Subject:
General Fund Revenue Budget, Capital & Treasury Management
Strategy 2022/23
Date of meeting:
Policy & Resources Committee:10 February 2022
Budget Council: 24
February 2022
Report
of:
Chief Finance Officer
Contact
Officer: Name: Nigel
Manvell
Tel: 01273 293104
James
Hengeveld
Tel: 01273 291242
Email: nigel.manvell@brighton-hove.gov.uk
james.hengeveld@brighton-hove.gov.uk
Ward(s)
affected: All
FOR GENERAL
RELEASE
1
PURPOSE OF REPORT AND POLICY CONTEXT
1.1
This report includes the proposed General Fund Revenue and Capital
Budget 2022/23 including the latest estimated resource position for
2022/23 to 2025/26, including changes in assumptions arising from
the key impacts of the Chancellor’s 3-year Spending Review
2021 and the subsequent provisional Local Government Financial
Settlement. It also includes revised estimates of demographic and
cost trends based on the latest information and forecasts. This
includes updated tax base forecasts as approved by Policy &
Resources Committee at its January meeting.
1.2
The Spending Review 2021 was a 3-year announcement which purported
to increase Local Government Spending Power by 3% in 2022/23.
However, this includes funding for social care reforms which will
be matched by new costs. Removing this element shows that Spending
Power has increased by 1.8% provided that councils elect to
implement the allowable 1% Adult Social Care precept in 2022/23.
Overall, this is some way short of current and anticipated demand
and inflationary pressures in 2022/23 and is in the context of
government grant reductions of over £100 million in the
previous decade.
1.3
A key point to note in the City Council’s budget position is
that the one-off Covid-19 grant awarded for 2021/22 (£8.023m)
was used to manage cost pressures and balance the recurrent General
Fund budget for 2021/22. While some aspects of the council’s
finances are expected to recover in 2022/23, including fees &
charges, rents and taxation, the financial impact of the pandemic
is ongoing, which, together with estimated cost and demand
pressures of over £12m makes 2022/23 a very challenging
budget.
1.4
The announcement of a 3-year Spending Review potentially makes the
position for the council clearer for the next few years, assuming
no significant changes to the announced funding parameters,
however, the restriction of the Local Government Financial
Settlement to a one-year settlement again leaves an element of
uncertainty. The 3-year Spending Review therefore makes the task of
balancing the budget over the period both clear but very
challenging as there is a large budget shortfall in 2022/23 and
further, albeit smaller, predicted budget shortfalls in later
years.
1.5
The scale of the estimated budget shortfall in 2022/23, over
£18 million, is such that achieving the necessary savings
next financial year, following on from many years of multi-million
pound savings packages, is very challenging and potentially
destabilising. The budget process has therefore focused on a longer
time horizon and has focused on the development of an achievable,
sustainable Medium Term Financial Strategy over a 4-year period.
This enables a shortfall in any one year to be managed over a
longer period to smooth out the financial impact of savings as far
as practicable. However, as always, there are limitations on the
extent to which savings can be deferred which is driven by the
level and availability of reserves.
1.6
While a 4-year planning period can aid management of the
challenging financial situation, it also carries additional risks.
In particular, any non-achievement or under-achievement of savings,
or any over-estimate of resources (e.g. taxation) in early years
will then place even greater pressure on later years, and without
strong financial management and governance, large deficits could
quickly build up beyond manageable levels, potentially placing the
authority in an unsustainable financial position.
1.7
In summary, the Spending Review, increasing cost and demand
pressures and additional pay costs have now crystallised the
council’s financial situation and it now needs to make clear
and potentially difficult choices to avoid financial instability
over the medium term.
2
RECOMMENDATIONS:
That Policy & Resources Committee
recommends to Council:
2.1
The Administration’s proposed budget and Council Tax increase
on the Brighton & Hove element of the council tax,
comprising:
i) A
general Council Tax increase of 1.99%;
ii) An Adult
Social Care Precept increase of 1.00%;
iii) The
council’s net General Fund budget requirement for 2022/23 of
£199.853m;
iv) The 2022/23
budget allocations to services as set out in the Budget book at
Appendix 1 incorporating 2022/23 savings proposals and
investments;
v) The
reserves allocations as set out in the table at paragraph
5.20;
vi) A recommended
working balance of £9.000m (approximately 4.5% of the net
budget).
