Agenda item

To begin the Overview & Scrutiny process of the draft 2022-25 MTFP

The Committee considered a report, set out in agenda pages 15 to 38, which gave a strategic overview of the draft Medium Term Financial Plan (MTFP) 2022-2025.

John Kaiser (Executive Member for Finance and Housing) and Graham Ebers (Deputy Chief Executive (Director of Resources and Assets)) attended the meeting to answer Member queries.

It was stated that this was the third year of the budget scrutiny process, of which the previous years had helped the overall budget setting process. This was a challenging time for local authority finances, with issues including inflation and social care costs providing increasing pressures on budgets. It was likely that the upcoming Local Government finance settlement would be a three year settlement, which would add an element of certainty with regards to funding. The potential impact of social care reforms could see severe pressures placed on Wokingham Borough Council (WBC) finances, as Wokingham had self-funding and partial self-funding social care users contribute around £8.5m per annum. Children’s Services were still on their journey to a ‘Good’ OFSTED rating, whilst the increases to building costs and materials had meant that some capital projects were being reviewed with regards to a temporary hold whilst costs stabilised.

During the ensuing discussions, Members raised the following points and queries:

·           What were the concerns in relation to CIL and S106 contributions? Deputy Chief Executive response – WBC’s approach was to provide the funding upfront to unlock future development. S106 and CIL contributions were then received later from developers. Where a developer was struggling, or there was a significant time gap between the upfront funding and receipt of contributions, WBC could see pressures on its finances. The general reserve was there to cushion any impact, however if several large developers all started struggling simultaneously then reserves may not be enough.

·           What was the worst case scenario financially for WBC with regards to the adult social care reforms? Deputy Chief Executive response – In very crude terms, the better the NHS was funded the better their throughput of patients would be, which would mean more clients entering the social care sector. If there was no forthcoming funding whatsoever, these reforms could place a £20m burden on WBC in several years’ time.

·           It was noted that Members were appreciative of taking both capital and revenue proposals together this year.

·           Were WBC being penalised for having a good collection rate of Council Tax, how confident were WBC that a 3 year Local Government settlement would be forthcoming, and should a three year settlement be agreed what could be done mid-settlement to improve the terms for WBC? Executive Member and Deputy Chief Executive response – When looking at grants, WBC were good in many areas and subsequently received smaller grants. The only way that central Government could improve struggling Councils was by providing them with additional funding. WBC needed to be very alive to the levelling up agenda and the impact that this might have on the Borough. Officers were more confident than not with regards to a three year settlement, and it was not unheard of for representations to be heard and changes to be made mid-settlement, for example negative revenue support grants.

·           Which staff were included within calculations relating to contractual inflation? Deputy Chief Executive response – This would include all directly employed staff with a best estimate for the level of contractual inflation. Currently, budget had not been assigned for a pay award, however there were indications that it could be around a 1.75% award.

·           Why was the assumed additional council tax base increase 2.25% for year one and 1.5% for year 2? Deputy Chief Executive response – This was a statutory calculation which included forecasts and officers tended to be fairly cautious. The further on officers looked, the more speculative they had to be and there was no confidence that there would be an increase above 1.5%, however this would be reviewed.

·           Who exactly were WBC engaging with within Central Government with regards to receiving a fair funding settlement? Executive Member response – John Redwood had been spoken to publically with regards to this, and this would be done with all of the Borough’s MPs in a simple and logical way. It was then hoped that the Borough’s MPs would lobby Ministers on WBC’s behalf. The second stage would involve writing to Michael Gove (Secretary of State for Levelling Up, Housing and Communities and Minister for Intergovernmental Relations) to try and persuade him to provide a fair funding settlement. It was important that the levelling up policy was not at the detriment of the Wokingham Borough.

·           It was noted that draft bid sheets would be provided to the Committee earlier than the publishing dates of future agendas where possible and practicable.

