Agenda item

5:10pm to 5:40pm

The Deputy Leader, Acting Chief Finance Officer and Deputy Chief Accountant attended to present a report updating the Committee about Chesterfield Borough Council’s (CBC) budget.

The Council approved the original General Fund budget for 2020/21 on 26 February 2020. The original budget for 2020/21 forecasted a surplus of £16k and the indications were that the medium-term outlook would continue to be challenging. The Medium-Term financial forecast approved by full Council on 26 February 2020 showed increasing deficits of £723k in 2021/22 rising to £827k by 2023/24.

The impact of the coronavirus pandemic and the council’s response to it in the first quarter of this financial year led to a revised deficit forecast of £3.246m being reported to members as part of the ‘Month 2 Budget Monitoring 2020/21 & Updated Medium Term Financial Forecast’ report in July. This deficit was mainly due to lost income arising from the closure of sports centres, car parks, and venues during the first national lockdown.

The Council started quarter 2 with a forecast deficit of £3.246m for the financial year 2020/21. At the end of the second quarter the position had improved to an anticipated deficit of £192k at year end. A summary of the key variances was provided in the table at paragraph 2.1 of the officer’s report. One of the key variances was a third tranche of the Covid-19 grant was received from the Ministry for Housing, Communities and Local Government (MHCLG) in the sum of £205k. On the 21 October a fourth tranche of £587k was announced by MHCLG. These grants brought the total received by the Council, across all four tranches of funding, to £1,889k.

The council had continued to submit Coronavirus Job Retention Scheme grant claims to HMRC. The estimate at month two was that the council might receive £500k in grant funding through this scheme. It was now anticipated that the council would receive £697k, an increase of £197k.

The council would also be eligible for Job Retention Scheme Bonus payments of £147k on the basis that no furloughed staff had been made redundant.

The Government had also provided new burdens grant funding of £160k for administering business rates reliefs and payments of Small Business Grants and Discretionary Grants to local businesses.

MHCLG launched an income compensation scheme which partially reimbursed local authorities for lost income from sales, fees and charges in 2020/21 as a result of the pandemic. CBC had recently submitted the first claim to MHCLG for the period April to July for £998k. It was estimated that this would provide around £2m of income to the council by the end of the year. MHCLG had indicated that the claims would be subject to assurance testing before payment were made.

However, the MHCLG income compensation scheme excluded reimbursement for lost rental income and demand for industrial, commercial and retail units had fallen due to the Covid-19 pandemic which had resulted in an additional cost pressures of £68k because the council was liable to pay business rates on void units.

Sheffield International Venues had recently advised the council that the current lease arrangements for Tapton Park Golf Course were no longer viable and requested financial assistance to allow the continued operation of the facility. The impact of agreeing a rent holiday for 2020/21 had been included in the quarter 2 financial position.

All of the council’s budget holders had been tasked with carrying out fundamental reviews of the cost centres for which they were responsible. This work aimed to identify and agree further savings as part of the in-year annual budget review and resetting process. This work would be followed by a ‘check and challenge’ process involving Service Directors and the accountancy team with a curb on all non-essential spend. It was hoped that these activities would bring the General Fund Revenue Account for 2020/21 back into balance. A review of current reserves and provisions was also underway to identify any earmarked monies that could be repurposed.

The medium-term financial plan demonstrated a more challenging outlook from 2021/22 onwards with annual forecast deficits of at least £700k. In response to this position, Council approved an action plan to eliminate the forecast deficits over the life of the medium-term financial plan. These were to be developed by officers and approved by members during 2020/21 so that savings could be realised for the start of 2021/22. It was hoped that this would place the medium-term financial plan on a path to a balanced position through 2024/25.

The impact of Covid-19 has meant that officer time in the first six months of the financial year has understandably been diverted to managing the council’s response to the pandemic and to supporting residents, businesses and communities through the response and recovery stages. Immediate steps were now being taken to determine how much of the action plan could be delivered before the end of the financial year to avoid the need for more difficult decisions to be made as part of the 2021/22 budget setting process.