2.2
That Council notes the updated 4-Year Medium Term Financial
Strategy included in the Budget Book at Appendix 1.
2.3
That Council approves the Capital Strategy for 2022/23 at Appendix
2 comprising:
i) The
strategy for funding the investment in change, including the
flexible use of capital receipts as set out in section 7;
ii) The
capital resources and proposed borrowing included at Annex A of the
Capital Strategy;
iii) The Capital
Investment Programme for 2022/23 of £222.788m included within
the Budget Book at Appendix 1 and incorporating allocations to
strategic funds.
2.4
That Council notes the Equalities Impact Assessments to cover all
relevant budget options and their cumulative effect as set out in
Appendices 6 and 7.
2.5
That Council further notes that approval of the budget is an
indicative resourcing decision to be taken in the context of the
explanation given in the Legal Implications paragraph 17.3.
2.6
That Council approves the Treasury Management Strategy Statement as
set out in Appendix 3 comprising:
i) The
Annual Investment Strategy;
ii) The
Prudential and Treasury Indicators;
iii) The Minimum
Revenue Provision policy;
iv) The
authorised borrowing limit for the year commencing 1 April 2022 of
£590m.
2.7
That Council notes that supplementary information needed to set the
overall council tax will be provided for the budget setting Council
meeting as listed in paragraph 11.3.
That Policy & Resources Committee
agrees:
2.8
That the council’s Chief Finance Officer be authorised to
make any necessary technical, presentational or consequential
amendments to this report before submission to Budget Council.
3
Context and background information
3.1
As identified in the Draft Budget report to Policy & Resources
Committee in December 2021, the advent of restricted, one-year
Spending Reviews for 2020/21 and then in response to the pandemic
in 2021/22, meant that budget planning necessarily focused on
an annual process due to the removal of any certainty over future
resources.
3.2
The provision of a 3-year Spending Review at the end of October
2021 was therefore a step forward in terms of enabling longer term
planning but unfortunately the level of resources provided is not
sufficient to remove the council’s predicted budget gaps over
the period due to continuing cost and demand pressures across many
services, particularly demand-led areas such as social care and
homelessness.
3.3
For this reason, the budget process for 2022/23 has not only
focused on options to address the estimated budget shortfall next
year but has included the development of a more detailed 4-year
Medium-Term Financial Strategy (MTFS) which will cover the Spending
Review period plus one year. The MTFS provides an opportunity to
smooth out the financial impact of savings over the period to avoid
destabilising effects on services and enable the necessary lead-in
time for managing more fundamental consultation and change. The
MTFS will therefore become a more important and substantial
financial plan over the period as it will be the mechanism by which
the council can demonstrate and articulate its plans to achieve
financial balance and sustainability over the medium term.
3.5
Locally, as reported and evidenced through its targeted budget
monitoring reports (TBM), this council is experiencing a number of
pressure points that present high risks and need to be heeded in
its financial planning, including:
·
The likely requirement to plan for the repayment of reserves over
the medium term period, including reserves of £1.521m used to
‘financially smooth’ the 2021/22 budget;
·
Cover for Collection Fund taxation losses (deficits) experienced in
2020/21 due to the pandemic which government allowed to be spread
over 3 years starting in 2021/22;
·
The numbers of people supported in, and the cost of, Emergency and
Temporary Accommodation and associated support services has been
increasing year-on-year and has been further exacerbated by the
pandemic. Although short term funding has been received to meet
accommodation costs through the pandemic, if people are not
successfully ‘moved on’ to sustainable accommodation or
settings, this will increase baseline numbers further and the
impact on the council’s budget will be potentially very
substantial over the next few years. There are significant
challenges in achieving ‘move on’ due to a range of
factors outside of the council’s control including the
housing situation.
