Agenda item

Mr N. J. Rushton CC, the Leader of the Council, and Mr L. Breckon CC, Lead Member for Resources, have been invited to attend for this and other Medium Term Financial Strategy (MTFS) items together with other Lead Members as appropriate.

 

The Commission considered a report of the Director of Corporate Resources which provided information on the proposed 2022/23 – 2025/26 Medium Term Financial Strategy (MTFS) as it related to Corporate and Central items, provided an update on changes to funding and other issues arising since the publication of the draft MTFS, and provided details of a number of strategies and policies related to the MTFS.  A copy of the report marked ‘Agenda Item 8’ is filed with these minutes.

 

The Chairman welcomed the Leader of the Council, Mr N. J. Rushton CC, and the Cabinet Lead Member for Resources, Mr L. Breckon CC, to the meeting for this item.

 

The Director of Corporate Resources in introducing the budget highlighted the following:

 

• The Council was in a slightly improved position following the Local Government Finance Settlement announced in December.  This had reduced the shortfall in 2023/24 from £11.5m to £7.9m, making it more manageable, though some tough decisions would still be required to bridge that gap.
• The key pressures over the last five years had centred around Social Care, Special Educational Needs and the capital programme.  Added to those this year were rising inflation costs and the adult social care reforms, Government funding for which was likely to be inadequate.
• Whilst a review of fair funding had been announced in the Local Government Finance Settlement, nothing further had been done about this as yet.  This had not therefore been factored in as part of the current MTFS.  Pressure continued to be applied on the Government to take this forward, but there was concern that the review would be more limited in scope than the Council hoped for.

 

The Leader welcomed the increased funding allocated by the Government (i.e. Improved Better Care Fund, Social Care Grant and Services Grant) which had improved the Council’s position for the coming year.  He highlighted that ordinarily a balanced budget for the first two years of the MTFS could be presented.  However, this had not been possible this year.  Whilst assurance was provided that the gap could be bridged, the Leader agreed this would require some difficult decisions to be made, highlighting that the Council had already delivered significant savings over a number of years.  The Council had been prudent and maximised its opportunities to raise revenue funding by increasing council tax and whilst difficult, it was recognised that this was necessary to help manage the cost pressures faced.  The Leader assured members that the Council would continue to pursue fair funding.

 

Arising from discussion, the following points were made:

MTFS Summary and changes to the Revenue Budget

 

(i)              A member commented on the degree of risk in the new MTFS which had been demonstrated through the discussions at each overview and scrutiny committee.  The Director assured members that detailed analysis of the key risks faced had been undertaken and this would be detailed in the report to the Cabinet along with details of the contingencies being put in place to address these.  The Leader commented that it was clear in preparing this budget that the Council faced greater risks over the coming four years than it had faced over the last 10, but said he was hopeful that some, for example, around business rates reform, fair funding and the County Deal, could ultimately benefit the Council for the future.

(ii)             Concern was raised about the lateness of the receipt of the Local Government Finance Settlement which it was agreed was unhelpful and made it difficult for local authorities to properly budget.  The allocation of funding for only one year added to this difficulty.  As the Council had resolved to produce a four year MTFS, it had to rely on estimates and forecast as best it could over that period, but this added to the uncertainty of future years and limited its ability to plan and manage risk.  

(iii)           A member commented that this was a sound MTFS as far as it could be provided for.  It was recognised that it was extremely difficult to predict four years ahead but felt reassured that officers and Lead Members recognised the pressures and would address these head on.  The Council was well run and despite being so low funded, was in a good position.

(iv)           Whilst the Services Grant for 2022/23 was welcomed, the Government had made clear that, given the planned funding review, this might not continue beyond next year.   It was noted that a total of £822m had been made available nationally, but that the Council had only received a small percentage (around 0.5%).  A Member commented that the Council had not received a fair proportion of this funding, or other funding allocated by the Government, (e.g. the Social Care Grant).  It was suggested that the allocation had been based on the traditional, outdated formula that continued to disadvantage the Council as a result of it having a reasonable council tax base.  This emphasised the need for fair funding.  The Lead Member for Resources agreed and emphasised the need for all political groups to continue to pressure the Government to address this.

(v)            A member questioned whether council tax receipts would likely be affected over the coming year as household incomes were squeezed because of, for example, increased fuel costs and rising national insurance contributions.  Members noted that whilst collection rates might fall a little, it was not expected that this would be significant.  Council tax receipts were often resilient and were not overly affected by such external pressures.  The Lead Member said it was recognised many residents would be experiencing difficulties as the cost of living increased and the Council would continue to deliver services to them as effectively and efficiently as possible.

(vi)           Regarding the New Homes Bonus Grant members noted that the Government had suggested that this would not continue beyond next year.  Therefore, whilst the Government’s response to the consultation was still awaited, the MTFS had been prepared on this basis.

