Agenda item

Report of the Chief Executive on the budget proposals for 2021/22.

Cabinet approved the following budget proposals and noted that any comments from Overview and Scrutiny Committee will be returned to Special Cabinet on 19 January 2021 for consideration, before final recommendations are made to Council:

 

General Fund

 

(1)   The proposed General Fund Budget as summarised in Appendix A, and detailed in appendix B.

 

(2)   The inclusion of the savings and growth proposals into the budget as detailed in appendices C and D.

 

(3)   The approval of the 2021/22 fees and charges which have been incorporated into the budget proposals, as set out in appendix E.

 

(4)   The increase in the Council’s Band D Tax of £4.23 (1.97%), taking the average Band D Tax to £219.15 for 2021/22.

 

(5)   That £610,000 is added to the Covid-19 earmarked reserve from the 2021/22 budget, the expenditure of which will be delegated to the Section 151 Officer in consultation with the Executive Member for Resources. This will be fully funded from the one off Covid-19 Support Grant received from the Government.

 

(6)   That the Special Expenses Scheme continue into 2021/22, and the Special Expenses detailed in Appendix M be approved for inclusion in the Council Tax for 2021/22, subject to consultation with Town and Parish Councils.

 

Housing Revenue Account (HRA)

 

(1)   That dwelling rents are increased by CPI+1% in accordance with Government legislation, resulting in an average rent of £109.01 per week.

 

(2)   To continue the policy of charging formula rent when vacant properties are re-let.

 

(3)   The approval of the Housing Revenue Account budget for 2021/22 as shown in appendix F.

 

(4)   The approval of the 2021/22 fees and charges which have been incorporated into the budget proposals, as set out in appendix H.

 

(5)   The Medium-Term Financial Strategy (MTFS) to maintain HRA working balances to a minimum of 5% of rental income.

 

Capital Programme

 

(1)   The approval of the Capital Programme for 2021/22 to 2025/26 as set out in Appendix I.

 

(2)   The approval of the Capital Financing for the Capital Programme, for 2021/22 to 2025/26 as set out in Appendix J, and note the forecast capital balances in Appendix K.

 

Medium Term Financial Strategy

 

(1)   The approval of the Medium-Term Financial Strategy and Financial Governance Framework, including all annexes and prudential indicators for 2021/22 – 2023/24 as set out in Appendix L.

Report of the Chief Executive on the budget proposals for 2021/22.

 

(1)       The Decision Taken

 

RESOLVED:

 

Cabinet approved the following budget proposals and noted that any comments from Overview and Scrutiny Committee will be returned to Special Cabinet on 19 January 2021 for consideration, before final recommendations are made to Council:

 

General Fund

 

(1)     The proposed General Fund Budget as summarised in Appendix A, and detailed in appendix B.

 

(2)     The inclusion of the savings and growth proposals into the budget as detailed in appendices C and D.

 

(3)     The approval of the 2021/22 fees and charges which have been incorporated into the budget proposals, as set out in appendix E.

 

(4)     The increase in the Council’s Band D Tax of £4.23 (1.97%), taking the average Band D Tax to £219.15 for 2021/22.

 

(5)     That £610,000 is added to the Covid-19 earmarked reserve from the 2021/22 budget, the expenditure of which will be delegated to the Section 151 Officer in consultation with the Executive Member for Resources. This will be fully funded from the one off Covid-19 Support Grant received from the Government.

 

(6)     That the Special Expenses Scheme continue into 2021/22, and the Special Expenses detailed in Appendix M be approved for inclusion in the Council Tax for 2021/22, subject to consultation with Town and Parish Councils.

 

Housing Revenue Account (HRA)

 

(1)     That dwelling rents are increased by CPI+1% in accordance with Government legislation, resulting in an average rent of £109.01 per week.

 

(2)     To continue the policy of charging formula rent when vacant properties are re-let.

 

(3)     The approval of the Housing Revenue Account budget for 2021/22 as shown in appendix F.

 

(4)     The approval of the 2021/22 fees and charges which have been incorporated into the budget proposals, as set out in appendix H.

 

(5)     The Medium-Term Financial Strategy (MTFS) to maintain HRA working balances to a minimum of 5% of rental income.

 

Capital Programme

 

(1)     The approval of the Capital Programme for 2021/22 to 2025/26 as set out in Appendix I.

 

(2)     The approval of the Capital Financing for the Capital Programme, for 2021/22 to 2025/26 as set out in Appendix J, and note the forecast capital balances in Appendix K.

 

Medium Term Financial Strategy

 

(1)      The approval of the Medium-Term Financial Strategy and Financial Governance Framework, including all annexes and prudential indicators for 2021/22 – 2023/24 as set out in Appendix L.

 

(2)       Reasons for the Decision

 

The report will go on for consideration at the Overview and Scrutiny Committee (OSC) on 13 January 2021. Recommendations made by OSC and any changes will be considered by Special Cabinet on 19 January 2021, prior to the proposals being considered at Full Council on 1 February 2021.

 

The current 2020/21 financial year has been marked by the serious adverse effects upon the Council’s finances of the COVID pandemic.

 

In the original 2020/21 budget, approved prior to the arrival of COVID upon the scene, it was always planned to draw down on General Fund reserves by £1.6M, mainly to fund an additional Earmarked Reserve for future payments to reduce the pension fund deficit.