·
The council’s increasing reliance on income from fees and
charges, particularly parking and permit revenues. Fees &
Charges are related to visitor and economic activity and behaviours
which can change over time, potentially affecting income levels (up
or down).
·
Similarly, the council’s commercial property portfolio, which
provides substantial rental income of around £9m, is known to
be highly geared toward the retail sector, which had been declining
prior to the pandemic and may now be further impacted in the medium
term;
·
The council is also highly reliant on suppliers and providers who
may be impacted, at least in the short term, by Brexit and/or the
pandemic either in terms of the cost of supplies or cost of labour,
or the impact on supply chains. Suppliers/providers may also be
impacted by the National Minimum Wage increase (6.6%) and/or the
National Insurance increase. This could result in increased
contractual costs filtering through to the council.
·
Increased pay costs resulting from: inflationary pressures which
are driving up pay awards; the cost of increasing the
council’s minimum pay grade (including the Real Living Wage
increase); the increasing cost of market supplements due to
national and local labour supply issues, and; the cost of resolving
the recent industrial dispute.
3.6
Managing the council’s finances, i.e. achieving financial
balance, over a medium term financial period is a realistic
approach given the scale of the financial challenges but carries
additional risks. Utilising (i.e. internally borrowing from)
reserves to financially smooth the budget over a period of years is
not uncommon practice but it is still not desirable. There are also
two distinct types of financial smoothing proposed in the 2022/23
budget as set out below:
i)
Funding of one-off Covid-19 impacts: The 2022/23 budget
process has identified cost pressures of £2.233m that are
expected to be short-term and which are directly or indirectly
related to the impact of the pandemic. Ideally, one-off resources
would be identified to cover these costs but as the council has no
further one-off resources available and government have not
provided further Covid grant support, it is proposed to borrow from
existing reserves and repay them over a 10-year period at a
repayment rate of £0.208m per annum starting in 2023/24.
ii)
Imbalanced recurrent revenue budget – using financial
smoothing to address annual budget gaps can only be undertaken for
a short period over the MTFS period because it is an imbalance of
ongoing, recurrent expenditure that would otherwise build up very
quickly to a large ongoing deficit. Any use of financial smoothing
to address a recurrent budget imbalance must therefore be
accompanied by a viable medium-term plan demonstrating the
replenishment of reserves over the period, recognising that failure
to achieve savings in later years may lead to adverse consequences
or measures including:
-
Depletion or exhaustion of reserves;
-
Spending controls and restrictions (including Section 114
‘stop’ notices);
-
Unplanned cuts or reductions to services;
-
Unplanned staffing reductions through redundancy, voluntary
severance and/or vacancy controls;
-
Diversion of capital receipts from capital investment and the
unplanned sale of assets to shore up revenue (i.e. capitalisation)
in the short term.
3.7
Further discussion of the Medium Term Financial Strategy and a
potential approach for managing the budget over the next 4 years is
discussed in Section 9 below. The following section details the
outcome of the Spending Review alongside updated estimates of other
costs and resources.
4
RESOURCES AND PLANNING ASSUMPTIONS 2022/23
Provisional Local Government Financial Settlement (LGFS)
4.1
The provisional Local Government Finance Settlement for 2022/23 was
announced on 16 December 2021 and reflected the headline funding
announcements for year one of the 3-year Spending Review
announcement in October which included:
·
Confirmation of an allowable 1% Adult Social Care precept which
would provide an additional £1.588m if agreed;
·
Confirmation that the threshold at which an
increase in Council Tax requires a local referendum will be 3%
including a 1% Adult Social Care (ASC) precept. Any proposal to
increase council tax by 3% or more would therefore need to be
accompanied by an agreed substitute budget, which would need to be
implemented if the increase were voted down by the electorate;
·
Allocation of the core funding increase of £1.5bn nationally
including additional Adult Social Care grant funding of
£3.056m and a one-off Services Grant of £4.077m. The
Services Grant has been allocated on a one-off basis as the
government intends to review the allocation mechanism for future
years to make best use of this resource therefore this funding will
continue into future years but the impact of any changes is
unknown;
·
Increase in the Revenue Support Grant (RSG) from £6.666m to
£6.877m;
·
Increase to the Improved Better Care Fund, which provides joint
funding toward adult social care, from £9.182m to
£9.459m;
·
Increase to the Lower Tier Services Grant from £0.624m to
£0.657m;
·
Increase in the New Homes Bonus grant by £0.486m, reflecting
the new property completions in the city, however, this has been
provided on a one-off basis as the government intends to replace
the mechanism for distributing this funding in the future.
