Subject:
|
Targeted Budget
Management (TBM) 2020/21:
Month 5
|
Date of Meeting:
|
8 October 2020
|
Report of:
|
Acting Chief Finance
Officer
|
Contact Officer:
|
Name:
|
Jeff Coates
|
Tel:
|
01273 292364
|
|
Email:
|
Jeff.Coates@brighton-hove.gov.uk
|
Ward(s)
affected:
|
All
|
FOR GENERAL RELEASE
1
PURPOSE OF REPORT AND POLICY CONTEXT:
1.1
The Targeted Budget Monitoring (TBM) report is a key component of
the council’s overall performance monitoring and control
framework. This report sets out the forecast risks as at Month 5
(August) on the council’s revenue and capital budgets for the
financial year 2020/21.
1.2
As set out in the General Fund Revenue Budget 2020/21 report to
Budget Council, £7.825m was provided for in the budget for
reinvestment in identified cost and demand pressures across social
care and £7.220m for reinvestment in other priority service
areas. These sums were expected to meet identified demand-led, cost
and income pressures in 2020/21. The council also set aside a risk
provision of £0.750m to mitigate potential demand risks
and/or any difficulties in delivering savings targets. However,
since setting the budget the Coronavirus outbreak has had a severe
financial impact on the city and the council. This has been
reported through financial update reports to Policy & Resources
Committee in March, April, May, July and September. This report
shows the latest forecast impact on budgets and includes memorandum
information to indicate the element of the forecast attributable to
the pandemic.
1.3
The forecast risk for 2020/21 as at month 5 is a £7.853m
overspend on the General Fund revenue budget. This includes a
forecast overspend of £0.366m on the council’s share of
the NHS managed Section 75 services. This is an improvement of
£28.150m from Month 2, however, it should be noted that
£17.523m of the improvement is due to additional government
grant funding including a third tranche of Emergency Response
funding and estimated grant funding relating to compensation for
losses of sales, fees and charges. There are, however, underlying
improvements in income and expenditure as shown in paragraph 4.3
below.
1.4
As noted above, the council set aside a £0.750m risk
provision to mitigate risks identified at the time of setting the
budget. However, £0.575m of this now needs to be held against
the additional costs of the pay award, now confirmed at 2.75%, and
the remaining £0.175m has already been released in the
forecast outturn position above. Therefore, there is no further
risk provision available to mitigate the forecast pressures
identified in this report. This is clearly unprecedented and goes
well beyond the ability of normal financial management measures to
be able to manage the situation. The recommended approach for
managing the forecast deficit is set out in the General Fund
Financial Planning Update report also on this committee
agenda.
1.5
The report also indicates that £3.826m (37%) of the
substantial savings package in 2020/21 of £10.291m is at
risk. Most of this (£3.097m) is due to pressures arising from
COVID-19.
2
RECOMMENDATIONS:
2.1
That the Committee note the forecast risk position for the General
Fund, which indicates a budget pressure of £7.853m. This
includes an overspend of £0.366m on the council’s share
of the NHS managed Section 75 services.
2.2
That the Committee note the forecast net Collection Fund deficit of
£11.818m.
2.3
That the Committee note the forecast for the Housing Revenue
Account (HRA), which is currently an underspend of
£0.307m.
2.4
That the Committee note the forecast risk position for the
Dedicated Schools Grant which is an overspend of
£0.429m.
2.5
That the Committee note the forecast outturn position on the
capital programme which is a forecast underspend of
£0.270m.
2.6
That the Committee agree to “un-pause” the Brighton
Research & Innovation Fibre Ring’ capital scheme as set
out in Appendix 6 Capital Programme Performance’
2.7
That the Committee agree to establish a Sinking Fund for Royal
Pavilion and Museums maintenance from any underspend on those
budgets in 2020/21 (see paragraph 9.9)
3
CONTEXT/ BACKGROUND INFORMATION
Targeted Budget
Management (TBM) Reporting Framework
3.1
The TBM framework focuses on identifying and managing financial
risks on a regular basis throughout the year. This is applied at
all levels of the organisation from Budget Managers through to
Policy & Resources Committee. Services monitor their TBM
position on a monthly or quarterly basis depending on the size,
complexity or risks apparent within a budget area. TBM therefore
operates on a risk-based approach, paying particular attention to
mitigation of growing cost pressures, demands or overspending
through effective financial recovery planning together with more
regular monitoring of high risk demand-led areas as detailed
below.
