Agenda item

To consider the initial strategic overview for the draft Medium Term Financial Plan for 2023-26.

The Committee considered a report, set out in agenda pages 33 to 52, which set out the initial strategic overview for the draft Medium Term Financial Plan (MTFP) for 2023-26.

The report set out the unprecedented financial challenges facing Wokingham Borough Council (WBC), both nationally by Local Government and then subsequent impact on WBC. Inflationary pressures, including within utilities, construction, pay and contracts were placing pressure on WBC’s finances, whilst Council Tax increases were presumed to be capped at 1.99%. Whilst budget managers, senior officers, the Corporate Leadership Team and Executive Members had already undertaken considerable work to provide proposals to be considered by Overview and Scrutiny, further work would be required to address the current estimated budget gap of £4m.

Clive Jones (Leader of the Council), Imogen Shepherd-DuBey (Executive Member for Finance), and Graham Ebers (Deputy Chief Executive (Director of Resources and Assets)) attended the meeting to answer member queries.

The Leader and Executive Member for Finance stated that this was to be the most difficult year for Local Authority Finances for the last 40 years, citing inflationary pressures, pressures from increasing numbers of refugees, and the looming Adult Social Care reform to name a few. Regular meetings were underway with a number of Council’s in the South of England, who were also citing concerns around these pressures. Receipt of the Local Government Finance Settlement would occur around Christmas Eve, which was not an appropriate way for Local Government to be able to set their budgets. Ministers had been written to, to ask for an earlier settlement for a period of longer than 1-year. Whilst WBC was in a much more favourable position than many other Local Authorities, it was still crucial for savings to be identified to address the current estimated budget gap of £4m.

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

·         Was the budget gap cumulative? Deputy Chief Executive response – Yes, and gap which was not addressed in year one would carry over to year two. If the total revenue budget gap was addressed in year one it would place WBC in a good position going forwards. With regards to capital, part of the solution could be to passport projects to future years, find additional income to fund projects, or decide which projects were absolute priorities and which may be delayed or cut;

·         What was the long-term plan to address our financial situation, as even if internal spending was addressed this year additional pressures could arise in future. Executive Member and Deputy Chief Executive response – In frank terms, if this situation carried on then it would push WBC towards delivery of only statutory services. Some Local Authorities had declared Section 114 notices, whilst the underlying funding arrangement systems for Local Government were broken as the maximum WBC could raise Council Tax by would be 1.99%, with inflationary pressures far exceeding this. This situation required a considerable amount of work from departments to review their spending and identify potential savings, whilst this was also an opportunity to be radical with income – for example the Town Centre regeneration project had risks associated however this will provide an eventual income to WBC after debts were paid off. The fundamental issue with a move towards only statutory service provision was that preventative measures would be cut back, and quite often reactionary measures were far more expensive than taking initial preventive actions (for example in Children’s and Adult’s Services);

·         At what point would a total reshape of service delivery and financial structures need to be considered? Executive Member and Deputy Chief Executive response – Every Local Authority was in the same situation, and the overarching question for Central Government was what they wanted Local Authorities to look like in future. On a micro-level, WBC was reorganising the business all the time, and the more fundamental question was whether Local Authorities would become a facilitator of social community capital rather than a direct service provider;

·         As WBC had focused on sound financial management and value creation for some time, whereas other authorities may be experiencing the urgent need to create value for the first time. As such, was WBC towards the bottom of the list of Local Authorities in terms of financial issues? Executive Member and Deputy Chief Executive response – WBC had focussed on sustainable change and value creation for many years, and WBC was in the top 20 Local Authorities on the CIPFA Local Authority resistance list. Whilst WBC was by no means in the worst position, we did have the issue of lower income per resident;

·         Did each new home delivered in the Borough ‘break even’ in terms of the income received and services delivered? Deputy Chief Executive response – This was a very difficult calculation which would make a number of assumptions. An estimated answer would be provided at a future meeting;

·         What assumptions had been built in with regards to the expected level of Local Government Settlement? Deputy Chief Executive response – The assumption was that the settlement would be the same as last year which was a £0 revenue support grant, retention of between £12m and £14m in business rates, and £3m in new homes bonuses;

·         It was requested that the overall departmental budgets and existing budgets for services be provided alongside proposed bids;