4.2
In July 2021, at the start of the budget process, the
council’s financial planning assumption was an increase in
funding of £6.280m. In the event, the provisional settlement
has announced additional recurrent funding of £8.140m which
therefore provides £1.860m additional resources to support
the 2022/23 budget.
4.3
The final Local Government Finance Settlement is expected to be
announced in February 2022.
Adult Social Care
(ASC) and Better Care Funding (BCF)
4.5
All additional funding for Adult Social Care has been directed
towards supporting the demand and cost pressures within the
service. The table below summarises the resources available to
support of Adult Social Care pressures in 2022/23:
|
Table 1: Social Care Resources
|
2020/21
|
2021/22
|
2022/23
|
|
ASC Precepting *
|
2%
£2.894m
|
3%
£4.450m
|
1%
£1.588m
|
|
Improved BCF
|
£9.181m
|
£9.181m
|
£9.459m
|
|
Adult Social Care Grant
|
£6.815m
|
£7.759m
|
£10.815m
|
* Subject to full Council approval for 2022/23
Referendum Threshold
4.6
The provisional Local Government Finance Settlement confirmed that
the threshold at which an increase in council tax requires
confirmation from a local referendum will be 3% including a 1%
Adult Social Care precept. Any proposal to increase council tax by
3% or more would therefore need to be accompanied by an agreed
substitute budget, which would need to be implemented if the
increase were voted down by the electorate.
Business Rate Retention and Council Tax Income
4.7
Details of the expected business rate retention income forecasts
were set out in the report to the January 2022 Policy &
Resources Committee. The council is forecast to receive
£71.432m from its locally retained share of business rates
and Section 31 compensation grants in 2022/23 which is an increase
of £4.444m compared to 2021/22. This increase includes 4.9%
inflation funded through government section 31 compensation grants,
anticipated growth in business space in the city and a review of
the likely number of successful appeals against business rates
rateable value.
4.8
The Council Tax taxbase report was also agreed by this committee in
January 2022. Assuming a Council Tax increase of 2.99% and taking
into account changes to the tax base, the total projected Council
Tax income in 2022/23 is £163.652m. This is an increase of
£7.738m compared with 2021/22.
4.9
The tax base calculation also incorporates the changes to the
Council Tax Reduction (CTR) Scheme being presented to full Council
on 3rd February 2022. The additional cost of proposed
changes in 2022/23 is approximately £0.331m and this is
reflected in the tax base calculation above.
Other Government Grants
4.10
The grant allocations for 2022/23 have been included within the
Budget Book at Appendix 1. Some grant allocations for next year
have not yet been announced, in particular, homelessness and rough
sleeper funding, Supporting (Troubled) Families funding, and Public
Health Grant. However, where these are critical to the setting of
the 2022/23 budget, as in the case of those named, an estimate has
been included.
Fees
and Charges
4.11
The council’s Corporate Fees & Charges Policy requires
that all fees and charges are reviewed at least annually and should
normally be increased by a minimum of either the corporate standard
inflation rate, statutory increases, or actual increases in the
costs of providing a service to reflect cost inflation.
4.12
Over recent years, fees & charges have become an increasingly
important element of the council’s financial sustainability
following grant reductions of over £100 million since
2010/11. Services therefore benchmark non-statutory fees and
charges with other providers and councils to ensure that charges
are comparable and competitive within the local context, and can
maximise income to protect essential services wherever feasible.