3.2
The TBM report is normally split into the following sections:
i)
General Fund Revenue Budget Performance
ii)
Housing Revenue Account (HRA) Performance
iii)
Dedicated Schools Grant (DSG) Performance
iv) NHS
Controlled S75 Partnership Performance
v)
Capital Investment Programme Performance
vi)
Capital Programme Changes
vii)
Implications for the Medium Term Financial Strategy (MTFS)
viii) Comments of the Chief
Finance Officer (statutory S151 officer)
4
General Fund Revenue Budget Performance (Appendix 4)
4.1
The General Fund includes general council services, corporate
budgets and central support services. Corporate Budgets include
centrally held provisions and budgets (e.g. insurance). Note that
General Fund services are accounted for separately to the Housing
Revenue Account (Council Housing). Note also that although part of
the General Fund, financial information for the Dedicated Schools
Grant is shown separately as this is ring-fenced to education
provision (i.e. Schools).
4.2
The table below shows the forecast outturn for council-controlled
revenue budgets within the General Fund. These are budgets under
the direct control and management of the Executive Leadership Team.
More detailed explanation of the variances can be found in Appendix
4. Please note that the ‘COVID Variance’ column is a
memorandum-only column identifying the extent of the
‘Forecast Variance’ attributable to the pandemic.
Forecast
|
|
2020/21
|
Forecast
|
Forecast
|
COVID
|
Forecast
|
Variance
|
|
Budget
|
Outturn
|
Variance
|
Variance
|
Variance
|
Month 2
|
|
Month 5
|
Month 5
|
Month 5
|
Month 5
|
Month 5
|
£'000
|
Directorate
|
£'000
|
£'000
|
£'000
|
£'000
|
%
|
3,101
|
Families, Children & Learning
|
92,476
|
94,225
|
1,749
|
2,376
|
1.9%
|
13,512
|
Health & Adult Social Care
|
64,666
|
75,426
|
10,760
|
17,121
|
16.6%
|
25,857
|
Economy, Environment & Culture
|
39,195
|
48,469
|
9,274
|
9,633
|
23.7%
|
3,526
|
Housing, Neighbourhoods & Communities
|
16,521
|
21,249
|
4,728
|
4,945
|
28.6%
|
1,336
|
Finance & Resources
|
20,877
|
21,716
|
839
|
312
|
4.0%
|
565
|
Strategy, Governance & Law
|
5,393
|
5,567
|
174
|
379
|
3.2%
|
47,897
|
Sub Total
|
239,128
|
266,652
|
27,524
|
34,766
|
11.5%
|
(239)
|
Corporately-held Budgets
|
(7,452)
|
(11,461)
|
(4,009)
|
(5,986)
|
-53.8%
|
4,250
|
Corporate PPE Costs
|
0
|
2,800
|
2,800
|
2,800
|
0.0%
|
(15,905)
|
COVID-19 Grant
|
0
|
(18,462)
|
(18,462)
|
(15,905)
|
0.0%
|
36,003
|
Total General Fund
|
231,676
|
239,529
|
7,853
|
15,675
|
3.4%
|
13,070
|
Collection Fund Deficit
|
|
|
11,818
|
|
|
49,073
|
Total Forecast Deficit
|
|
|
19,671
|
|
|
4.3
The position above shows an overall improvement over TBM Month 2 of
£29.402m including the projected Collection Fund deficit. The
improvement arises from a mixture of improved income forecasts,
additional government grant funding received, and improving
expenditure forecasts. This indicates a net reportable deficit of
£19.671m in 2020/21.
