Decision details

Corporate Financial Update Quarter 1, 2022/23

Decision Maker: Council

Decision status: For Determination

Is Key decision?: No

Is subject to call in?: No

Decisions:

The Deputy Leader and Finance and Assets Portfolio Holder, Councillor Andrew Jarvis, presented the first quarter financial monitoring report of 2022/23.  The report provided the projected year end position based on performance to the end of Quarter 1 and officers’ planned actions to ensure a balanced budget by the end of the financial year.

 

The report and appendices included details relating to the revenue budget, capital expenditure, collection of Council Tax and business rates and the Council’s current position with regard to debt collection.

 

The report had also been considered by the Overview and Scrutiny Committee at its meeting on 26 August 2022 and by Cabinet on 31 August 2022, when Council had been recommended to approve the revenue virements listed therein.  Councillor Jarvis explained that the report had been delayed in coming to Council due to the rescheduling of the meeting and that the Quarter 2 Financial Update Report had not been prepared prior to the publication of the agenda for this meeting.  He therefore proposed to brief Council using the Quarter 1 report but would also update Council on subsequent developments.

 

Councillor Jarvis referred Members to the Revenue Budget and drew attention to the fact that the country was currently facing the first significant inflation in a generation.  The Council was not immune to this and this was reflected in the outlook for the rest of the year, with salary increases now looking certain to be way above the 2% assumed in the budget in February.  The current offer from employers, which had been rejected by unions, was an increase of £1,925 on all pay points.  A settlement at this level would cost the Council an additional £678k compared to what had been included in the budget.  In addition, there was significant inflation in some bought-in costs, and a further £132,000 had been included for fuel costs versus the budget.  However, the adverse impact of inflation was largely offset by a number of corporate, financial items.  In particular, with higher interest rates a very significant surplus of around £350,000 was expected on the Council’s investment income versus budget.  The Council had had managed to undertake recent capital investment without resorting to the expected borrowing.  This had saved about £207,000 in interest payments.  Additionally, the slightly lower capital spending than expected reduced Minimum Revenue Provision charges by £89,000.  There was a wide range of other variances both up and down emerging in other budgets, and details of these were presented in Section 3.1 of the report and in Appendix 1.  In total, these other factors added up to a forecast overspend of around £65,000.  Employee costs, before the impact of the assumed salary settlement, remained in line with the budget.  Councillor Jarvis said that, at this time, there were also a number of virements for which Council approval was sought.  These were listed in Section 3.1.2 of the report and included, example, budgets relating to the Rough Sleeping Initiative, grants relating to homelessness, receipt of funding for asylum seekers and the Contain Outbreak Management Fund.  Councillor Jarvis pointed out that the items on Green Home Grant and Sustainable Warmth Cumbria listed in Section 3.1.2 were within Cabinet delegation limits and that those virements had already been approved.

 

As a result of all of this, the Council had a projected overspend in the business-as-usual revenue budget at the end of Quarter 1 of £228,000 as summarised in Table 1.  However, Councillor Jarvis pointed out that this level of overspend was similar to previous years and was confident that this gap was likely to be closed by the end of the year.  In addition, within the budget, an allowance had been made for £261,000 costs associated with the Covid pandemic.  Currently, it was not envisaged that this would be required, which reduced the pressure on the Council’s finances.

 

While this would leave the Council’s revenue budget roughly balanced for the year, Councillor Jarvis informed Members that there were initial indications that the revenue position had worsened significantly in recent months.  There appeared to be a growing shortfall in some areas of income, particularly car parks.  At the same time costs had been reassessed in the light of inflation, and this indicated significant additional pressure on a number of budget, for example, on the utilities budgets.  The Finance Team was assessing the scale of these impacts, and was working with the Senior Leadership Team to identify mitigating actions.  Councillor Jarvis said that he would report back on these with the Quarter 2 update in December.

