Decision Maker: Overview and Scrutiny Committee
Decision status: For Determination
Is Key decision?: No
Is subject to call in?: No
This report presents the first draft budget
for 2019/20 to 2023/24.
Councillor Andrew Jarvis, Finance Portfolio Holder introduced the 2019/20 Five Year Draft Budget. The first draft budget had been considered by Council on 18 December 2018 and the report considered at that meeting was attached as Appendix A to the substantive report. The remainder of the substantive report provided an update on significant changes since the first draft budget had been prepared.
The Government had published the provisional Local Government Finance Settlement on 13 December 2018. It would be subject to consultation until 10 January 2019 and the final settlement for each authority was usually published soon after the conclusion of the consultation period. The majority of the settlement was in line with the four-year settlement the Council accepted in 2016/17 and which was already reflected in the draft 2019/20 – 2023/24 budgets attached to the report. Details of the main changes in the provisional settlement were provided.
The Council Tax referendum thresholds remained at the levels set for 2018/19 for district councils, with the maximum increase of the higher of below 3% or £5. For this Council, this could potentially raise the maximum increase in Band D Council Tax from the £5 that as included in the draft budget to £5.72, which would generate an additional £32,800 of income from Council Tax. There were no limits on increases for parish councils, but the Government expected parishes to take all available steps to mitigate the need for Council Tax increases.
As expected, the Government had chosen not to reduce local authority funding through reductions in business rate retention, a reduction which had been known as negative Revenue Support Grant. Under the original four-year settlement, the Council had expected a reduction in funding of £613,000 for 2019/20. This decision by the Government had been widely expected and had already been reflected in the draft budget proposals considered by Council on 18 December 2018.
Rural Services Delivery Grant was due to be frozen nationally for 2019/20, but the provisional settlement had increased the national funding from £65m to £81m. This Council’s share of the grant would increase from £347,900 to £433,500. This was an extra £85,600 for 2019/20 only.
The Cumbrian authorities had not been successful in the bid to become a business rate pool pilot. The draft budgets for 2019/20 to 2023/24 did not anticipate any additional income from the potential pilot pool. The existing Cumbrian pool was expected to continue for 2019/20.
The settlement also included some unexpected funding from the business rate levy account surplus. The Government collected a levy of up to 50% from authorities who collected more business rates than their baseline. This levy was used to fund a safety net for authorities who fell well below their baseline. This was the first time the levy had exceed the safety net, and the Government had £180m to distribute nationally. The Council’s share was £34,000.
Finally, the Government had confirmed the threshold for payment of New Homes Bonus would remain at 0.4% of taxbase for 2019/20. For this Council, this required a net increase in Band D equivalent properties on the Council Tax list of 211. The actual increase was only 132 properties, so the level of New Homes Bonus due to the Council would be £141,000 lower than budgeted at £516,700.
The final finance settlement, including the impact of any adjustments to business rates multiplier and tariff, would be reflected in the final budget proposals to be presented to Council on 26 February 2019.
The Government had already announced changes to the business rates funding system for 2020. The 50% central share of business rates retained by the Government would be reduced and the levy would be abolished but the system of tariffs, top-ups and safety nets would continue. As the proposals were to be fiscally neutral, it was expected that other grants would be cut or local government would be given additional duties to offset the additional income from business rates. These developments would be monitored and fed into the Medium Term Financial Plan as the details were clarified.
The current budgets were based on the existing staff establishment in December 2018 and known changes to fixed term posts. The Customer Connect Programme was expected to materially change the establishment and, therefore, the staffing budgets. Currently, a lump-sum was shown in the budgets for 2019/20 and subsequent years. During early 2019, it would be necessary to revise the staffing budgets to reflect the Customer Connect Phase 1 staffing changes, with further changes as part of the 2020/21 budget process to reflect Phase 2 staffing changes.
The Medium Term Financial Plan would be updated during summer 2019 and the updated Plan would be reported to Cabinet and Council: it was expected that this would be during July 2019 and would include the Budget Strategy for 2020/21 – 2024/25.
Councillor Jarvis thanked officers for their work on the report which demonstrated that the Council was in robust financial health. The final draft Budget Report would incorporate the consideration of internal and external consultation and would be presented to the 6 February 2019 Cabinet meeting and the 26 February 2019 Council meeting for ultimate approval.
The Director People and Places provided clarification with regard to a query relating to Castle Dairy and the potential cost implications of the forthcoming closure of the venture. He explained that the Council leased the building to Kendal College and that the College had chosen to operate a restaurant on the site. The College would, however, retain the leasehold and give consideration to its future use. There were no cost implications for the Council.
Councillor Jarvis responded to a number of queries. He provided an explanation regarding Disabled Facilities Grant (DFG) funding for which there was a statutory duty for the Council to provide the necessary funding to meet demand. There had been an unprecedented demand in the first two quarters of 2018/19 due to a change in the levels of funding and it was expected that there would be insufficient funds available for the whole financial year. The proposals in the draft budget would ensure that there was no exposure to risk moving forward.
Councillor Jarvis acknowledged that the Council was currently in a financially robust position, nevertheless, explained that, although interest rates were low, there was a cost in borrowing which should be avoided if not required. He pointed out, however, that there may be a need to borrow in the future in relation to any major capital investments, for example the Ulverston Leisure Complex, if approved.
Councillor Jarvis informed Members that there was currently £6m in the Capital Programme for Housing Investment Fund Loans to Housing Associations. He explained that consideration had to be given not only to the capital of this Council but also to the capacity of housing associations to deliver new homes. The Council would be prepared to consider increasing funding in the right circumstances.
Councillor Giles Archibald, Leader and Promoting South Lakeland Portfolio Holder, clarified that the Council was on track and likely to exceed its target for affordable homes.
RESOLVED – That the proposals contained in the report to achieve a balanced budget in 2019/20 be noted.
Report author: Lee Hurst
Publication date: 24/01/2019
Date of decision: 11/01/2019
Decided at meeting: 11/01/2019 - Overview and Scrutiny Committee