Updated Scenario (Moderate View)
|
Moderate View
Forecast
(July P&R)
|
TBM
Month 5
Forecast
|
Difference
Better (-)
Worse (+)
|
Base position: TBM
Forecast Month 2 (May)
|
36.003
|
36.003
|
0
|
Improvement due to
speed of recovery (Income)
|
-5.000
|
-4.081
|
+0.919
|
Further Mitigations
(i.e. cost improvements)
|
-3.000
|
-6.054
|
-3.054
|
Continued Capital
Programme pause *
|
-0.500
|
-0.492
|
+0.008
|
Further government
COVID-19 funding
|
-10.000
|
-17.523
|
-7.523
|
Revised Outturn Overspend 2020/21
|
17.503
|
7.853
|
-9.650
|
Forecast Collection
Fund Deficit 2020/21
|
10.000
|
11.818
|
1.818
|
Total Projected Deficit 2020/21
|
27.503
|
19.671
|
-7.832
|
* Subject to Policy & Resources Committee
approval to continue pausing capital schemes as recommended in the
General Fund Financial Planning Update report on this committee
agenda.
4.5
All things taken into consideration, by comparison to the Moderate
View estimate reported to the July committee meeting, the position
is currently £7.832m better with a projected deficit in
2020/21 of £19.671m. Although this is moving in the right
direction, without very significant improvements in income and
taxation revenues, and/or additional government grant, there
clearly remains a substantial projected deficit for 2020/21.
4.6
The chart below shows the monthly forecast variances for 2020/21
and the previous three years for comparative purposes, however, the
impact of the pandemic clearly makes comparisons difficult at this
time.
Demand-led Budgets
4.7
There are a number of budgets that carry potentially higher
financial risks and therefore could have a material impact on the
council’s overall financial position. These are budgets of
corporate significance where demand or activity is difficult to
predict and where relatively small changes in demand can have
significant implications for the council’s budget strategy.
These can include income related budgets. These therefore undergo
more frequent and detailed analysis.
Forecast
|
|
2020/21
|
Forecast
|
Forecast
|
COVID
|
Forecast
|
Variance
|
|
Budget
|
Outturn
|
Variance
|
Variance
|
Variance
|
Month 2
|
|
Month 5
|
Month 5
|
Month 5
|
Month 5
|
Month 5
|
£'000
|
Demand-led
Budget
|
£'000
|
£'000
|
£'000
|
£'000
|
%
|
(45)
|
Child Agency & In House Placements
|
22,283
|
22,241
|
(42)
|
152
|
-0.2%
|
11,991
|
Community Care
|
70,755
|
77,294
|
6,539
|
10,235
|
9.2%
|
4,949
|
Temporary Accommodation
|
3,133
|
11,251
|
8,118
|
6,648
|
259.1%
|
16,895
|
Total Demand-led Budget
|
96,171
|
110,786
|
14,615
|
17,035
|
15.2%
|
The chart below
shows the monthly forecast variances on the demand-led budgets for
2020/21.
TBM Focus Areas
The main pressures
identified at Month 5 are across parts of Families, Children &
Learning, Health & Adult Social Care, Homelessness, Transport
and Culture, Tourism & Sport. Information about these pressures
and measures to mitigate them are summarised below:
Families, Children &
Learning: The current projected position identifies potentially
significant cost pressures: £0.932m on Services for Children
with Disabilities; £1.065m on Services for Adults with
Learning Disabilities and £1.122m on Home to School
Transport. However, there is a forecast underspend on Children in
Care placements of (£0.937m) together with other variances of
(£0.433m), this results in a forecast of £1.749m
overspend as at Month 5. £2.376m of the forecast spend
relates to COVID-19 – this is a combination of loss of
income, impact on savings targets and additional expenditure given
the need to mitigate health risks posed by COVID-19. Work will
continue in implementing financial recovery plans but it is
anticipated that demand for statutory social care services could
increase as families exit lockdown, which could put additional
demands on budgets.
The projected position for the
Dedicated Schools Grant is an overspend of £0.429m. This is
largely due to some significant emerging overspends in the high
needs block, most significantly mainstream schools top-up funding
at £0.215m and education agency placements at £0.302m.