Due to the accounting arrangements for council tax and business rates income the consequences of any reduction in collection rates in the current financial year would not be felt until the following financial year. The Government had indicated that any deficits on the collection fund could be spread over three financial years rather than the normal one-year period. An analysis of the impact of this on future years’ budgets would be included in the final budget reports to Cabinet and Council in February 2021.

The most significant risks and pressures to the Medium-Term financial forecast based on the best available information were outlined in the officer’s report:

·      Delivering budget savings at the required level and at the right time continued to be a challenge and it would become more difficult to achieve as easier options were exhausted. Future budget savings proposals were now focused on several larger savings programmes rather than those delivering smaller savings.

·      Fees and charges income may be impacted by further closures imposed by local lockdowns in response to Covid-19 and the state of the economy due to continuing uncertainty around Covid-19 and Brexit. This may have a significant impact on the substantial annual income that the council generates.

·      Property rents from industrial, commercial and retail units had also been affected by the state of the economy. Current occupancy levels remained high and the Council continued to invest in its rental properties, however, income from the council’s interests in the Pavements and Vicar Lane Shopping Centres were continuing to decline.

·      A programme of capital receipts from the sale of surplus assets had been a significant source of funding for the capital programme. The pipeline of assets sales was reducing which would mean that future capital projects would need to be funded from borrowing.

·      The Council tax referendum limit for 2021/22 may be capped at 1.99%.

Members asked whether the viability issues at Tapton Park Golf Course were due to the pandemic or a different issue. The Acting Chief Finance Officer advised that the Chief Executive of the golf course had approached CBC with their viability concerns and CBC had requested to see copies of their accounts to understand the problems and how CBC could help. The rent assumption for the golf course had been reduced in the budget as a prudent approach.

Members noted that the two largest losses were from the sports centres and car parks and enquired how much of the losses would be reimbursed by MHCLG compensation and grants. The Acting Chief Finance Officer advised that approximately 60% of the income had been compensated and some money had been received from the furlough scheme. Another area of significant losses was rent and the Government was not willing to reimburse lost rent so Councils were required to cover this loss.

In the Budget Update report to Cabinet, it was noted that the Operating Services Department (OSD) had recorded a trading deficit because of the pandemic and this loss would be compensated by the ringfenced Housing Revenue Account (HRA) and Members asked whether this was normal practice. The Acting Chief Finance Officer advised that there was a ringfence between the HRA and General Fund, however, the OSD was outside both entities because it was operated as a trading account. This practise had been required in the 1980’s and CBC had continued the arrangement.

The Acting Chief Finance Officer was asked how much was not covered by the Income Compensation Scheme referred to in paragraph 2.25 of the officer’s report. The Acting Chief Finance Officer explained that the council had been reimbursed for their whole claim, however, the scheme did not allow council’s to claim for 100% of their losses. In total about 60-65% of the council’s losses would be covered.

Members asked about the meaning of the other movements column of the table in paragraph 2.1 of the officer’s report and they were informed that there were around 100 small movements which had been too minor to be detailed line by line.

A question was asked about where the information regarding service debts was shown and the Acting Chief Finance Officer advised that this information had been detailed in the report to Cabinet and no debt changes or increased borrowing was expected.

The Acting Chief Finance Officer was asked how long it was likely to take for the impacts of the second national lockdown to be seen. Budget holders had been asked to review their budgets to be included in the budget report to Cabinet in December.

Members enquired about the different types of borrowing referred to in Appendix B of the officer’s report and the Acting Chief Finance Officer explained that Local Government usually borrowed from two different places, either internally or the Public Works Loan Board. CBC had decided to go with internal borrowing in the past because it was less costly to use spare money in reserves which were not making large returns.

Members thanked the Acting Chief Finance Officer and the Deputy Chief Accountant for all of their hard work in the challenging circumstances.

RESOLVED –

That the Budget Update report be noted