Decision details

To agree the budget strategy and timetable for 2021/22, the net savings requirements by year for the next 5 years, and the revised General Fund revenue, funding and reserves projections.

Matter for Decision

This report presented and recommended the budget strategy for the 2021/22 budget cycle and specific implications, as outlined in the Medium-Term Financial Strategy (MTFS) October 2020 document, which was attached and to be agreed.

 

This report also recommended the approval of new capital items and funding proposals for the Council’s Capital Plan, the results of which were shown in the MTFS.

 

At this stage in the 2021/22 budget process the range of assumptions on which the Budget-Setting Report (BSR) published in February 2020 was based need to be reviewed, in light of the latest information available, to determine whether any aspects of the strategy need to be revised. This then provides the basis for updating budgets for 2021/22 to 2025/26. All references in the recommendations to Appendices, pages and sections relate to the MTFS.

 

The recommended budget strategy was based on the outcome of the review undertaken together with financial modelling and projections of the Council’s expenditure and resources, in the light of local policies and priorities, national policy and economic context. Service managers had identified financial and budget issues and pressures and this information had been used to inform the MTFS.

 

Decision of Executive Councillor for Finance and Resources to recommend to Council to

 

i.      Agree the budget strategy and timetable as outlined in Section 1 [pages 5 to 7 refer] of the MTFS document.

ii.    Agree the incorporation of changed assumptions and specific, identifiable Covid-19 pressures, as presented in Sections 3 and 4 respectively [pages 18 to 23 refer]. This provides an indication of the net savings requirement, by year for the next five years, and revised projections for General Fund (GF) revenue and funding as shown in Section 5 [page 27 refers]  and reserves [section 7 pages 32 to 35 refer] of the MTFS document.

iii.   Note the changes to the capital plan and funding as set out in Section 6 [pages 28 to 31 refer] and Appendix A [pages 40 to 44] of the MTFS document and agree the new proposals.

 

 

iv.  Agree changes to GF reserve levels, the prudent minimum balance being set at £6.33m and the target level at £7.59m as detailed in section 7 [pages 32 to 35 of the MTFS refers] and Appendix B [pages 45 and 46 of the MTFS refers].

 

Reason for the Decision

As set out in the Officer’s report.

 

Any Alternative Options Considered and Rejected

Not applicable.

 

Scrutiny Considerations

The Committee received a report from the Head of Finance.

 

The Committee made the following comments in response to the report:

      i.         Asked for clarification of the officer’s discussion of reserves as on the one hand she thought the officer had said that reserves would be used to offset financial pressures but on the other hand that the council’s reserves would be increased.

    ii.         Asked how the reserves could be used over the next few years considering the challenges which lay ahead.

   iii.         Referred to pages 123 – 126 of the agenda and noted that the scenario analysis which had been undertaken and acknowledged that a prudent position had been taken. Queried whether pressure had been taken off the Government by Council’s adopting a prudent approach. Questioned the prudent minimum balance and whether this would cover the council’s risks.

  iv.         Asked if there were more forecast figures taken from across the council since the figures which were approved at the July council meeting.

    v.         Commented that this was the time when residents needed to feel the benefit of the council’s good financial management. 

  vi.         Queried if the council was going to receive any Covid-19 grant funding and if they were how much this would be. Noted that the council was currently showing a surplus of money because a few capital schemes had been deferred. Also asked what the cashflow situation was for business rates, council tax and commercial tenants.

 vii.         Queried why the pay assumption had been increased from 2% to 2.5% and asked where the narrative was regarding this in the report. Referred to the statement on p130 of the agenda and asked which service reviews members should be expecting to hear about. Referred to 3 areas suffering particular impact because of Covid-19 which included parking, commercial rents and Cambridge Live and commented that there should be an explanation why the impacts were being extended into financial years 2021/22 and 2022/23. Asked if members could see bid from officers regarding ‘unavoidable items’ and whether these would be included within the budget.

viii.         Referred to section 8 of the report which looked at new ways of working and maintaining priorities and noted three interesting bullet points in that section. Asked the Executive Councillor to explain the directional financial impact of that section for example would it cost the council money or save the council money. 

