To consider the following Finance related reports scheduled for Cabinet consideration on 27 October 2021:
• MTFP Update
The O&S Board is asked to scrutinise the reports and make recommendations to Cabinet as appropriate.
Cabinet member invited to attend for this item: Councillor Drew Mellor, Portfolio Holder for Finance and Transformation
The Cabinet report for this item is included with the agenda for consideration by the Overview and Scrutiny Board.
Medium Term Financial Plan (MTFP) Update – The Leader of the Council with Portfolio for Finance and Transformation presented a report, a copy of which had been circulated to each member of the Board and a copy of which appears as Appendix 'D' to these minutes in the Minute Book. The Leader and officers addressed a number of points raised by the Board including:
· There were concerns that the funding gap had now increased from £7.1milion to £31.1 million. A Board member questioned the likelihood of achieving collectively all of the assumptions listed in the report. He commented on the additional spending allowed this year, the decision not to raise council tax, and that in his view the Council was acting recklessly. The Leader confirmed the current administration’s commitment to delivering low council tax and the rationale for the 1.5% increase in the council tax base. He explained that the Transformation programme provided the long-term solution to delivering savings, alongside maximising opportunities to invest in new assets. He referred to the different approaches taken by the current and previous administration and did not believe the Council was acting recklessly.
· A Board member asked whether the pay award assumption had been underestimated bearing in mind the Unions were asking for a 10% increase. It was explained that Pay and Reward had taken forward the principle of a net nil cost. It was acknowledged that the pay situation may need reviewing should inflation remain at the current level.
· The Finance Manager referred the Board to paragraph 25 of the report which listed the latest key assumptions, including the further growth in children’s services and the new 1.25% in employers’ national insurance contributions for the health and social care levy. Changes since the June report included the increase to 3.4% for the pay award and the increase in inflation.
· A Board member asked what the basis was for the council tax base assumption and referred to current issues in the construction industry. It was explained that the assumption was not only based on housing but also on collection rates.
· The latest position in respect of income generation was set out in the report. This indicated that while some areas had performed very well, assumptions had been adjusted to reflect that not all income streams would return to pre Covid levels until April 2024.
· A Board member asked how the Council was preparing financially for the new social care proposals. It was explained that councils had been left worse off by the proposals and further work was still required on what was a long-term issue. The Portfolio Holder was taking an interventionist approach to the adult social care market, including the recent decision in relation to extra care provision.
· A Board member asked if the Council was lobbying for new burdens funding to cover the costs of administering the allocations. It was explained that the Council was in dialogue with local MPs regarding a social care funding solution and the LGA continued to lobby on this issue.
· The Finance Manager explained that the Council was continually revising its financial estimates and assumptions. Any changes would be included in the next MTFP update report in December 2021.
· A Board member referred to the recent bin strike in Brighton and Hove and the current shortage of drivers and the risk of staff being attracted to other sectors by better pay. It was confirmed that the Council was able to agree targeted interventions to address pay where recruitment was an issue.
· The Finance Manager confirmed that the Council was in discussion with the LGA and central Government regarding a long-term solution to the ongoing concerns around the high needs budget in the Dedicated Schools Grant.
A Board member was concerned at the reliance on Transformation to deliver savings when only half of the current year’s forecast had been identified and asked what plans were in place over the next six months to address this. The Chairman referred to the Council’s main duty and responsibility of delivering services to its local residents. Some genuine concerns had been raised about the projected funding gap of £86 million over the next five years, the assumption that Transformation savings would be achieved, and the potential escalation of risk and pressure on reserves. The Leader explained that financial strategy workstreams had been put in place to address the funding gap. The Council had also given a commitment to invest in its unearmarked reserves and this had been reported to the Audit and Governance Committee.
Following the discussion, it was proposed to recommend to Cabinet that it notes the revised Medium Term Financial Plan with some concern and until the funding gap is addressed all new unbudgeted expenditure should cease. This motion was not carried.