·           How realistic was it to balance the capital funding gap? Executive Member and Deputy Chief Executive response – WBC would have to set a balanced budget, and therefore it was a definite realistic prospect to balance the budget. The real issue would be how many ‘pinch points’ would be involved, and identifying source income and when schemes would be delivered. The budget for year 1 would have to be balanced, and preferably year 2 and year 3 in addition. The capital programme had already been reduced by approximately £9m in the past three weeks, and the funding gap would be achieved however there may be some pain in doing so.

·           Had any further impacts of Brexit been budgeted for? Executive Member and Deputy Chief Executive response – This had been flagged up as there were a number of potential issues including interest rates, staff shortages, and supply chain issues. Best estimates were always used for the budget setting process, regardless of where those pressures came from.

·           Had any percentage increases been included within the capital programme with regards to the increased costs of materials, inflation, or labour issues? Executive Member and Deputy Chief Executive response – A very modest amount had been budgeted in for the moment, and it was a work in progress with regards to uplifting figures.

·           Were the significant savings targets achievable? Deputy Chief Executive response – Many of the savings proposals were efficiency savings, whereby a simultaneous service improvement and service cost reduction could be achieved. Some savings goals were more complicated going forwards, for example using the Public Loans Board to invest and receive a return. New regulations had reduced the ability of Local Authorities to borrow to invest, which had been laid out in a recent Executive paper.

·           What was the current Council Tax collection rate, and how far would it have to fall for a significant or catastrophic impact on WBC’s finances? Executive Member and Deputy Chief Executive response – The current Council Tax collection rate was around 99%, with a similar rate for business rates collection. A similar trajectory was developing and was expected for collection rates this year. Each 1% of Council Tax not collected would cost WBC approximately £1.2m, which would be significant in and of itself and therefore there was not a lot of leeway. The Council Tax reduction scheme had been extended this year, and WBC was working positively with residents to help them avoid getting into debt in general.

·           What could the national levelling up agenda mean for WBC? Executive Member response – Everybody should be entitled to a decent wage and opportunities. As Wokingham was seen to be at the top of the pile in terms of Local Authorities, it would be hard for the Government to level it up further. Levelling up appeared to be a good idea, but not at the expense of Local Authorities such as WBC. It was a great ambition, but it was yet to be seen what this would mean for WBC.

·           How much of the split of services delivered by WBC was moving from discretionary to statutory? Executive Member and Deputy Chief Executive response – WBC tried to make discretionary services self-funding so that they did not impinge on the budget as much. For example, the town centre regeneration would provide funding for other services.

·           The Committee gave their thanks to officers and Executive Members for their hard work in already being in a better position with regards to a budgetary gap than this time last year. The Deputy Chief Executive commented that WBC compared much better than a lot of Local Authorities in terms of a budgetary funding gap, however it was important that WBC were not penalised for having a strong Council Tax collection rate in terms of future settlement deals.

·           Would there be any delays to the capital programme as a result of increasing building material costs? Executive Member and Deputy Chief Executive response – It was wise to pause or change some projects where savings could currently be made and where it was palatable to do so. WBC was robust enough to be able to challenge and review projects where it made sense to do so. An example of this was the change of focus on WBC’s investment strategy to instead focus on affordable housing, which would take time including waiting for construction costs to fall.

·           Members commented that it was fantastic to see that the Citizens Advice Council Tax protocol had been adopted. The Deputy Chief Executive commented that the Council Tax team had done fantastic work to achieve a high collection rate whilst working positively with residents.

·           Would the capital templates be brought up to the same high standard of the revenue bid templates this year? Deputy Chief Executive response – It had been stressed to Directors and officers that it was important for the scrutiny process that each template was correctly filled out.

·           It was suggested that a section of Equalities obligations might be placed on bid sheets to remind officers and Executive Members at an early stage of potential full equality impact assessments that might later be required.

RESOLVED That:

1)     John Kaiser and Graham Ebers be thanked for attending the meeting;

2)     Revenue and capital bids be presented at future meetings of the Committee by each Directorate;

3)     Officers endeavour to circulate bids to Committee Members via email prior to agenda publication where possible.