Opportunities for increasing or generating income from fees &
charges are explored and implemented where these are consistent
with council priorities set out in the Corporate Plan.
5
CORPORATE PLAN INVESTMENTS & PRIORITY SERVICE PRESSURE
FUNDING
5.1
The council’s Corporate Plan contains priorities that aim for
a fairer, sustainable city and contains six outcomes that are
supported by a range commitments and actions. Full details are in
the published plan and the six outcomes supported are:
·
A city to call home
·
A sustainable city
·
A healthy and caring city
·
A city working for all
·
A stronger city
·
A growing and learning city
5.2
The investments to support these outcomes are continually
developing as they are informed by local demographic and economic
trends, ongoing research and policy development, and consultation
and engagement with residents, communities, partners and other
stakeholders, for example, the work of the Climate Assembly. As the
investment requirements become more certain they are built into
both the annual budget setting process and, for longer term
objectives, into the Medium Term Financial Strategy, so far as they
can be estimated and afforded. In this respect, investments for
2023/24 have also been included where known and in particular where
they support capital investment beyond one year.
5.3
A major investment area for the Corporate Plan relates to housing
and homelessness including ongoing capital investment plans of over
£95 million to deliver new build or purchased, affordable
housing and temporary and emergency accommodation through the
self-financing Housing Revenue Account (HRA) and other innovative
schemes including the Housing Joint Venture. These plans are well
advanced and are set out in detail in the Corporate Plan and the
HRA Revenue and Capital Budget also reported to the February Policy
& Resources Committee and Budget Council.
5.4
Another important area requiring substantial investment concerns
services that can help to support a healthy and caring city.
Demands on Social Care services continue to increase, reflecting
not only the increased population of the City but the continuing
trend for people to live longer but increasingly with limiting
illnesses, disabilities, mental health illnesses or dementia that
require increasing social care support to help them stay in their
homes and communities. The long awaited Social Care Reforms
announced by the government have, in financial terms, potentially
raised more questions than answers and it is likely to be some time
before the full financial impact is understood. In the meantime,
local authorities are facing substantially increasing costs and
demands and the investment required to meet these locally in
2022/23 is estimated at £7 million across adults and
children’s social care.
5.5
In 2018, the council declared a Climate and Biodiversity Emergency,
and this is therefore a high priority for the council and supports
the Corporate Plan objective of becoming a Carbon Neutral City by
2030. Revenue and capital investments of approximately £10m
are set out below in 2022/23, including further investment of
£7.5m in the Carbon Neutral 2030 programme aimed at improving
the sustainability and biodiversity of the city as well as the
health and well-being of its residents through schemes that enable
active travel, improve air quality and improve energy efficiency
(including the council’s own buildings).
5.6
The budget also proposes investments to continue to tackle
inequality and disadvantage including responding to disadvantage
among young people, continued support for embedding anti-racism,
and significant resources for addressing hardship including further
provision for discretionary hardship funds and a Local
Discretionary Social Fund together with increased funding of
£0.331m to improve support provided through the Council Tax
Reduction Scheme (CTR) which will move to a simpler earnings
banding scheme. It is noted that these initiatives are also linked
to the city’s response to the anticipated rising cost of
living, for example, in relation to rising fuel bills and
inflation.
5.7
There are also proposed investments to support of those living and
working in the city including investment in our parks, sporting
facilities, swimming pools and public conveniences as well as
further investment in city clean-up and graffiti removal and
replacement of seafront heritage lighting.
5.8
In total, there are proposed ongoing investments of £13.414m
and one-off investments of £1.649m to support Corporate Plan
priorities and outcomes, which also enables £9.910m of
associated capital investments through prudential borrowing. The
revenue investments are enabled by proposed local taxation
increases (2.99%), including the 1% Adult Social Care precept,
increased government grant support, and the substantial package of
savings (£10.318m) focused on delivering services at a lower
cost through redesign and/or technological changes, as well as
generating more income from fees & charges for services.