·         Was there an assumption that the new homes bonus and various grant supports would continue? Deputy Chief Executive response – Yes, there was a risk that the new homes bonus would begin to tail off at some point. Grants were built in to a number of bids, and officers were always exploring new opportunities for funding;

·         If capital schemes were delayed, then the subsequent revenue income stream could be impacted. What effects might this have? Executive Member response – Capital schemes were being prioritised in terms of the biggest benefits to the community. A part of this included identifying schemes which would deliver a revenue stream, for example delivery of solar farms. Where these schemes were not delivered as expected then WBC could see a reduction in revenue funds;

·         It was noted that expenditure for the Democratic Process also included the Chief Executive’s Office, which was much broader than delivering elections and member support;

·         It was agreed that the contractual inflation figure would be split into its component parts (for example: contractual inflation, national pay award, utilities etc.) and provided at a future meeting;

·         It was agreed that the current budgets for staff pay would be provided at a future meeting;

·         What assumptions had been made with regards to contract and procurement savings, as companies may be under pressure to seek increased income? Deputy Chief Executive response – This was one of the reasons that the £9m inflationary figure could pose a challenge. WBC was working with providers to see how we could help them in terms of preferred payment methods, and it was wholly responsible to explore any savings that could be made through contractual negotiations;

·         It was noted that WBC spent a considerable amount of money on external consultants, some of which carried out very specialist work. It was noted that it would be useful to see how much money each department was spending on external consultants;

·         It was noted that an assumption of growth of services delivered by Adult Services was built into the presented figures;

·         There were a number of special items proposed for 2023/24. If there was a risk of this not being one-off spends, would it be prudent to budget for them accordingly? Deputy Chief Executive response – The General Fund Balance was there to be used for true unknown spends. The change infrastructure team had always been classed as a special item, and it was now being embedded into the revenue budget as an ongoing service. There were also a number of major set pieces within the Planning service which would require a one-off spend;

·         It was agreed that the capital budget and outturn for the previous financial year would be provided at a future meeting;

·         It was noted that delivery of solar farms was certainly expected to pay for itself over their lifetime whilst providing a revenue income stream to WBC. Additional specialist works and investigations would be carried out by officers to ascertain what future delivery might be possible and feasible;

·         What did reprofiling of capital schemes entail? Deputy Chief Executive response – This was where a scheme which, for example, was proposed to be delivered in 2022/23 would be moved to a later year such as 2023/24 either in part or in total. This could be for a number of reasons, including defraying costs or prioritisation of other major capital schemes;

·         It was noted that it was much cheaper for WBC to borrow from itself where possible, rather than from the market;

·         Were capital projects being prioritised which would generate a revenue income for WBC? Deputy Chief Executive response – Any scheme which would generate more income than its overall delivery costs was an attractive proposition, which could provide revenue income for many years;

·         Was a £14m capital budget gap in Year 1 particularly abnormal? Deputy Chief Executive response – A gap of this magnitude was not uncommon for a Year 2 budget, however it was comparatively large for Year 1;

·         It was noted that refugees and asylum seekers moving into the Borough were likely to continue. Officers would be monitoring the situation closely;

·         What was the process for a growth bid being withdrawn – what were the criteria and how frequently did this occur? Deputy Chief Executive response – The process for bids being sent to Executive and then Council for approval began with a considerable amount of departmental and corporate wide work. Once proposals were more formalised, they were released to Overview and Scrutiny for consideration. At any stage prior to the February Budget Executive and Budget Council meeting, there was always the opportunity for a bid to be modified or pulled by the Executive Member in consultation with the relevant director;

·         It was noted that officers were always looking at Government Bills which could impact on WBC’s finances.

RESOLVED That:

1)      Clive Jones, Imogen Shepherd-DuBey and Graham Ebers be thanked for attending the meeting;

2)      The overall existing departmental budgets be outlined next to bids at future meetings;

3)      The contractual inflation figure be split into its component parts (for example: contractual inflation, national pay award, utilities etc.) and provided at a future meeting;

4)      The current budgets for staff pay be provided at a future meeting;

5)      A calculation be provided as to whether the average new property being built in the Borough broke even in terms of the cost of the average service provided compared to the income provided for example by Council Tax;

6)      The Capital budget and for the previous financial year and the capital outturn be provided at a future meeting;

7)      The existing budgets for services be outlined next to bids at future meetings;

8)      The timetable for scrutiny of each Directorate’s proposed bids be noted.