 

Since then, adverse COVID impacts of £3.3M had been identified for the current year.  These have been partly offset by government support payments totalling £2.0M.  Furthermore, the COVID Earmarked reserve set aside at the end of 2019/20 of £405k will be fully drawn down to offset the adverse COVID variance.  So the forecast net adverse variance from COVID for 2020/21 is approximately £900k, which is why the forecast drawdown of General Fund balances has risen from £1.6M to £2.5M, which means we aim to start 2021/22 with General Fund balances of £6M. 

 

The 2021/22 General Fund budget has been drawn up at a time when the extent to which COVID will have on-going impacts into the new financial year is extremely uncertain.  The Council have received confirmation that we will receive £610k of government support for COVID impacts in 2021/22, and the Council propose to transfer this to an Earmarked Reserve to offset any adverse impacts as they arise.  However, it remains the case that our budget will be vulnerable if COVID financial impacts for 2021/22 exceed £610k.  At present, this risk is unquantifiable, and will have to be monitored during the 2021/22 budget monitoring process.

 

Council Tax is proposed to rise by 1.97%, and this, combined with the increase in the Tax Base, will generate an additional £371,000 of income, net of Town and Parish Precepts.

 

Business Rate income, however, is expected to fall, both as a result of WHBC leaving the “pool” arrangement, and of minimal expected business rate growth.

 

As part of the COVID financial impact assessment for 2020/21, a potential collection loss of £2.0M of Council Tax and Business Rates was identified.  This will hit the Council through the Collection Fund, and are able to spread these losses over 3 years from 2021/22.  The 2021/22 amount is therefore around £670k.

 

The amount of New Homes Bonus the Council receive is predicted to fall from over £1M to just over £600k.  However, we will receive a new “Lower Tier Services Grant of £124k.

 

An item of note is the first budgeted contribution from Now Housing, which is expected to generate £40k of net interest income on loans by WHBC to the company in 2021/22. 

 

Overall, therefore, after establishing an Earmarked Reserve of £610k for COVID related impacts, a General Fund “gap” of £220k is projected for 2021/22.  When taken together with the £670k 2020/21 Collection Fund deficit to be borne directly by reserves in 2021/22, this results in projected General Fund reserves falling to £5.1M at the end of 2021/22. 

 

Whilst this appears to leave reserves in an adequate state, the £670k per annum Collection Fund draw upon reserves continues through 2022/23 and 2023/24.  Furthermore, no allowance has yet been made for 2021/22 COVID losses in excess of the £610k government support announced to date.  Therefore it is clear that in future years, the Council will have to drive further savings from the modernisation programme, as well as maximising income opportunities where possible, to ensure reserves remain adequate. 

 

The Housing Revenue Account has been far less impacted by COVID than the General Fund, and rent collection levels have held up well.  The impairment allowance for bad debts, at £490k, is in line with the current year, and the level of the provision is felt to be adequate.

 

It is intended to maintain HRA balances at a minimum level of £2.5M.

 

This will be achieved by managing the level of new HRA borrowing to take account of the requirement to meet the repayment schedule of existing borrowing, and to finance the Affordable Housing Programme.

 

£32.4M relates to the General Fund. Notable items include £6.9M for Bereavement Services, £4.4M for the Tewin Road Depot upgrade, £4.7M funded by Hertfordshire County Council for the Household Waste and Recycling Centre, and £11.5M of loans to Now Housing.

 

Much of the Hatfield Town Centre and WGC North capital spend will either be complete by the end of 2020/21, or is already covered by the 2020/21 capital budget, so may be subject to further re-profiling into 2021/22 if the need arises.

 

£39.5M relates to the Housing Revenue Account.  Of the total, £28.7M relates to the Affordable Housing Programme, including £13.2M for Minster House redevelopment, and £7.0M for Howlands House redevelopment.  Other than the Affordable Housing Programme, Long Term Major Repairs and the Gas Central Heating Replacement Programme account for £7.6M of HRA capital spend.

 

For the General Fund, the significant increase in external borrowing noted at the time of the 2020/21 budget is sustained.  A substantial and increasing part of this is the funding of lending by the Council to Now Housing.  In future years, it is anticipated that this activity will generate an increasing interest spread for the Council, although only £40k of net revenue has been included for 2021/22.  There is also a requirement to fund the on-going capital programme.

 

For the Housing Revenue Account, new borrowing to fund the Affordable Housing Programme is predicted to slightly outstrip repayment of existing debt until 2022/23, but, thereafter, repayments will exceed new borrowing, resulting in an overall fall in HRA debt levels by 2025/26. 

 

The Medium Term Financial Strategy (MTFS) is set out in Appendix L, and highlights a number of the opportunities and challenges faced by the Council in the period through to 2023/24 notably the likely requirement to find a further £1.9M of annual General Fund revenue savings by 2022/23.

 

The combination of a General Fund budget gap of £1.7M in 2022/23 and a further £0.6M in 2023/24, would imply a reduction of General Fund balances to £2.9M.  This may reduce further depending on the collection fund position and a further update will be provided to Special Cabinet on 19 January.

 

Nevertheless, the report demonstrates the Council’s commitment to achieving financial stability, and the Council does have a track record to be proud of in this respect.  It is intended that the situation will be improved by the driving out of further efficiencies from the Modernisation Programme, and the identification of further opportunities to increase income generation. 

 

Cabinet Members thanked Officers for their hard work on the Council’s budget for 2021/22.