 

Councillor Jarvis turned to the Capital Programme and drew attention to the fact that, as often was the case in Quarter 1, capital expenditure was relatively low, with £800,000 having been spent and a further £1.8m committed.  Appendix 2 to the report provided details of progress on the Capital Programme.  Whilst this reflected a reassessment of the timing of expenditure on a number of projects, Councillor Jarvis expected that a more comprehensive review would be completed as part of the Quarter 2 update.  This would also reflect key decisions being made, including the inclusion of the agreed programme for Grange Lido and the Promenade.

 

The rest of the report dealt with Treasury matters and Collection rates.  The Quarter 1 Treasury Management Update was attached as Appendix 3.  This provided a detailed review of the Council’s current position, however, there was little significant change from previous quarters to highlight here.  Collection, debts and creditor rates were presented in sections 3.4 to 3.6.  Overall this showed satisfactory performance.  There was a small shortfall in the expected collection of Council Tax.  However, this could be explained by the time required for processing the energy rebates on behalf of the Government, meaning that some customers were receiving initial bills later than usual.  Non-domestic rates collection was running well ahead of normal, although this was likely to have been impacted by the higher levels of retail relief.

 

Councillor Jarvis, in closing, said that, overall, this first view of 2022/23 performance highlighted two things.  Firstly, that the Council was not immune to the economic ill-wind.  Significantly higher costs would be seen coming through, particularly in terms of employees and of fuel.  Secondly, that the Council remained in a robust financial position.  Councillor Jarvis was confident that the Council would be able to offset the worst of the economic shocks facing it, and avoid carrying large deficits into the new Authority.  However, this would require ongoing vigilance and work by officers to control expenditure and accurately forecast budgets.  Councillor Jarvis undertook to keep Council updated on this in December.  He thanked officers for their work and moved the recommendations contained within the report and was seconded by Councillor Stephen Coleman.

 

Councillor Tom Harvey drew attention to Appendix 2 to the report with regard to Quarter 1 Capital Monitoring and KRE70 (Design Work Stramongate Kendal), the budget of £246,000 was due to be spent by November.  He pointed out that expenditure to date was only £6,951 and that it was already November and sought clarification as to whether the project would still go ahead or not.  The Chief Executive explained that agreement was being sought from external partners to extend the expenditure deadline.

 

Councillor Giles Archibald referred to the current volatility in interest rates and enquired whether officers were empowered to pay off loans should rates hit a spike where it was more appropriate for a loan to be repaid.  Councillor Jarvis said that any decision on debt should be taken in co-ordination with the other sovereign councils which constituted the Westmorland & Furness Authority.

 

Councillor David Webster expressed strong disappointment with regard to Appendix 2, KSC91 (Vehicle Purchase) and the comment which stated that three electric vehicles for parking were planned but probably not going ahead this year due to infrastructure issues.  Councillor Jarvis explained that, moving forward, the vehicle stock of all four councils which would make up the Westmorland & Furness Authority needed to be examined and that it would be prudent to delay this project for a few months.  He stressed that there was no lack of intention to purchase electric vehicles.  Councillor Dyan Jones, Climate Action and Biodiversity Portfolio Holder, pointed out the fact that there was currently no infrastructure in the District for hydrogen powered vehicles and undertook to discuss the matter with Councillor Webster outside of the meeting.

 

Councillor Janette Jenkinson sought clarification with regard to Appendix 2 and the £2m given by Glaxo Smith Klein towards the Ulverston Leisure Centre.  She sought assurance that this money would remain allocated to this project moving forward into the new Authority.  Councillor Jarvis highlighted the fact that the money had not yet been given but simply promised and that discussions remained ongoing.  The Chief Executive added that the Council was in constant contact with Glaxo Smith Klein and undertook to provide a written update to all Members within the next seven days.  Councillor Jenkinson reiterated the need for clarification that the Westmorland & Furness Council would commit to the project following receipt of any money given by Glaxo Smith Klein.

 

It was unanimously

 

RESOLVED – That

 

(1)        the contents of the report and Appendices 1 to 3 thereto be noted; and

 

(2)        the revenue virements listed at 3.1.2a, 3.1.2b, 3.1.2e and 3.1.2f be approved.

Report author: Claire Read

Publication date: 12/01/2023

Date of decision: 01/11/2022

Decided at meeting: 01/11/2022 - Council

Accompanying Documents: