Agenda item

Report of the Chief Executive on the budget proposals for 2022/23.

(1)   Cabinet noted the Statement of the Chief Financial Officer on the robustness of budgets and adequacy of reserves (Appendix N).

 

(2)   Cabinet also noted that the following amounts for the year 2022/23 had been set in accordance with regulations made under Sections 31A and 31B of the Local Government Finance Act 1992:

 

	100% TAXBASE	99.40% TAXBASE
Welwyn Garden City	17,853.5	17,746.4
Hatfield	12,378.2	12,303.9
Welwyn	4,747.1	4,718.6
Ayot St Lawrence	70.0	69.6
Ayot St Peter	113.4	112.7
North Mymms	4,438.3	4,411.7
Essendon	431.8	429.2
Northaw & Cuffley	3,113.5	3,094.8
Woolmer Green	614.4	610.7
Total	43,760.2	43,497.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3)    Cabinet approved the following budget proposals and noted that any comments from Overview and Scrutiny Committee will be returned to Special Cabinet on 18 January 2022 for consideration, before final recommendations are made to Council on 2 February 2022:

 

(4)     General Fund

 

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

 

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

 

(4.3)  The fees and charges which have been incorporated into the budget proposals, as set out in appendix E.

 

(4.4)  The increase in the Council’s Band D Tax of £4.95 (2.26%), taking the average Band D Tax to £224.10 for 2022/23.

 

(4.5)  That £250k be added to the Covid-19 earmarked reserve from the 2022/23 budget, the expenditure of which will be delegated to the Section 151 Officer in consultation with the Executive Member for Resources. This will be partly funded from the one off received from the Government in 2022/23.

 

(4.6)  That the Special Expenses Scheme as set out in section 3.5 continue into 2022/23, and the Special Expenses detailed in Appendix M be approved for inclusion in the Council Tax for 2022/23.

 

(5)     Housing Revenue Account (HRA)

 

(5.1)  That dwelling rents are increased by CPI+1% in accordance with Government legislation, resulting in an average rent of £113.92 per week.

 

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

 

(5.3)  The Housing Revenue Account budget as shown in appendix F.

 

(5.4)  The fees and charges which have been incorporated into the budget proposals, as set out in appendix H.

 

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

 

(6)     Capital Programme

 

(6.1)  The Capital Programme for 2022/23 to 2026/27 as set out in Appendix I.

 

(6.2)  The Capital Financing for the Capital Programme, for 2022/23 to 2026/27 as set out in Appendix J, and note the forecast capital balances in Appendix K.

 

(7)     Medium Term Financial Strategy

 

(7.1)  The Medium-Term Financial Strategy and Financial Governance Framework, including all annexes and prudential indicators for 2022/23 – 2024/25 as set out in appendix L.

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

 

(1)        The Decision Taken

 

RESOLVED:

(unanimous)

 

(1)  Cabinet noted the Statement of the Chief Financial Officer on the robustness of budgets and adequacy of reserves (Appendix N).

 

	100% TAXBASE	99.40% TAXBASE
Welwyn Garden City	17,853.5	17,746.4
Hatfield	12,378.2	12,303.9
Welwyn	4,747.1	4,718.6
Ayot St Lawrence	70.0	69.6
Ayot St Peter	113.4	112.7
North Mymms	4,438.3	4,411.7
Essendon	431.8	429.2
Northaw & Cuffley	3,113.5	3,094.8
Woolmer Green	614.4	610.7
Total	43,760.2	43,497.6

 (2)Cabinet also noted that the following amounts for the year 2022/23 had been set in accordance with regulations made under Sections 31A and 31B of the Local Government Finance Act 1992:

 

 

(3)  Cabinet approved the following budget proposals and noted that any comments from Overview and Scrutiny Committee will be returned to Special Cabinet on 18 January 2022 for consideration, before final recommendations are made to Council on 2 February 2022:

 

(4)       General Fund

 

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

 

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

 

(4.3)    The fees and charges which have been incorporated into the budget proposals, as set out in appendix E.

 

(4.4)    The increase in the Council’s Band D Tax of £4.95 (2.26%), taking the average Band D Tax to £224.10 for 2022/23.

 

(4.5)    That £250k be added to the Covid-19 earmarked reserve from the 2022/23 budget, the expenditure of which will be delegated to the Section 151 Officer in consultation with the Executive Member for Resources. This will be partly funded from the one off received from the Government in 2022/23.