 

The Head of Finance said the following in response to Members’ questions:

      i.         She referred to a table on p141 of the agenda which set out the reserves that the council had and it showed in the 2021/22 column that the council was using £2.9 million of reserves over the next couple of years. The prudent minimum balance was shown in the table at the top of p143 of the agenda and set out the minimum balance that the reserves should be kept at. The difference between the prudent minimum balance and the council’s amount of reserves could be used by the council in a number of ways. The council’s reserves were not increasing; the prudent minimum balance of reserves was being raised. 

    ii.         There were a number of options for how the council’s reserves could be used and it was important to consider how the council could use the reserves to generate an income.  Reserves could be used to invest in a regeneration project which provided rental income, or a renewable energy projects which provided climate change benefits and generated an income, to support the council’s capital programme.

   iii.         Setting a prudent minimum balance required not only officer judgement but also a calculation to support it. Consideration had to be given to what had happened within the financial year.  The Council had seen a reduction in its income of around £8 - 9 million. There was a Government income compensation scheme which should reduce this deficit in a substantial way. The prudent minimum balance would be reviewed on a regular basis and would be reviewed again in the Budget Setting Report.   

  iv.         The forecast figures were looked at on a regular monthly basis, and a detailed end of quarter report was done. The second quarter report was not available at the moment.  Monthly flash reports were done but these were not as detailed as the quarterly reports. There was a projected underspend of approximately £2 million following the interim MTFS which was approved in July 2020.

    v.         An application had been made to the Cultural Relief Fund to cover the costs of Cambridge Live. She had now seen guidance for claiming for loss of income and had just submitted the initial claim for the first 4 months of the year. This would be for approximately £2 million but she noted that as the guidance was general and that MHCLG would be auditing claims and there was a considerable amount of judgement when claims were compiled.  She expected future claims for the rest of the year to be a lot lower. As the lockdown eased there were conditions around what could be claimed and whether these were as a result of Government guidance or local decisions.  Council tax income had held up but she expressed concerns that impacts of the lockdown were yet to be seen for example as a result of the end of the furlough scheme, increase in unemployment and more claims on council tax support scheme. The Council had been relatively shielded by the losses in business rates because of Government grants.

  vi.         Officer’s view was that a 2.5% pay rise was a better estimate given the recent pay award. There were a number of service reviews in progress and a number planned for the future. She would expect to see the outcomes of reviews of fees and charges, revenues and benefits and customer services in the budget setting report. The Head of Commercial services continued to do detailed forecasts regarding income which was based on assumptions relating to Covid-19, the recovering of the city centre and the return of full car parking charges. The Head of Property Services had done a detailed review of the property portfolio on a property by property basis and what properties might be provide opportunities for improvement or redevelopment. Cambridge Live had looked at how outdoor events might be delivered in 21/22 and how social distancing may affect the events. When preparing the BSR if things are truly unavoidable they are identified as such in the BSR the challenge is deciding whether something is truly unavoidable or whether it could be delivered in a different way or were not 100% necessary.

 

The Executive Councillor commented:

        i.       that the council was facing very unusual and uncertain circumstances, which included Covid-19, Brexit and the fair funding review, which meant the council needed to be prudent in how it considered using its reserves. The Council was not saying that it would not spend reserves but at the moment careful consideration needed to be given to the use of reserves so that the council was in a strong position to face challenges which lay ahead.

      ii.        Section 8 of the budget strategy section was alerting people to the potential ways that the council can move forward and this might cost money initially but the intention would be to save money in the longer term. The Council will look in relation to Covid-19 how it can build on the work with the Mutual Aid Networks and how the council can continue to work with the community.

 

The Committee resolved by 4 votes to 0 to endorse the recommendations.

 

The Executive Councillor approved the recommendations.

 

Conflicts of Interest Declared by the Executive Councillor (and any Dispensations Granted)

No conflicts of interest were declared by the Executive Councillor.