non-payment of Housing Benefits overpayments (£500k) and non-payment of other debts (£500k) were also anticipated;
• Additional costs from Cemeteries, Rough Sleepers, Personal Protective Equipment (PPE), and ICT were all factors;
• Sales and income from fees and charges were expected to lose around £681k, but the Government would provide some assistance, leading to a net loss of £371k;
• The forecast net overspend position for 2020/21 was £1.75m, but the total amount could be as little as £500k, if COVID-19 started to diminish.
• Some councils were considering suspending non-essential expenditure, or making redundancies and others were facing bankruptcy.  Hyndburn had been prudent and could cover its deficit.  The Council would continue to work hard to provide value for money.
• A further financial update would be provided to the Cabinet in November 2020.

The following Members spoke on the financial update: M Haworth, P Cox, M Miller, T O’ Kane, P McGinley and M Parkinson OBE.  The following matters were raised:-

• The impact on the Council’s reserves of the adverse variance, but an optimistic view that the Government would provide some additional funding;
• Recognition that the Government had already provided significant amount of support via the Coronavirus Business Interruption Loan Scheme, Business Support Grants, Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme;
• The pressure felt by the construction and other industries and those now out of work or self-employed looking at having to rely on Universal Credit and Council Tax Support.  The disproportionate impact on young employees and lower paid workers, such as those in cleaning and maintenance, who would be last to see any economic recovery.  It was hoped that the Government would keep its promises;
• Concern at the amount of financial support which might be required by Hyndburn Leisure and any future liabilities.  There was a call for the Trust to seek to minimise its losses and to explore whether insurance monies might cover some of the deficit and to maximise numbers of returning customers;
• A call for the Government to help out Hyndburn given that it its capacity to raise revenue from rates was limited;
• Pressure on the poorest in society who could not afford to buy food and the ineffectiveness of the ‘Eat Out to Help Out’ campaign for those individuals.  A call to the Council to help out the local food banks, which might be in much greater demand when the furlough scheme was due to end in 5 weeks time;
• Concern not to write off debts and overpayments too readily, as this would place an additional burden on those who do pay.

The Leader of the Council reiterated that the report provided estimates only at this stage and that the situation might change in response to the progress of the virus.  He acknowledged that the cost of the Leisure Centre was high, but its role was important.  The outcome of a Leisure Services Review was due to be provided to the Council in November 2020.  A key challenge facing Hyndburn was that it had the highest rates of obesity in the country.  The Let’s Move Hyndburn campaign had recently been launched to tackle sedentary people and to encourage lifestyle changes.

Monthly figures on COVID-19 costs were provide to the Ministry of Housing, Communities and Local Government (MHCLG).  All local authorities had written jointly to the Government about funding.  Some monies had already been received to ease cash flow difficulties earlier in the year.  The Government were considering the issues raised and in the meantime councils would continue to lobby for funding.

The figures for Hyndburn would be firmed up later in the year, but the Leader was confident that with the help of reserves and based upon the efforts of both the current and previous administration, coupled with diligent treasury management, the Council would be able to stay within Budget.

Councillor Plummer summarised by stating that the report outlined both the best and worst case scenario.  However, it was hoped that the best case scenario would be realised.  She agreed to take into account the comments raised by councillors about insurance and returning customers concerning Hyndburn Leisure, support to food banks and not writing off debts too quickly.

Resolved                             -   That the report on the Financial Position for 2020/21 be noted.