Covid-19 Pandemic Financial Impact
5.10
The Covid-19 pandemic caused an enormous financial shock to the
whole economy in 2020/21, impacting people and businesses across
all sectors, including the public sector. This has continued in
2021/22 but the financial impact on the local authority has been
more variable as there have been periods with minimal restrictions
in force and the avoidance of full lock downs together with the
increasing success of the vaccination programme. However, there has
been a continued impact on finances including:
·
Significantly higher numbers of Council Tax Reduction claimants,
resulting in taxation losses, although numbers have been steadily
reducing since June 2021 but are still around 1,000 higher than
pre-pandemic levels;
·
Significant impacts on Adult Social Care in order to ensure
discharge from hospitals into care settings as soon as possible.
However, NHS funding has helped to partially mitigate this
financial impact in 2021/22.
·
Similarly, continued high levels of cost and activity relating to
homelessness and rough sleeping which has required the use of
£3.6m Covid funding in 2021/22 and is a key area of risk for
2022/23.
·
Continuing losses of fees, charges and rental incomes due to
suppressed economic and visitor activity in the city, however, this
impact is significantly less than in 2020/21. Subject to
restrictions remaining limited or being removed fully, most revenue
streams are expected to recover, however, commercial rentals are
expected to remain somewhat suppressed for much of 2022/23
reflecting the slow progress of economic recovery.
|
Table 3: Covid-19
One-off Cost Pressures 2022/23
|
£m
|
|
Temporary Accommodation spot purchase
costs
|
1.500
|
|
Ongoing use of emergency (hotel) accommodation
for rough sleepers
|
0.160
|
|
Reduction in income/attendance, council run
nurseries
|
0.150
|
|
Management of tented encampments
(co-ordinator)
|
0.023
|
|
Commercial rent reductions, voids and bad
debts (not covered by Sales, Fees & Charges compensation
grant)
|
0.400
|
|
Total One-Off
Covid-19 Costs 2022/23
|
2.233
|
Reserves Position and One-off Funding
Latest Financial Performance in 2021/22
5.12
Targeted Budget Management (TBM) is the council’s system of
budget monitoring and the TBM Month 9 (December) report included on
this committee agenda shows a projected underspend of £1.093m
on the General Fund, which includes a projected underspend of
£1.877m on the council’s share of NHS controlled
Section 75 partnership services due to a significant short term
downturn in care packages. The overall underspend is a substantial
improvement of £4.489m since Month 7 (October) and provides
critical one-off resources to reduce the call on reserves.
5.13
The improved position has resulted from a combination of effective
cost control measures including: vacancy management; improved
income forecasts due to a lower than expected impact from Omicron
restrictions, and; ongoing contributions to manage hospital
discharge from the NHS. There are also reduced numbers of care
packages but this is expected to be short term due to ongoing
impacts of the pandemic on private and independent sector providers
and staffing.
5.14
The underspend of £1.093m will add to general reserves
available at the start of 2022/23. As normal at budget setting
time, all other council reserves have been reviewed to ensure they
remain adequate and relevant for their intended purpose. Where
reserves are no longer required, they can be released to support
the budget position. Conversely, where they are insufficient, a
proposed allocation may be required. Following the review,
£1.279m is assessed to be available for release and will also
add to the general reserves available at the start of 2022/23.
These two additional one-off resources are reflected in the table
below.
One-off
Resource Liabilities and Proposed Allocations
5.15
The working balance will be recommended to continue at a minimum of
£9.0m to meet general risks applicable to a unitary
authority.
5.16
Table 4 identifies the potential resources and liabilities that
will need to be taken into account in setting the 2022/23 budget.
At this stage, this assumes that spending in 2021/22 will remain in
line with the TBM Month 9 (December) projection including an
additional £0.600m underspend through the application of
Contain Outbreak Management Funding against qualifying costs in
overspending service areas .