Corporate and Central Items

 

(vii)         Inflation – A member challenged the estimates included for running cost inflation in future years and questioned, given the expectancy that this will rise, whether that allocation was too optimistic.  The Director said based upon continued increases seen in inflation over the last few months, there was a real risk that the provision could be too low.  Contracted prices would provide some protection and spread increases over future years.  However, it should not have a too significant effect on the budget, as running cost inflation had a relatively small impact compared to the National Living Wage and pay awards.  

(viii)        Ways of Working Programme – Members noted that as the Programme was rolled out and officers began a hybrid working approach, this would free up office space at County Hall.  A member questioned whether any cost analysis had been undertaken to determine the best use of the campus i.e. whether to rent or sell parts of this.  The Director advised that discussions were being held with partners with the aim of renting out space no longer needed which would generate an income for the Council.  The Leader commented that there was no intention to sell any part of the County Hall campus and that the preference would be to maximise its use and generate a good income through renting. 

Adequacy of Earmarked Funds and Robustness of Estimates

(ix)           Health and Social Care Integration – Members noted that it had expected that an Integrated Care System would be introduced in April though the legislative timetable had been delayed.  As part of this the three CCGs (Clinical Commissioning Groups) would be merged into one.  As expected, the biggest issue currently facing the County Council was hospital discharges and pressures on adult social care.  However, the Chief Executive assured members that the Council was well placed given how well it worked locally with NHS partners.  Members noted that a briefing would be provided for all members the following day on this issue and all were encouraged to attend.

 

(x)            Budget Equalisation Fund – It was noted that the money allocated to this Fund came partly from contingencies made, but not used this financial year, and partly from the Council’s revenue budget.  It was acknowledged that the creation of this Fund contributed to the financial gap in savings required to be made.  However, the Director explained that whilst this might appear counterintuitive, it was necessary for the Council to allocate money for the increasing SEND deficit; the Fund would equal that deficit by the end of the MTFS.

Capital Programme 2022/23 – 2025/26

(xi)           Prudential borrowing – Members noted that whilst historically the Council had been against borrowing, the position had now shifted and this might prove necessary to deliver the capital programme.  The Director emphasised, however, that this would come down to affordability.  The Leader confirmed that the key issue to consider would be the revenue consequences of the borrowing.  If it could be afforded and the Council was looking to borrow for the right reasons, e.g. an invest to save scheme, then prudential borrowing would now have to be considered.

 

Funding and Affordability

(xii)         Forward Funding – A member emphasised the risk to the Council’s capital programme arising from the need to forward fund schemes necessary to support developments detailed in district council local plans.  Whilst a single agreement with all district councils could not be reached, the Chief Executive assured members that all parties had agreed to move forward on an individual basis and that constructive discussions were being held with districts including Charnwood, Blaby and North West Leicestershire.   The Director advised that each area and each project differed in terms of need and risk and therefore a series of agreements would likely be needed.  The Director further emphasised that the Council was heavily dependent on district councils to secure the section 106 developer contributions needed to deliver its capital programme.

(xiii)        External debt – The Council’s current external debt was low compared to many other authorities.  The Council had repaid significant amounts of debt over the last decade.  The possibility of generating savings through repaying more of this debt was also looked at regularly.  However, this could be expensive due to penalties applied and so there was little scope to repay more at the current time.

 

Changes to the Capital Programme 2022 - 2026

(xiv)        In response to a question raised, the Director clarified that the £8m balance referenced in paragraph 78 of the report was different to the £8m allocation from the Covid reserve for Highways Investment that was included in the December Cabinet report.

(xv)         It was noted that the allocation of funding for the Members Highway Fund had been made in the current financial year (2021/22) for a period of two years and that no further funding had been allocated for this in the new MTFS.

 

 

Corporate Asset Investment Fund (CAIF)

(xvi)        The CAIF made a meaningful contribution to the Council’s revenue budget.  This was therefore a positive policy to make the best use of the Council’s resources and assets.

(xvii)      Members noted that whilst primarily investments were made in County, as these also provided an economic benefit.  However, investments were made out of County where these were considered appropriate and worthwhile.  This helped maximise the use of the Fund and ensured diversification to manage risk. 

(xviii)     In response to a question raised the Director confirmed that the CAIF would be funded from the Council’s own resources and did not require any borrowing.  Members were informed that a report on the performance of the Fund would be presented to the Commission in the Autumn.

(xix)        Whilst independent advisers had suggested that entry into the residential markets might be advisable, the Council had decided against this at the current time.  Whilst a good investment from a property point of view, there was concern that increased exposure to residential market risk would not be appropriate for the Council.

RESOLVED:

 

(a)  That the report and information now provided be noted;

(b)  That the comments now made be submitted to the Cabinet at its meeting on 11^th February 2022 for consideration.