These pressures are offset by forecast underspends elsewhere in the
DSG.
4.8
Adults Services: The service is facing significant
challenges in 2020/21 in mitigating the risks arising from
increasing demands from client needs, supporting more people to be
discharged from hospital when they are ready and maintaining a
resilient local provider market. This is alongside supporting
vulnerable clients during the coronavirus pandemic, delivering a
significant financial recovery plan and developing integration
plans through the Better Care Fund.
·
Service pressure funding of £3.900m, including Better Care
and Winter Pressure funding, has been applied in 2020/21 and used
to fund budget pressures resulting from the increased demands and
complexity in the city. However, £1.550m was needed to
backfill the reduction in CCG funding contributions. Over the last
two years there has been an overall £3.750m reduction in CCG
funding due to pressures on local NHS budgets, however, this has
all been borne by the HASC budget although CCG funding also relates
to services in other directorates.
·
At
this stage, £3.498m of the total financial recovery plan of
£4.387m are being forecast as unachievable in this financial
year. This is predominantly due to Covid-19.
·
Overall HASC is
forecasting to overspend by £10.760m in 2020/21 which clearly
indicates the scale of the current challenges. Actions are focused
on attempting to manage demands on and costs of community care
placements across Assessment Services and making the most efficient
use of available funds. The majority of the forecast overspend is a
result of:
o
COVID-19 related
spend £17.119m;
o
Unfunded element
of cumulative CCG funding reductions of £0.361m;
o
£0.500m due
to System control issues following the implementation of new
software in April 2018, which have been identified and are being
addressed.
·
The
HASC directorate is planning a development programme called
‘Better Lives, Stronger Communities’ which aims to
implement a consistent strengths-based approach across key work
streams, ensuring robust pathways are in place, developing a
community reablement offer and re-designing the front door service.
This programme of work was temporarily paused due to Covid-19 but
is now moving ahead. This new way of working across the directorate
will be reliant on a corporate and city-wide approach. However, the
evidence at present indicates that the Health & Social Care
system is under considerable pressure and this is generating
additional costs for the council due to:
o
Pressures on NHS
budgets resulting in reduced funding contributions from the
CCG;
o
Significant
pressures on the acute hospital resulting in increased costs to
support timely discharge into residential and nursing home
care;
o
Ongoing
transformation of GP practices and enhancement of their clinical
screening and general medical services which contribute to
preventative support;
o
Pressures on NHS
outreach and other preventative services including community
nursing (known as Integrated Primary Care Teams);
o
There
is also focus nationally on improving rates of hospital discharge
in order to accommodate winter pressures.
The
funding of all care packages is scrutinised for Value for Money,
ensuring that eligible needs are met in the most cost-effective
manner which will not always meet people’s aspirations.
Established safeguards are in place to provide assurance within
this process
4.9
Housing Services and Temporary Accommodation: is now
forecast to overspend by £3.818m with a further overspend of
£4.300m for housing of rough sleepers to 31 March 2021,
totalling £8.118m. However, the report details
financial recovery measures using Flexible Homelessness Support
Grant and collecting HB from rough sleepers to reduce this
overspend to £4.276m. There are three main elements to this
overspend as follows:
·
a pressure of £1.695m arising from the continued higher
volumes of temporary accommodation being required due to the
continuing local pressures and bedding in the statutory
requirements of the Housing Reduction Act. Also continued
levels of overspending as in 2019/20 on other areas of TA such as
repairs and income collection mean that £0.350m of savings
are unlikely to be met. The numbers in spot purchase accommodation
at the end of 2019/20 remained high at over 100 and so, due to the
pandemic and the difficulties with moving people on from temporary
accommodation, it is assumed that numbers will remain similarly
high for the remainder of the year.
·
the number presenting as homeless has then risen sharply between
March and July as a result of the pandemic and housing those at
risk of rough sleeping as part of the response to the
‘everyone in’ initiative from the Government. This has
led to a forecast overspend of £2.348m. As at the end
of August there were 217 units of spot purchase accommodation in
use across the temporary accommodation service as all other forms
of TA are full. This compares to the budget assumption of 36 units
on average throughout the year and is the major reason for the
overspend.
