Agenda item

Budget Book 2020/21 (attached).  (NOTE: A copy of the report that was considered by the Strategy and Resources Committee on 3^rd February 2020 is attached).

Council received a presentation by the Head of Resources regarding the Revenue Budget 2020/21, Capital Programme and Medium Term Financial Strategy 2020/24 and highlighted the following:

·         Government settlement December 2019.  The confirmed 2020-21 settlement (included the Rural Services Delivery Grant) was £3.317m.  In cash terms this was £48,000 more than 2019/20 (1.5% increase) in line with last year.  The Fair Funding Review had been delayed by one year until April 2021.  The New Homes Bonus in-year allocation had been allocated for 2020/21 only.  There were no legacy payments on the 2020/21 allocation.  The Government was intending to consult on the future of housing incentive in Spring 2020 to move towards a new, targeted approach.  The Rural Services Delivery Grant matched the 2019/20 level.  Council Tax levels for District Councils could be increased by up to 2% or £5 whichever was higher.  The referendum in relation to Council Tax levels for Town and Parish Councils had been deferred.  

·         The reduction in Government funding for 2012/13 to 2020/21.  Funding had reduced from £28.1bn to £18.5bn (34%) to 2019/20.  There were potential significant changes to core funding from the Government from 2021/22 onwards and the Council needed to put plans in place to become more commercial and improve efficiencies across the whole Council.

·         Medium Term Financial Plan (2019-23) approved by Council in February 2019 was based on a number of financial assumptions about the future which included: funding from Central Government, retained Business Rates income and future Council Tax levels, cost pressures and saving plans, and contributions to and from reserves (e.g. vehicle replacement).  The forecast budget gap as at this time last year from 2021/22 onwards was outlined. 

·         New Homes Bonus changes introduced in 2017 and potential changes for 2021/22 year onwards.

·         New Homes Bonus provisional level of funding to 2020/21.  The level of funding for 2019/20 was £1,445,670.  The Medium Term Financial Plan assumed £1.446m, therefore there was an additional £391,000. It was recommended that £250,000 be placed into a reserve for transformation and delivery of the corporate plan.  For 2021/22 the projected income was £814,531, therefore was a potential reduction of over £1m funding on the current level.  For 2022/23 the projected income was £434,860, therefore was a potential reduction of over £1.4m funding on the current level.  There was uncertainty around future funding and design of the new scheme for 2021/22.       

·         The 2020/21 Business Rate retention forecast income was £1.986m.  The 2020/21 draft budget (above baseline funding) included £1.658m income.  Reform of Local Government funding from 2021/22 onwards.        

·         Local Government Finance funding reforms which included: Spending Review for the period 2021/22; a review of relative needs and resources; Business Rates retention pilots; Business Rates baseline reset; Fair Funding review; New Homes Bonus review; reforms to Local Government funding would change the level of resources available and impact on the revenue budget; indicative allocations would be announced in Autumn 2020.          

·         Council Tax levels for 2019/20 Band D properties had been increased by £5.33 (equivalent to 2.99%).  For 2020/21 Rural Councils could increase levels by up to 2% or £5 (whichever higher).  By increasing the level by £5 for 2020/21 would increase NDC’s proportion of Council Tax for Band D properties from £183.35 to £188.35 (increase of 2.73%).  Devon County Council could increase its proportion of Council Tax by up to 2% and an additional 2% for Adult Social care.         

·         Strategic Grants (Appendix B) – it had been recommended that the level of strategic grants not be reduced.  The Medium Term Financial Plan supported the principle of a planned reduction for 2020/21 of around 9%, however the Government finance settlement had been slightly better than forecast, therefore no reduction was recommended for 2020/21. 

·         Draft Revenue Budget 2020/21 which included: cost pressures and savings; options to balance the budget and how it would be funded.   Business rates retention and New Homes Bonus were both at risk of change for 2021/22 year onward.        

·         Draft Revenue Budget 2020/21 (Appendix A) showed a balanced budget and assumed:

o   2.73% (£5.00) increase in Council Tax (each 1% equated to circa £63,000).

o   Strategic Grants have not been reduced as originally planned.

o   Parish Grants removed following report and decision made by Strategy and Resources Committee on 4 November 2019 and replaced with new Climate and Environment Grants scheme for smaller Parish Councils outlined in January 2020.

·         Additional one-off core Government funding placed into a Transformation Reserve to deliver the Corporate Plan.        

·         Reserves (Appendix C).  General fund balance forecast level at 31 March 2021 was £1.161m (8.7% of net budget).  The recommended level was between 5-10%.  Earmarked reserves forecast level at 31 March 2021 was £3.336m.  In compliance with the Local Government Act 2003, the Chief Financial Officer assured the Committee of the robustness of the estimates and the adequacy of the proposed financial reserves.         