5.18
Internal borrowing from reserves is clearly not desirable and is a
last resort for any authority. However, the Covid-19 pandemic is an
exceptional event and it is for events and financial shocks such as
this that the authority maintains not only a working balance of
approximately 4% of its net budget, but a sustainable level of
usable, earmarked reserves to provide it with the necessary
financial resilience. Borrowing from earmarked reserves to meet
one-off Covid-19 impacts and repaying them over 10 years is
appropriate given that this is an exceptional event and the aim is
to minimise the burden on the revenue budget by spreading
repayments over a longer time frame. However, the planned use of
reserves as part of the Medium Term Financial Strategy (MTFS) to
manage annual (recurrent) budget gaps, as set out in Section 9,
requires repayment within the 4-year MTFS period as recurrent
deficits can quickly build up to unmanageable levels. The MTFS must
be able to demonstrate that balance can be achieved over the period
with an achievable level of savings.
5.19
The use of reserves proposed here will utilise approximately 9% of
current reserves and balances for financial smoothing. Financially,
this is manageable in the exceptional circumstances and, if
approved, the authority will plan for repayment of in its Medium
Term Financial Strategy beginning in 2022/23.
|
Table 4: One-off
Resources, Liabilities and Proposed Allocations
|
£m
|
£m
|
|
Released general reserves (detailed in appendix 4)
|
|
1.279
|
|
|
|
|
|
Revenue Budget position 2021/22 (TBM):
|
|
|
|
Forecast outturn underspend (as at TBM Month 9
/ December)
|
|
1.093
|
|
|
|
|
|
Collection Fund Position:
|
|
|
|
·
Estimated 2021/22 Council Tax collection fund net deficit including
3-year smoothing
|
-2.150
|
|
|
·
Business Rates collection fund deficit
relating to Section 31 grant including retail and nursery relief
awarded in 2021/22
|
-20.459
|
|
|
·
Contribution from Section 31 grant timing
reserve (retail and nursery reliefs)
|
20.459
|
|
|
·
Estimated 2021/22 Business Rates Retention collection fund net
surplus including 3-year smoothing
|
0.889
|
|
|
·
Planned contribution from collection fund adjustment reserve for
3-year deficit smoothing
|
0.538
|
|
|
|
|
|
|
Sub-total Collection
funds net position
|
|
-0.723
|
|
|
|
|
|
Projected One-off
Resources available at the start of 2022/23
|
|
1.649
|
|
|
|
|
|
Proposed One-off
Allocations in 2022/23:
|
|
|
|
Corporate plan one
off investments as set out in Table 2
|
-0.479
|
|
|
Diseased Trees
removal
|
-0.600
|
|
|
Planning –
Provision for Public enquiries
|
-0.050
|
|
|
Planning –
Guidance for Liveable Cities
|
-0.150
|
|
|
Allocation to
Council Tax Reduction Discretionary Fund
|
-0.190
|
|
|
Allocation to
Welfare Reform Support Fund (LDSF)
|
-0.180
|
|
|
|
|
|
|
Short-Term Covid-19
pressures shown in Table 3
|
-2.233
|
|
|
|
|
|
|
MTFS contribution
from reserves (2022/23)
|
-1.983
|
|
|
Net shortfall in one off
resources
|
|
-4.216
|
|
|
|
|
|
Managed by:
|
|
|
|
Internal borrowing
for short-term Covid-19 costs spread over 10 years
|
2.233
|
|
|
Internal borrowing
to balance resources over the 4-year MTFS period
|
1.983
|
|
|
Balance
|
|
0.000
|
5.21
The proposed one-off allocations for 2022/23 are explained in more
detail below:
·
Covid-19 financial impacts (£2.233m): these are set out in
detail in the table at paragraph 5.11 above;
·
One-off investment in Corporate Plan priorities (£0.479m):
these investments are set out in detail in the table at paragraph
5.9 of the report;
·
Ongoing management of Ash & Elm dieback (health & safety
works) (£0.600m): these allocations are in relation to the
recommendations emanating from the Tree Diseases report, which were
approved by the Environment, Transport & Sustainability
Committee at its meeting on 24 November 2020 (Item 43). The
allocations help to manage the spread of the diseases as well as
safely removing dying and unsafe trees.
·
Public Inquiries (£0.050m) - two public inquiries are
anticipated next year (re: Toad’s Hole Valley) and this
pressure funding is required to fund barrister services, specialist
witnesses and associated costs.