·
A further pressure of £4.300m relating to the accommodation
costs of housing rough sleepers in the City up to December 2020.
The Council has bid for resources from the MHCLG under the Next
Steps Accommodation Programme (NASP) and has just been awarded
£3.429m to the end of March 2021. This grant is to cover
costs of rough sleeping over both HNC and HASC directorates and
therefore will not cover the significant cost pressures relating to
rough sleepers across both directorates. The council is waiting for
more clarification from MHCLG to identify which services can be
funded going forward over the two Directorates of HNC and
HASC.
Discussions between officers and the
MHLG indicate that the council will be expected to move on a large
proportion of the rough sleepers by December into more sustainable
accommodation and potentially restrict the numbers housed going
forward. Therefore, current forecasts assume no further growth in
the numbers of households supported under the ‘everyone
in’ initiative as budget resources have not been identified.
A separate report will be brought to P&R Committee before
Christmas which will discuss the full costs, the grant and future
implications.
Housing will be undertaking an
overarching Temporary Accommodation ‘end to end’ review
once the support resource from Performance & Improvement
team is in place. This work will include reducing the use and
length of stay in Temporary Accommodation and be linked to
improving homeless prevention and enabling move-on to more
sustainable accommodation. The review will also include an
assessment of void turnaround processes, and income collection and
repairs. Further service transformation was due to be rolled out in
March but has been delayed due to COVID-19. The service is also
having to adapt to reflect the new approaches required under
COVID-19 restrictions and how it can engage differently with people
at risk of homelessness.
4.10
Environment, Economy & Culture: The Directorate
has substantial income budgets for parking, museums and venues and
for the council’s commercial property portfolio, all of which
are dependent on visitor numbers and commercial activity.
There is also a challenging additional income target for Parking
Services of £3.800m for 2020/21. These activities and
services have been heavily impacted by the COVID-19 lockdown and
the forecast is for significant income shortfalls compared to
budget for 2020/21 in all these areas.
The directorate has, however, started
to benefit financially from the release from lockdown. August
has seen a substantial recovery of Parking Services income with
income levels rising to close to budget in some areas. The Month 5
forecast for the whole year impact of unavoidable cost pressures
(mainly agency staffing) related to maintaining core services, such
as refuse collection & recycling and street cleansing, at
pre-COVID-19 levels is also reduced but still substantial. The
revised forecast assumes that parking income levels remain near to
budget for the rest of the year which is potentially optimistic in
the light of the latest Covid19 related announcements.
The parking income recovery and the
estimated sales, fees and charges compensation grant from central
government reduces the forecast overspend between Month 4 and Month
5 from £25.857m to £9.274m. Confirmation of the final
claim amount will not be known until year end, and in the meantime
the estimate for income losses for October to March is subject to
the ongoing impact of Government control measures, so there may be
some movement in the forecast as a result.
Monitoring Savings
4.11
The savings package approved by full Council to support the revenue
budget position in 2020/21 was £10.291m following directly on
from a £12.236m savings package in 2019/20. This is very
significant and follows eight years of substantial packages
totalling over £142m that have been necessary to enable cost
and demand increases to be funded alongside managing reductions in
central government grant funding.
4.12
Appendix 4 provides a summary of savings in each directorate and
indicates in total what is anticipated/achieved or is at risk.
Appendix 5 summarises the position across all directorates and
presents the entire savings programme. The graph below provides a
summary of the latest position and indicates that £3.826m
(37%) is currently at risk. Of this £3.097m is in respect of
pressures relating to COVID-19. Mitigation of these risks will be
included in the development of services’ financial recovery
actions as far as possible.
5
Housing Revenue Account Performance (Appendix 4)
5.1
The Housing Revenue Account is a separate ring-fenced account
within the General Fund that covers income and expenditure related
to the management and operation of the council’s housing
stock. Expenditure is generally funded by Council Tenants’
rents and housing benefits. The forecast outturn is currently an
underspend of £0.307m and more details are provided in
Appendix 4.