 

(4.6)    That the Special Expenses Scheme as set out in section 3.5 continue into 2022/23, and the Special Expenses detailed in Appendix M be approved for inclusion in the Council Tax for 2022/23.

 

(5)       Housing Revenue Account (HRA)

 

(5.1)    That dwelling rents are increased by CPI+1% in accordance with Government legislation, resulting in an average rent of £113.92 per week.

 

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

 

(5.3)    The Housing Revenue Account budget as shown in appendix F.

 

(5.4)    The fees and charges which have been incorporated into the budget proposals, as set out in appendix H.

 

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

 

(6)       Capital Programme

 

(6.1)    The Capital Programme for 2022/23 to 2026/27 as set out in Appendix I.

 

(6.2)    The Capital Financing for the Capital Programme, for 2022/23 to 2026/27 as set out in Appendix J, and note the forecast capital balances in Appendix K.

 

(7)       Medium Term Financial Strategy

 

(7.1)    The Medium-Term Financial Strategy and Financial Governance Framework, including all annexes and prudential indicators for 2022/23 – 2024/25 as set out in appendix L.

 

(2)       Reasons for the Decision

 

The report will go on for consideration by Overview and Scrutiny Committee (OSC) on 6 January 2022. Recommendations made by OSC and any changes will be presented to Special Cabinet on 18 January 2022, in order to recommend the budget proposals to Council at its meeting on 2 February 2022.

 

General Fund

 

The General Fund budget was summarised in Appendix A, and split by service in Appendix B.

 

The starting point for 2022/23 was a forecast non-ring-fenced General Fund reserve balance of £5.8M.  This was slightly below the originally budgeted position of £6.0M as Covid pressures have continued to impact us through 2021/22.

 

This 2022/23 budget was predicting a rise in the Net Cost of Services of £261k, to £13,350k.  This was summarised in Section 3.1.5 of the report.  The Council had succeeded in identifying savings for the base budget of nearly £1.5M, exceeding identified growth items of £1.0M. Growth items included the impact of the increase in National Insurance upon the cost base.  This was partly offset by a government grant shown “below the line” in Appendix A1.

 

Although identified savings exceeded identified growth items, with rising inflation needing to be allowed for as well, the overall impact was a slight rise in the cost base. 

 

The Council were proposing to increase Council Tax by £5 per Band D property, the maximum allowed without a referendum.  This equated to 2.26%.  Some of the financial benefit of this increase was offset by the increase in Council Tax Support Scheme claimants, which operated through a reduction in the tax base. It was expected that the cost of this scheme will level out in future years.

 

The contribution from Business Rates was slightly higher in 2022/23, partly due to the fact that Welwyn Hatfield was once again in a pool arrangement.  Although the Collection Fund line in Appendix A1 appeared volatile, this was offset by transfers to and from the relevant Earmarked Reserve.

 

The New Homes Bonus continued into 2022/23, which was originally uncertain.  Furthermore, a new “Services Grant” of £201k was to be received, essentially to offset the National Insurance increase referred to earlier.  But, unlike the National Insurance increase, which had to be built into the base budget for future years, this grant may be a “one off”.

 

The opportunity was being taken to replenish the Earmarked Reserve for Covid impacts by £250k, as the existing reserve would be fully drawn down by 31 March, 2022.

 

Overall, the 2022/23 General Fund budget predicted a drawdown from General Fund non-ring-fenced reserves of £73k, leaving such reserves at £5.7M at 31 March, 2023.  This was comfortably above the assessed minimum of £3.4M. So for 2022/23, the General Fund budget position is sustainable.

 

However, the Medium Term Financial Strategy in Appendix L was predicting a further drawdown from reserves of £1.5M in 2023/24, and £380k in each of 2024/25 and 2025/26, unless further savings could be identified as part of next year’s budget exercise.  Although the coming on stream of certain revenue flows beyond 2023/24 helped to reduce the annual gap, the drawdown of reserves, unless arrested in the future, will leave the Council at the minimum assessed level by March 2026.  It will be challenging to continue to find savings or efficiencies without impacting upon services.   

 

The final government settlement was awaited, and is not expected to materially change the 2022/23 budget.  However, longer term uncertainties are exacerbated by the fact that, once again, only a one year settlement had been announced.

 

Housing Revenue Account

 

The HRA budget proposals were summarised in Appendix F, and principal variances were set out in Appendix G.

 

The HRA had been less impacted by COVID than the General Fund, and rent collection levels had held up well.  The increase in impairment allowance for bad debts, at £490k, was again in line with the current year, and this level of the provision was felt to be adequate.

