Decision status: Recommendations Approved
Is Key decision?: No
Is subject to call in?: Yes
Note – Shadow Cabinet Member Councillor John Holmes declared a disclosable pecuniary interest in part of this item of business by virtue of the fact that he was one of South Lakeland District Council’s nominated Directors on the Board of South Lakes Housing. He remained in the meeting during the introduction to the report and was then disconnected from the meeting whilst Cabinet firstly reached a decision on Recommendation No.(3) in relation to receiving of Right to Buy receipts. Councillor Holmes was then re-connected to the meeting for the remainder of the item and the meeting.
The Finance and Resources Portfolio Holder presented the report, stating that, even before the announcement of lockdown on 23 March 2020, the Council had started incurring additional expenditure and seeing reductions in income. The report presented the latest forecast of the impact of Covid-19 on the budget forecast for 2020/21 and other emerging pressures, such as the pay award or any potential reductions in approved expenditure through delays to projects and possible reduced activity. The situation was summarised as at the start of May 2020, but it had to be noted that the situation was moving very quickly, with new Government announcements daily. The report recognised the exceptional seriousness of the financial issues arising from the Covid19 and informed of the monitoring and management of the situation.
The Council’s finances remained strong in the short term. The report attempted to take a prudent view of what the impact was likely to be, however, the full picture would only emerge in the next few months, and the position would change. It was clear that, over the period of the current Medium Term Financial Strategy, the Council would need to take action to bring the longer term forecast back into line and South Lakeland retained the ability to manage its financial response in a controlled way over the medium term.
The first quarter monitoring report would be key in setting out a more complete picture of the impact of Covid-19 and, more importantly, a strategy for bringing the budget back in line over the medium term through the updated Medium Term Financial Plan.
The report provided details in relation to Covid-19 Expenditure, Income (excluding Council Tax and National Non-Domestic Rates), the Capital Programme, Council Tax and Non-Domestic Rates, Government Funding, Reserves, Treasury Management, a summary of budget amendments required, 2019/20 Year-End, the longer-term outlook and next steps.
The Finance and Resources Portfolio Holder drew particular attention to the Council’s statutory duty to deliver a balanced budget, including the use of reserves. He referred to Section 3.7 of the report which highlighted that, due to the prudent way that the Council had managed its finances, the level of non-earmarked reserves was around £6.1m. Consequently, the Council was currently in a position where it could bear the current impact of around £2m from the Covid crisis. The Section 151 Officer had stated that it was unlikely that the Council would need to issue a Section 114 Notice based on the Council’s expenditure to date, the current rate of income loss, the level of reserves, and the Government funding to date. This reassurance is very welcome.
However, the Finance and Resources Portfolio Holder explained that this did not mean that the financial challenge for the Council from Covid-19 was over. Firstly, the Council could not continue to lose income and incur additional costs at the rate of £500,000 to £600,000 per annum for a prolonged period without additional Government funding. Secondly, although the currently had reserves, they were both limited and would need to be rebuilt in future years. Thirdly, the current crisis had very significant implications for future years. There would be a direct impact on next year’s budget from shortfalls in tax collection this year; the base for non-domestic rates was likely to be severely eroded; and the Council would face calls for greater expenditure to protect community organisations and to help rebuild the economy. On top of that were the uncertainties on Government funding. The Finance and Resources Portfolio Holder indicated that he would cover these issues in the first version of the new Medium Term Financial Plan due to be presented to Cabinet in July 2020.
The Finance and Resources Portfolio Holder thanked officers involved in the work, and in particular the Finance Lead Specialist (Section 151 Officer) and her team, who were closely monitoring the unprecedented financial situation, whilst overseeing huge flows of cash in grants and changes to Non-Domestic Rates, all of this occurring at financial year-end.
Councillor John Holmes having at this stage been disconnected from the meeting as outlined above, Members considered Recommendation No.3 and endorsement of the decision to receive the Right to Buy receipts by 20 June 2020. The Deputy Leader and Housing and Innovation Portfolio Holder pointed out that this was an example of the Council supporting its housing provider, South Lakes Housing, in its important work throughout the District.
A vote was taken with regard to the proposal outlined at Recommendation No.3 during which Cabinet Members, with the exception of the Customer and Commercial Services and People Portfolio, confirmed that they had, without interruption, heard the full presentation and discussion on the item. The Customer and Commercial Services and People Portfolio was not able to be heard, however, the Leader wished to proceed on the basis that the meeting was still quorate.
Councillor John Holmes was re-connected to the meeting and confirmed that he was able to see (where practicable) and hear all Members participating in the meeting.
A number of questions were raised by Members. In response, the Finance and Resources Portfolio Holder indicated that, although there had been savings on meetings as a result of the COVID-19 situation, for example, through not having to provide refreshments or paying for room hire, this was not significant in the context of the overall loss being faced as a result of the crisis. With regard to moving forward with the new Leisure Centre in Ulverston, he explained that work had had to be re-prioritised as a result of the current crisis. There was, however, no intention to move away from this project. The Chief Executive undertook for Members to be provided with a written response as regards costs in relation to the support of virtual meetings.
Members commended the work being carried out around the Council’s finances in these unprecedented times.
A vote was taken on the proposals at Recommendations Nos.1, 2, 4, 5 and 6 during which all Cabinet Members, including the Customer and Commercial Services and People Portfolio Holder whose audio problem had by this stage been resolved, confirmed that they had, without interruption, heard the full presentation and discussion on the item.
RESOLVED – That
(1) the contents of this report be noted;
(2) the Chief Executive be recommended to approve the budget amendments set out in section 3.9 of the report as an Emergency Non-Executive Decision;
(3) the decision to receive the Right to Buy receipts by 30 June 2020 be endorsed;
(4) the Finance Lead Specialist (Section 151 Officer) be delegated authority to approve variation of income payment terms and any associated contractual variations, in consultation with the Legal Governance and Democracy Lead Specialist (Monitoring Officer) and the Finance and Resources Portfolio Holder, outlined in Tables 1 and 2 of the report and any in the future where the request is both below and over the key decision threshold but within the approved budget for the contract;
(5) the Finance Lead Specialist (Section 151 Officer) be delegated authority for the increasing of the expenditure budget for the recently announced discretionary grant scheme for small businesses by the amount of grant allocated and for which details are awaited; and
(6) reserves be protected by not allowing carry forwards of underspend into this financial year except in exceptional circumstances.
Reasons for Decision
The report sets out proposals that provide resources to implement the Council Plan alongside responding to the pandemic. Budget monitoring forms part of the corporate governance arrangements that support all Council priorities.
Alternative Options Considered and Rejected
The report presents proposals for a response to the potential budget pressures arising from the pandemic. The proposals together meet the Council’s statutory duty to set a balanced budget for 2020/21 and to monitor the budget during the year. . An alternative option would be to reject some of the proposals; this would then require further work to ensure the budget can be balanced.
Publication date: 22/05/2020
Date of decision: 20/05/2020
Decided at meeting: 20/05/2020 - Cabinet
Effective from: 02/06/2020
Current call-in Count: 0