6
Dedicated Schools Grant Performance (Appendix 4)
6.1
The Dedicated Schools Grant (DSG) is a ring-fenced grant within the
General Fund which can only be used to fund expenditure on the
schools budget. The schools budget includes elements for a range of
services provided on an authority-wide basis including Early Years
education provided by the Private, Voluntary and Independent (PVI)
sector, and the Individual Schools Budget (ISB) which is divided
into a budget share for each maintained school. The forecast
outturn is an overspend of £0.429m and more details are
provided in Appendix 4. Under the Schools Finance Regulations any
underspend or overspend must be carried forward to support the
schools budget in future years.
7
NHS Managed S75 Partnership Performance (Appendix 4)
7.1
The NHS Trust-managed Section 75 Services represent those services
for which local NHS Trusts act as the Host Provider under Section
75 Agreements. Services are managed by Sussex Partnership
Foundation Trust (SPFT) and include health and social care services
for Adult Mental Health and Memory and Cognitive Support
Services.
7.2
This partnership is subject to separate annual risk-sharing
arrangements and the monitoring of financial performance is the
responsibility of the respective host NHS Trust provider.
Risk-sharing arrangements result in financial implications for the
council where a partnership is underspent or overspent at year-end
and hence the performance of the partnership is included within the
forecast outturn for the Health & Adult Social Care
directorate. An overspend of £0.366m is currently forecast
and more details are provided in Appendix 4.
8
Capital Programme Performance and Changes
Forecast Variance Month 2
|
|
Reported Budget Month 5
|
Forecast Outturn Month 5
|
Forecast Variance Month 5
|
Forecast Variance Month 5
|
£'000
|
Directorate
|
£'000
|
£'000
|
£'000
|
%
|
0
|
Families, Children & Learning
|
33,611
|
33,611
|
0
|
0.0%
|
0
|
Health & Adult Social Care
|
693
|
693
|
0
|
0.0%
|
0
|
Economy, Environment & Culture
|
65,371
|
65,371
|
0
|
0.0%
|
0
|
Housing, Neighbourhoods & Communities
|
2,859
|
2,859
|
0
|
0.0%
|
(2,417)
|
Housing Revenue Account
|
48,196
|
48,148
|
(49)
|
-0.1%
|
0
|
Finance & Resources
|
3,305
|
3,083
|
(222)
|
-6.7%
|
0
|
Strategy, Governance & Law
|
1,347
|
1,347
|
0
|
0.0%
|
(2,417)
|
Total Capital
|
155,380
|
155,110
|
(270)
|
-0.2%
|
8.2
Appendix 6 shows the changes to the capital budget and Appendix 7
provides details of new schemes for 2020/21 to be added to the
capital programme which are included in the budget figures above.
Policy & Resources Committee’s approval for these changes
is required under the council’s Financial Regulations. The
following table shows the movement in the capital budget since
approval at Budget Council.
Summary of Capital
Budget Movement
|
Reported Budget Month 5
|
|
£'000
|
Budget approved as at July Policy &
Resources Committee
|
160,042
|
Changes reported at other committees and
already approved
|
100
|
New schemes to be approved in this report (see
Appendix 5)
|
2,714
|
Variations to budget (to be approved)
|
(554)
|
Reprofiling of budget (to be approved)
|
(6,922)
|
Slippage (to be approved)
|
0
|
Total Capital
|
155,380
|
8.3
Appendix 6 also details any slippage into next year. However, as
normal, project managers have forecast that none of the capital
budget will slip into the next financial year at this early stage
in the expectation that there is time to address any initial delays
experienced.
9
Implications for the Medium Term Financial Strategy (MTFS)
9.1
The council’s MTFS sets out resource assumptions and
projections over a longer term. It is periodically updated
including a major annual update which is included in the annual
revenue budget report to Policy & Resources Committee and Full
Council. This section highlights any potential implications for the
current MTFS arising from in-year TBM monitoring above and details
any changes to financial risks together with any impact on
associated risk provisions, reserves and contingencies. Details of
Capital Receipts and Collection Fund performance are also given
below because of their potential impact on one-off or future
resources.