 

The mandated 1% per annum reduction of rents ended at the end of 2019/20, and, as in the last 2 years, rents could again rise at CPI + 1% per annum. 

 

It was intended to maintain HRA balances at a minimum level of 5% of rental income, around £2.5M.

 

This was achieved by managing the level of new HRA borrowing to take account of the requirement to meet the repayment schedule of existing debt, to finance the Affordable Housing Programme and to invest in the existing stock.

 

Fees and Charges

 

General Fund Fees and Charges were set out in Appendix E, and those for the HRA in Appendix H.

 

Capital

 

The proposed Capital budget of £126.7M was set out in Appendix I. 

 

£68M related to the General Fund. A number of the larger General fund schemes listed in the 2021/22 budget had now largely completed.  However, an increase in capital spend by Now Housing was planned, and this was financed through the General Fund.  The Now Housing capital programme, based upon the company’s business plan, was significantly front-end loaded, with £60M of the next 4 year’s total of £84M occurring in 2022/23.  In reality, such a level was unlikely to be met in 2022/23, and some of the total will probably be achieved by purchasing units from schemes in the HRA capital programme.  In such cases, the increase in General Fund borrowing would be compensated by a reduction in HRA borrowing.  But the budget of £60M gave the Council headroom to assess Now Housing projects for their viability and sustainability as they arise.

 

HRA capital spend is planned to be £57.4M for 2022/23. 

 

As with the General Fund, a number of significant individual Affordable Housing schemes had now been completed, or nearly so.  However, there were certain schemes for 2022/23 requiring increased spend, such as Howlands House and Burfield.  Within the HRA capital budget, but outside the Affordable Housing programme, it was proposed to invest £9.6M over the next 2 years in refurbishing Howard House.

 

The Council were also taking the opportunity to increase capital investment in the existing stock by increasing the Major Repairs Reserve, over the next few years, already partly financed by the depreciation charge.

 

Although a number of items in the capital budget fall in future years, the combined impact of all items was an increase in the Capital Financing requirement, as set out in Appendix J.

 

Financing

 

Appendix J summarised the estimated 5 year borrowing requirements through to 2026/27.

 

For the General Fund, the increase in the borrowing requirement continued.  Most of this is the funding of lending by the Council to Now Housing.  In future years, it was anticipated that this activity will generate increasing interest income for the Council, and £100k had been included for 2022/23.  This was a prudent assumption, based on a lower likely level of investment than implied by the £60M capital budget referred to above.

 

For the HRA, the decision to provide additional investment in the existing housing stock over the next few years, plus certain other projects with a required capital spend over the next 2 years, meant that the Council’s HRA borrowing requirement was now predicted to rise to £296M by 2026/27.  This was sustainable within the HRA 30 year business plan, which indicated the ability to repay all debt within 24 years. 

 

Medium Term Financial Strategy

 

The MTFS set out in Appendix L highlighted challenges faced by the Council in the period through to 2024/25 notably the likely requirement to find a further £1.5M of annual General Fund revenue savings by 2023/24 if the Council were to avoid further erosion of reserves.

 

The Council’s financial position would be affected by government Spending Reviews, Fair Funding Reviews, and any further reforms to the Business Rates Retention system, or, indeed, complete Business Rates reform.  The outcome of these was unknown at this stage.

 

The potential for further adverse COVID impacts upon the Council’s finances still remained unquantifiable.

 

It was also worth bearing in mind that, for 2022/23, the level of Council Tax increase, at 2.26%, the maximum possible without a referendum, was lower than the current rate of inflation. If this situation, which the Council had not faced for some time, persists, it represented a significant long term risk.

 

The combination of a predicted General Fund budget gap of £1.5M in 2023/24, and a further £0.76M gap in 2024/25 and 2025/26 combined, implied a reduction of General Fund balances to £3.4M by March 2026, the Council’s assessed minimum level.

 

Furthermore, the Council’s level of General Fund Capital Reserves was now depleted, which may constrain options for major capital spend over and above those projects already planned.

 

Within the HRA, the revenue account was more stable than the General Fund.  However, the level of capital spend and related borrowing over the next few years was significant.  While it was sustainable within the 30 year HRA Business Plan, this would need regular review.

 

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

 

Special Expenses

 

Special Expenses, whereby Council Tax amounts were adjusted by settlement to take account of differing expenditure levels, were set out in Appendix M.

 

Cabinet Members thanked Officers for their hard work on the Council’s budget for 2022/23.