·         Medium Term Financial Strategy 2020-24 was based on a number of financial assumption about the future which included: funding from Central Government; retained Business Rates income and future Council Tax levels; cost pressures and savings plans; and contributions to and from reserves (e.g. vehicle replacement).  Paragraph 5.1.5.6 outlined the assumption on loss of core funding and New Homes Bonus.  Paragraphs 5.1.5.8 and 5.1.5.11 in the report provided further detail on the budget gap and what was not included.  Appendix D detailed the modelled financial projections.       

·         Capital Programme for 2019/20 to 2022/23.  Investment plans for 2019/20 to 2021/22 totalled £31.276m.  5 business cases for capital funding had been submitted.  The cost to the Council was £1.936m.  The Project Appraisal Group had scored all of the business cases as “high”.  The Watersports Centre potential funding bid had not been included and would be presented to a future Committee.  Business cases had been submitted for the following projects:

o   Online consultation software system

o   ICT projects 22-23

o   Vehicle replacement

o   Boyton House re-furbishment

o   Disabled Facility Grants

·         The projects would be funded by earmarked reserves (£0.553m) and the borrowing need would increase by £1.383m. 

·         Future year borrowing costs had been included in the Medium Term Financial Plan.  The borrowing costs would increase to £1.278m by 2023-24 (an increase of £0.578m).  Borrowing costs increase would be offset by the Leisure Centre maintenance savings and new Leisure Centre contract revenue subsidy income (£0.496m).  Without any further capital receipts in addition to the amount that had been forecast already, it was estimated that borrowing costs could increase to £1.480m in 2029-30 due to additional future year vehicle and ICT replacements. 

·         Draft Capital Programme (Appendix E).  The total Capital Programme 2019-20 to 2022-23 was £34.191m which would be recommended to Council for approval on 26 February 2020.          

·         How the total Capital Programme 2019-20 to 2022-23 would be funded. 

·         Projected underlying need to borrow in accordance with the 10 year Capital Strategy. 

·         Risks identified that could affect financial plans. 

·         Timeline – Council at its meeting on 15 January 2020 approved the Council Tax base; the budget and capital programme had been considered by the Strategy and Resources Committee on 3 February 2020 and Policy Development Committee on 13 February 2020; Council on 26 February 2020 to consider the approval of the budget and capital programme and setting of Council Tax.

Council thanked the Head of Resources and his team for their work in producing a balanced budget for 2020/21.

In response to questions, the Head of Resources advised the following:

·         The overall budget for the Chairman of the Council had decreased by £10.

·         A review of the relative needs and resources would form part of the Government’s Fair Funding review.  A review of Business rates retention and New Homes Bonus would be included within the Fair Funding Review.  It had been assumed that the Council would receive less funding from the Government in the future.

·         Employees and associated costs within the budget had been reallocated from the Ilfracombe and South Molton Community Offices to the core Corporate Communications team.  There had been no reduction in the number of employees. 

·         The increase in budget for the Senior Management Team was due to an inflationary increase and in central recharges and other costs.  There had been no increase in the number of employees.

·         Car park income had increased by approximately £50,000.  Car parks expenditure had increased slightly due to the increase in costs for supplies, machine costs and maintenance.

·         Corporate Communications costs had increased as a result of staff transferring from the South Molton and Ilfracombe Community offices.  There was not an increase in costs overall for Corporate Communications.

·         The overspend of £80,000 within the Waste and Recycling Service was as a result of the decrease in the value of recyclable materials and the inefficiencies of the Trade Waste service.  A review of the Trade Waste service was in the process of being undertaken with the aim to make the service more efficient, optimise rounds to increase capacity to generate more income and improve customer satisfaction.  Reports would be brought forward for consideration in due course.

·         Planning fees were set nationally.  The number of larger planning applications received had decreased, which had resulted in a reduction in income.

·         The forecast reduction of costs from the CCTV service was a result of the planned creation of a CCTV hub during 2020/21 which would change how the service was delivered and reduce costs.  The Town Centre Manager had presented a report to the Strategy and Resources Committee in September 2019.  Once the timeline had been determined, Members would be informed.

·         The timing of any future borrowing was dependent on how the authority managed its treasury activity and due to current low interest rates and reduced returns on investments it was prudent for the Council to ‘internally borrow’ and use these monies to fund the Capital Programme.

The Chief Executive advised that a briefing for Members would be arranged prior to the next meeting of Council on 1^st April 2020 to provide an update on the progress of delivery of the Council’s corporate priorities.