Capital Receipts Performance
9.2
Capital receipts are used to support the capital programme. Any
changes to the level of receipts during the year may impact on
future years’ capital programmes and may impact on the level
of future investment for corporate funds and projects such as the
Strategic Investment Fund, Modernisation Fund, Asset Management
Fund and the Information, Technology & Digital Investment Fund.
The planned profile of capital receipts for 2020/21, as at Month 5,
is £10.962m which includes significant receipts expected from
the land transferring to the Housing Joint Venture, a number of
lease extensions, and property sales identified to support the
Stanmer redevelopments. To date there have been receipts of
£0.517m in relation to the disposal of Oxford Street Car
Park, two small leases and some minor loan repayments. The capital
receipts performance will be monitored over the coming months
against capital commitments.
9.3
The forecast for the ‘right to buy sales’ in 2020/21
(after allowable costs, repayment of housing debt and forecast
receipt to central government) is that an estimated 30 to 40 homes
will be sold with a maximum useable receipt of £0.515m to
fund the corporate capital programme and net retained receipt of up
to £4.000m available to re-invest in replacement homes. To
date 12 homes have been sold in 2020/21.
Collection Fund Performance
9.4
The Collection Fund is a separate account for transactions in
relation to council tax and business rates. Any deficit or surplus
forecast on the collection fund relating to council tax is
distributed between the council, Sussex Police and Crime
Commissioner and East Sussex Fire Authority, whereas any forecast
deficit or surplus relating to business rates is shared between the
council, East Sussex Fire Authority and the government.
9.5
The council tax collection fund is forecast to be in deficit by
£9.775m of which £9.805m relates to the current year
equating to 5.2% of the budgeted income and £0.530m from the
deficit brought forward. The forecast deficit has reduced from
month 2 by £1.475m and the main reasons for this are an
improved forecast for collection of council tax, lower growth in
SMI (Severely Mentally Impaired) exemption awards, including a
reduction in August, and reducing pensioner Council Tax Reduction
(CTR) claimants. The impact of Covid-19 is significantly
contributing to the deficit through reduced council tax receipts
and increases in working age CTR claimants.
9.6
The main contributors to the deficit are forecast losses in
collection of £4.730m relating to both the current year and
the collection of arrears, increased CTR awards of £2.485m,
continuing increase in SMI exemptions (including backdated
elements) £0.495m and shortfalls in liability, in part due to
less properties being added to the valuation list at £0.495m.
In addition, there are higher than forecast awards of other
discounts totalling £0.500m (includes Single Person Discounts
and disregards for students and SMI claimants) and other exemptions
totalling £0.540m, including probate and patient exemptions.
The council's share of the overall forecast council tax deficit is
£8.298m.
9.7
The business rates collection fund is forecast to be in deficit by
£7.184m. This is based on the estimated impact of COVID-19 on
reduced collection of business rates income and potential business
failures equating to 5% of the original net rates payable and
increased empty property relief. The council’s 49% share of
the deficit is £3.520m.
9.8
The combined collection fund deficit of £11.818m would need
to be funded from one-off resources; normally this would be
considered as part of the 2021/22 budget setting process.
Reserves, Budget Transfers and
Commitments
9.9
The creation of reserves, the approval of budget transfers
(virements) of over £0.250m, and agreement to new financial
commitments of corporate financial significance that are not
provided for in the council’s approved Budget and Policy
Framework require Policy & Resources Committee approval in
accordance with the council’s Financial Regulations and
Standard Financial Procedures. There is one new item requiring
approval at this time.
9.10
As agreed by this Committee, the Royal Pavilion & Museums Trust
transfer took place on 1st October 2020. In year one the external
planned maintenance budget is £0.598m. The planned
maintenance budget will continue to be held by the council. In the
event of any year-end underspend, the remaining balance needs to be
protected and ring-fenced to ensure the upkeep of the transferred
properties. To accommodate this, it is recommended that a Sinking
Fund is created in a similar fashion to the Sinking Fund created
when the Dome was established many years ago. It is very unlikely
that any significant sum will build up within the fund but it could
help to absorb any minor overspends without impacting on other
revenue budgets.
