Agenda item

A report by the Director of Finance and Support Services updating the committee of the financial implications and pressures for the year 2020/21 as a result of the current pandemic situation.

The Committee is asked to review, comment on and make any relevant recommendations for action to the Cabinet Member for Finance.

72.1  The Committee considered the financial implications of COVID-19 report from the Director of Finance and Support Services (copy appended to the signed minutes). 

72.2  The Director of Finance and Support Services introduced the report and highlighted that the report reflects the state of affairs at publication; since 2 July further Government funding has been announced and an additional £500m will be available to local authorities to replace loss of income or to pay the deficit on collection funds, however the allocation of this has not yet been detailed.  The projected budget gap for 2020/21 and Medium-term Financial Strategy (MTFS) will be updated once the detailed allocation of funds is known.  At this time a budget gap for 2020/21 is predicted on an estimated scale of £34m to £50m.  Uncertainty remains around the cost of the COVID-19 response, future economic recovery within the county, and the expected receipt from Council Tax as a result of increased unemployment.  The financial situation is currently reactive, with Government funds coming after the necessary spend; the Council would welcome further support from the Government and, in particular, more funding certainty for the current and next financial year.

72.3  The Committee made comments in relation to the report including those that follow.  It:

·       Welcomed this update report providing Members with a strategic overview of the effect of COVID-19 on the Council’s finances, and thanked the Finance team for their work in such uncertain times.

·       Queried whether there was any indication as to the Government’s intentions regarding funding of the COVID-19 effort, and whether it aims to reimburse the additional expense fully or partly.  The Cabinet Member for Finance commented that the initial indication was for expense to be fully funded; the Council has received £36.4m to date and awaits a further announcement.  Modelling commissioned by the County Council Network estimates council tax revenue will be 5-6% lower than expected which would equate to the Council’s income being reduced by £25m. 

·       Commented that the report does not enable scrutiny of the estimated costs and forecast predictions for future years, and requested that future reports must include the key assumptions that underlie the forecasted figures and issues, and also address the risk around the assumptions.

·       Commented that given the emergency nature of the impact on finances, could the normal rules preventing councils from borrowing to fund revenue expenditure be relaxed in order to allow a loan or bond to be taken over a long period.  The Cabinet Member for Finance explained this had been discussed with officers but no new guidance has been given; a letter was sent to the Chancellor recently raising this point and lobbying for flexibility. 

·       Suggested an alternative approach of relaxing the capitalisation of revenue expenditure so the COVID-19 impact could be capitalised from revenue expenditure instead.  The Cabinet Member for Finance explained the capitalisation is restricted to use for transformational purposes.

·       Expressed concern regarding the growing shortfall expected from the Council Tax precept this year, commented that district and borough councils are also facing a growing shortfall from Council Tax collection, and queried whether the Council would consider sharing the burden of deficit with the district and borough councils rather than taking a full precept amount.  The Cabinet Member for Finance commented that discussions continue however district and borough councils haven’t reported issues with payment of the agreed precept.  The Director of Finance and Support Services confirmed regular dialogue is in place with district and borough councils, and that government is developing a process to spread the deficit owed over three years.

·       Expressed concern regarding the impact upon residents resulting from the need to use either reserve funds or serious service reductions required to fund the budget deficit, which will compound upon service reductions over the previous ten years.  Commented that use of reserves should be considered rather than reducing services, or alternatively consider prudent borrowing to take advantage of low interest rates.  The Cabinet Member for Finance commented that the use of reserves will be considered but that the Council must maintain financial resilience.  Prudent borrowing will be considered pending further funding announcements from the Government expected in the autumn Budget Statement.

·       Sought reassurance that the Council are not near to issuing a Section 114 notice.  The Cabinet Member for Finance commented that the Council is not needing to issue a section 114 notice at this point in time.  The Director of Finance and Support Services added that the biggest issue the Council faces is uncertainty.  The gap for this year and the next three years is estimated in the papers to be presented at Full Council on 17 July and, assuming there is no second wave of COVID-19, a gap at the lower end could be resolved without significant reductions to frontline services.  Certainty on the budget gap should increase through the autumn as the effect of a potential reduction in Council Tax revenue becomes clearer.

·       Supported continued lobbying of the Government for extra funding and certainty of funding.  The Cabinet Member for Finance encouraged all Members to lobby their MP on the need for clarity and certainty for Local Government.

·       Chairman encouraged all Members to attend and input their priorities to the budget plans at the Member Budget Day on 31 July.

·       Queried in relation to the potential reduction to the Local Enterprise Partnership (LEP) funding necessary to deliver significant road schemes within the county, whether road schemes are likely to receive less funding and if so which schemes.  A Member sought reassurance the A259 scheme at Littlehampton/Angmering will continue.  The Cabinet Member for Economy and Corporate Resources explained the Government has withheld one third of LEP funds and requested projects be re-justified; the Council confirmed to the LEP all projects could be completed and is awaiting confirmation from the LEP that funding will be received.  Information will be provided for the Committee on the schemes being funded by the LEP.

·       Queried what work has been undertaken with the business sector to determine the likely route and speed of economic recovery.  The Cabinet Member for Economy and Corporate Resources explained engagement with forums and stakeholders has been undertaken to create an Economy Recovery Plan which aims to address issues in the Gatwick Diamond, Sussex rural economy, and coastal town areas.  The Plan will go before Cabinet in July for endorsement followed by consultation with stakeholders.  The Plan will come before this Committee for comment at its September meeting, and then for Cabinet’s final endorsement in October.

·       Commented that British Airways (BA) and Gatwick Airport Limited are the largest employers in West Sussex and, following uncertainty on BA’s continued operation at Gatwick, queried whether the Council has sufficient oversight and influence regarding BA’s operation.  Expressed concern that BA have cancelled the travel voucher scheme offered at the beginning of the COVID-19 lockdown.  The Cabinet Member for Economy and Corporate Resources undertook to look into the matters raised.

·       Expressed concern that Adult Social Care may see increased demands as a result of COVID-19 for the current and future years, queried how the MTFS is being used to consider this, and encouraged lobbying of Government for extra funding for social care.  The Director of Finance and Support Services confirmed the latest MTFS projections will be given at July Full Council.  Pressures are expected via increased cost and increased demand, and this will remain under review through the budget process.

·       Queried whether there are plans in place to support the care market or individual care homes in West Sussex if needed.  The Director of Finance and Support Services explained that the Adults team are working to understand the pressures and risk that COVID-19 presents within adult social care and the local care market.  The Chairman of the Health and Adults Social Care Scrutiny Committee (HASC) confirmed that the Committee are monitoring this matter.

72.4  Resolved:

1)   That the Committee welcome the Economic Recovery Plan coming to the Committee for scrutiny at its September meeting;

2)   That the Committee support the continued lobbying of Government for extra funding and certainty, particularly in relation to social care;

3)   That the Committee recognise the Council’s need to look at ways to meet our budget gap, that this should include the potential use of reserves and prudent borrowing if relevant, and that any savings should form part of the ongoing budget considerations;

4)   That all Members be encouraged to attend and input their priorities to the budget plans at the Member Budget Day on 31 July;

5)   That future papers on COVID-19 finance must include the underlying assumptions and risks so an assessment around that can be made by the Committee;

6)   That the Cabinet Member for Economy and Corporate Relations provide information on the LEP schemes and projects; and

7)   That the Committee recognise the need for clarity from government on the funding details.