Agenda item

A report by the Director of Finance, Performance and Procurement, providing an update regarding the Medium Term Financial Strategy 2019/20 to 2022/23.

The Committee is asked to note the forecasts and assumptions leading to the current budget gap, note that assuming a council tax increase of 4.99% next year followed by 1.99% for the subsequent period that the budget gap would be £92.3m, and comment on the indicative timetable for setting the 2019/20 budget.

51.1  The Committee considered a report by the Director of Finance, Performance and Procurement (copy appended to the signed minutes).

51.2  The Cabinet Member for Finance and Resources introduced the Medium Term Financial Strategy 2019/20 (MTFS) report which sets out the budget challenges over the next four years. £216m of savings have been made over the last four years including efficiency savings; a further £145.1m gross (£92.3m assuming the predicted rise of Council Tax) of savings are needed over the next four years in order to close the budget gap, which equates to 10% of the Council’s budget. The savings decisions which now need to be taken are very difficult, but are necessary in order to protect other Council services and the Cabinet Member does not wish to use Council reserves to bridge the gap.

51.3  The Director of Finance, Performance and Procurement introduced the report and accompanying presentation (copy appended to the signed minutes), detailing the impact of eight years of austerity upon this Council and how this compares to other authorities. The Council currently has sufficient levels of reserves, of which some is earmarked for designated spending, however the focus is on avoiding unplanned use of reserves as has happened in other authorities. It is hoped the Government’s draft finance settlement figure may be released before Christmas with the final settlement figure being confirmed in January 2019.

51.4  The Committee made comments in relation to the Medium Term Financial Strategy including those that follow. It:

·        Commented that the effects of austerity are continuing to affect residents and the Council should be doing all it can to loudly and clearly lobby central Government for increased funding. 

·        Queried the figures in Table 8 Summary Budget Gap; if no Council Tax rise is made for 2020/21 why the total funding rises by £22m by 2021/22.  The Director of Finance, Performance and Procurement explained that the 2020/21 figures assume a balanced 2019/20 budget and therefore expenditure is increased to cover that budget. If Council Tax were then kept at the same level with no rise in 2020/21, the base expenditure for the same services would be at that higher level; effectively the starting point would be increased.

·        Members queried whether service provision would be lower if Council Tax was not increased. The Director of Finance, Performance and Procurement confirmed that in 2022/23 if no Council Tax increase was agreed real cuts to services would need to be made due to inflation. Council Tax needs to increase to maintain or slightly reduce current services. The total expenditure detailed in Table 8 of £625.4m for 2022/23 is as predicted in order to protect services at the current level of provision.

·        Commented that the expenditure to provide the same services rises between 2019/20 to 2022/23 by £45m. This context needs to be borne in mind and needs very careful explanation to residents by both officers and Councillors so it is clear what is being asked of Council Tax payers.

·        Queried whether success in applying for the 75% Business Rate retention pilot would bring uncertainty, and whether the need to hold bigger reserves due to this could be justified when there is great service need. The Director of Finance, Performance and Procurement explained there is no assumption of success in the pilot bid, and that if it is successful the additional income would be earmarked for improving the digital infrastructure within the county. The Cabinet Member for Finance and Resources confirmed that the reserves would not be increased. The Leader stated that the reserves are necessary to protect against unexpected events, and that volatility is to be expected following Brexit and this should be planned for. Effort is being put into growing the local economy to reassure businesses. Representations on the Council’s funding have been made to Government and Ministers, alongside working with the County Council’s Network and lobbying MP’s. The Cabinet Member for Finance and Resources urged members to provide an update at their Parish Councils on the Council’s budget to highlight the challenges.

·        Queried the presentation slides which show us reducing our reserves. The Cabinet Member for Finance and Resources explained the apparent reduction is due to using reserve funds that have been earmarked for specific purposes as expected, unlike other authorities who have used reserves to balance their budgets. Earmarked reserves are continually reviewed to ensure they are appropriate and proportionate; currently it is 3% of the annual budget which is considered very prudent and robust.

·        Expressed concern about the unintended consequences of the 30% reduction in real terms spending since 2010/11, with reductions in adult social care and troubled families initiatives moving the costs elsewhere or to other authorities.

·        Requested information regarding what the funding gap would be if Council Tax was increased above the 1.99% Government cap in future years. The Cabinet Member for Finance and Resources confirmed to the committee that every 1% increase in Council Tax rates would raise £4.4m of funding.

·        Queried in relation to the £26m of savings being looked at through the Select Committees, whether if these measures are rejected the savings have to be found elsewhere. The Leader confirmed this is the case and difficult decisions would have to be made by Cabinet Members. All non-statutory services will be under consideration. 

·        Commented that as there is a strong link between the capital budget and the revenue budget it would be helpful for both to be presented to Committee at the same time. The Cabinet Member for Finance and Resources confirmed that capital and revenue budgets will both be considered at the January meeting of this Committee.

·        Commented that Members were concerned to see savings decisions added to the Forward Plan but were reassured that these will receive member involvement and appropriate scrutiny.

51.5  The Chairman then invited observing Members to speak on this item and comments were made including those that follow:

·        Queried in relation to working with district/borough Councils to co-operate on savings and minimising impacts, whether all seven local Councils were supporting and engaging this and what the positive impact has been. The Leader confirmed all local Councils are being engaged with, in particular regarding supported housing. The work is ongoing and due for discussion at the Leader’s Board in November.

·        Noted the difference between the statutory services the Council must provide and the non-statutory services the Council would like to continue to provide.

·        Queried why the Council are bidding to be included in the 75% Business Rate pilot scheme when Surrey County Council are part of the current 100% scheme and are experiencing financial difficulties. The Director of Finance, Performance and Procurement commented that it isn’t possible to say why Surrey’s bid was chosen, however it was notably open about tackling their financial issues via the pilot scheme. The Leader commented that most bids were predicated around adult social care needs; Surrey has a bigger adult social care need than this Council which may have helped their application.

·        Expressed concern regarding the economy of West Sussex if no deal is reached on Brexit, particularly for agricultural workers, and commented that it would be helpful for the report to cover the scenario if no deal is agreed. The Cabinet Member for Finance and Resources explained that more should be known over the coming weeks and the report can be updated ahead of the February County Council meeting.

·        Commented that the County Councils Network have been very successful in promoting the pressures in social care, and stressed a need to engage local media and public in the same way as reductions to services and supported living grants may have unanticipated consequences.

51.6  Resolved:

1)  That the Committee notes the forecast and assumptions leading to the current budget gap as presented in the report, and notes the council tax assumptions for 2019/20;

2)  That the Committee recognises the need to continue to lobby the Government for increased funding, and the need to more effectively communicate the Council’s budget pressures to residents and businesses; and

3)  That the Committee broadly supports the indicative timetable for drawing up a budget for 2019/20.