Agenda item

To discuss with the Executive Member for Transformation & Finance and the Director: Finance the current financial position in preparation for scrutiny of the 2019/20 budget proposals.

Stuart McKellar, Director: Finance updated the meeting on the Council’s financial position since the Council set its budget in February 2018. He reminded Members that in order to bridge the 2018/19 budget gap 1% had been added to Council Tax and an additional £0.5m was taken from the General Reserves. 

The latest reported position was that there had been significant increases in demand for social care services with a potential overspend of £0.5m in Adult Social care and £1.5m in Children’s Social Care. He advised that other potential variances would broadly balance. There was an expected underspend on Treasury Management due to additional income from capital receipts, Section 106 and Community Infrastructure Levy moneys.  The Council would also benefit from a successful £2m VAT claim for leisure sites, that would provide additional one-off funds to support future budgets.  The corporate contingency of £2.5m remained and Corporate Management Team (CMT) would keep spend under close review for the rest of the year.

The Director: Finance explained that the new Fair Funding review reset would recalibrate the distribution of funding across local authorities. There was therefore a risk that this would have a significant impact although it was anticipated that some dampening mechanism would be used to reduce the impact in the short term.

He explained the assumptions which had been made in order to start the budget planning process.

He reminded Members that the successful bid to establish a Business Rates Pool across all Berkshire Authorities as a pilot would both inform the new system in 2020/21 and had been financially beneficial for Berkshire as a whole and Bracknell Forest specifically.

He explained that CMT were in the process of re-assessing the assumptions used to calculate the predicted gap and that the gap in 2020/21 was large due to the impact of the new funding arrangements coupled with no significant transformation savings currently projected beyond 2019/20. The financial strategy was to use the Future Funding Reserve to manage the transition to the new funding system over time.  

The Director: Finance advised the meeting that the original target of £11m of on-going savings had been achieved by the transformation programme. He reiterated that both Children’s and Adult Social Care were experiencing significant increases in demand which were impacting on the delivery of transformation projects. It was noted that CMT were considering how to balance a whole systems approach with targeted interventions.

In response to questions from Members the following points were made:

• Financial assumptions were being tested and pressures were currently at £3m and anticipated efficiencies would be proposed at £2m subject to Members’ agreement.
• It was anticipated that there would be a loss of £4m business rate income in 2020 and it would be challenging to build this up again.
• It was recognised that strategic discussions were ongoing to address the potential ‘cliff edge’ for local authority finances in 2020 and it was noted that areas in the south who had experienced growth would see a reduction whereas northern areas were expected to see a slight improvement in funding, in relative terms.
• It was acknowledged that business rate appeals were the most challenging issue in the changing funding structure as no appeals had yet been heard against the 2017 ratings list so there was a level of uncertainty. This was a risk element of the transition to central arrangements and the changing the appeals process was particularly complex.
• The Council had previously used all of the flexibility offered by the Adult Social Care precept and therefore the maximum increase to Council tax in 2019/20 would be 2.99%.
• Multiple data sources were used by Adult Social Care to anticipate demand however the response to healthcare and prevention work meant that it was hard to predict when and at what level individuals would require support in the future. Longitudinal studies were not yet available to inform this process.
• It was recognised that there should be closer working with Education due to some specific cases of children who had transitioned into Adult Social Care who required support and could have been identified earlier through their SEN support.
• There was currently £8m in General Reserves and £8.6m in Business Rate Fair Funding Reserve.
• Action: The Director: Finance agreed to circulate a response to the query regarding how much had been written off in the previous year for Council Tax arrears.
• Monthly monitoring of accounts was used to test the financial assumptions. As highlighted at recent Environment, Culture and Communities Overview and Scrutiny Panel, this process had identified £300k income shortage for car parking in the town centre. This was due to the new Avenue car park drawing customers away from Braccon Walk which would create a future budget pressure.
• Though Brexit would have a potential impact on the Council’s finances no direct financial assumptions had been made. In particular, Members queried the potential impact on business rates due to vacancies if companies left the area and were reassured that there was a year’s lag before a vacancy affected the budget and this would give the Council time to respond.  

The Director: Finance explained that until the Executive approved the draft budget proposals it would be difficult to provide a further update. The Chairman of the Commission stated that the Commission should be able to comment on the draft budget before it went to the Executive.