10
ANALYSIS & CONSIDERATION OF ANY ALTERNATIVE OPTIONS
10.1
The provisional outturn position on the General Fund is an
overspend of £7.853m. This includes a forecast overspend of
£0.366m on the council’s share of the NHS managed
Section 75 services. Together with a forecast deficit on the
Collection Fund of £11.818m, this indicates a current deficit
of £19.671m.
10.2
There are no further financial risk provisions available to
mitigate the forecast position. Any overspend at the year-end would
normally need to be funded from general reserves and balances which
would then need to be replenished to ensure that the working
balance did not remain below the recommended level of
£9.000m. The management of the forecast deficit is considered
further in the General Fund Financial Planning Update report also
on this committee agenda.
11
COMMUNITY ENGAGEMENT & CONSULTATION
11.1
No specific consultation has been undertaken in relation to this
report.
12.1
The forecast risk at Month 5 represents 3.4% of the net General
Fund. The forecast indicates a number of demand and cost pressures
alongside income and taxation losses, largely driven by the impact
of the pandemic. Substantial government funding support, financial
management action and some improvement in income have brought the
deficit down from early estimates of over £50m to under
£20m. However, this will still require all directorates and
services to do everything possible to mitigate the position as far
as they are able and maximise income as services continue to come
out of lockdown. As noted above, consideration of the management of
any deficit is given in the General Fund Financial Planning Update
report.
13
FINANCIAL AND OTHER IMPLICATIONS
Financial Implications:
13.1
The financial implications are covered in the main body of the
report. Financial performance is kept under review on a monthly
basis by the Executive Leadership Team and the management and
treatment of forecast risks is considered by the Audit &
Standards Committee as part of its review of strategic risks.
Finance Officer Consulted: Jeff
Coates
Date: 24th September 2020
Legal Implications:
13.2
Decisions taken in relation to the capital and revenue budget must
enable the council to observe its legal duty to achieve best value
by securing continuous improvement in the way in which its
functions are exercised, having regard to a combination of economy,
efficiency and effectiveness. The council must also comply with its
general fiduciary duties to its Council Taxpayers by acting with
financial prudence, and bear in mind the reserve powers of the
Secretary of State under the Local Government Act 1999 to limit
Council Tax & precepts.
Lawyer Consulted: Elizabeth
Culbert
Date: 25th September 2020
Equalities Implications:
13.3
There are no direct equalities implications arising from this
report.
Sustainability Implications:
13.4
Although there are no direct sustainability implications arising
from this report, the council’s financial position is an
important aspect of its ability to meet council priorities. In
addition, the council’s response to managing the impact of
the pandemic, in lieu of further government funding announcements,
will be important to demonstrate that in a worst case scenario, it
has plans to manage the financial impact and avoid financial
collapse.
Risk and Opportunity Management Implications:
13.5
The council’s revenue budget and Medium Term Financial
Strategy contain risk provisions to accommodate emergency spending,
even out cash flow movements and/or meet exceptional items. The
council maintains a recommended minimum working balance of
£9.000m to mitigate these risks. The council also maintains
other general and earmarked reserves and contingencies to cover
specific project or contractual risks and commitments. However,
current reserves and balances were not set at a level to manage
financial shocks of the scale of the pandemic and any depletion of
reserves and balances to manage this position will normally require
a plan for replenishment in future years.
SUPPORTING DOCUMENTATION
Appendices:
1.
Financial Dashboard Summary
2.
Revenue Budget Movement Since Month 2
3.
Revenue Budget RAG Ratings
4.
Revenue Budget Performance
5.
Summary of 2020/21 Savings Progress
6.
Capital Programme Performance
7.
New Capital Schemes
Documents in Members’ Rooms:
None.
Background
Documents
None.