·
Planning Guidance for a Liveable City (£0.150m) – this
investment follows the report to Environment, Transport &
Sustainability Committee to provide a project manager and
consultants to prepare a Supplementary Planning Document that will
provide a framework and guidance for delivering a future city
centre with liveable, 20 minute neighbourhoods in the context of a
post-covid environment, changes to the retail market, new transport
measures and regeneration sites.
·
Council Tax Reduction Discretionary Fund (£0.190m): This
allocation is for approval by full Council on 3 February 2022 in
considering its annual review of the Council Tax Reduction Scheme.
The allocation, if approved, will again top-up the existing
recurrent budget of £0.010m to £0.200m. The
discretionary fund provides extra one-off support, via application,
for people in hardship who may need help to meet exceptional
housing costs, rent or Council Tax shortfalls, home removal costs,
or rent in advance.
·
Allocation to maintain the Welfare Reform Support Fund
(£0.180m). In recent years, the council has made an annual
allocation to maintain support for people in hardship, in
particular, those impacted by welfare reforms including the benefit
cap. This fund complements welfare benefits and other discretionary
funds including Discretionary Housing Payments (DHP) and the
Council Tax Reduction Scheme discretionary fund. The fund is used
primarily to ensure continuation of the Local Discretionary Social
Fund (LDSF) which, for example, provides emergency assistance and
vouchers for food and white goods.
6
SAVINGS PROPOSALS 2022/23
6.1
Taxation and Adult Social Care precept increases, together with
additional resources provided by the Spending Review 2021, are not
sufficient to balance the budget due to the need to provide cover
for inflationary pressures, and the need to provide investment to
support Corporate Plan priorities including funding to manage
above-inflation cost increases and increases in demands across
critical statutory services such as social care and homelessness.
To balance the budget therefore requires a substantial savings
programme as in previous years.
6.2
The overall savings package is £10.318m and incorporates the
draft proposals presented to the Policy & Resources Committee
on 2 December 2021; these savings are included in appendix 1.
6.3
Over the previous 5 years, the council has focused on identifying
and delivering many savings through its Modernisation Programme
supported by significant capital investment. This was enabled by
generating capital receipts from the sale of surplus assets to
create an invest-to-save budget using the government’s
capital receipt flexibilities, which allows capital receipts to be
applied to revenue saving projects and programmes and this
flexibility continues through to 2024/25.
6.4
The council approved continuation of the Modernisation Fund in
February 2020 over a further 4-year period to enable delivery of
the substantial savings and efficiencies required over the period
to meet the predicted budget gaps set out in the Medium Term
Financial Strategy. The council also utilises the fund to
continuously improve value for money as a matter of course because
this ensures the best use of its resources and contributes to
improved customer and digital services.
6.5
There are other methods of funding invest-to-save programmes
including unsupported borrowing where there is a good business case
for doing so. Availability of capital receipts for modernisation is
also anticipated to be at a much lower level over the next few
years due to high demand for other priority capital investments and
fewer assets available or suitable for disposal. More information
on the Modernisation Fund and its proposed application are set out
in the section on Modernisation Programme Funding below.
7.1
The Prudential Framework requires local authorities to produce a
Capital Strategy which is to be presented and approved by members
each year. The purpose of the Capital Strategy is to provide a
single place for transparency and accountability of local authority
non-financial investments and its capital investment programme,
including any commercial investments in commercial property or
loans to third parties.
7.2
The aim of the Capital Strategy is to ensure members are fully
conversant with the risks of non-financial investments and are
aware of how the risks are proportional to the council’s core
service activity. The document will include:
·
The proposed Capital Investment Programme
·
The Governance & Risk Framework
·
Potential and pending non-financial investments
·
An overview of the council’s Risk Exposure
7.3
The new Prudential Code for Capital Finance issued in 2021
prohibits PWLB lending to local authorities that plan to buy
commercial assets primarily for yield. The PWLB will still be
available to all local authorities for refinancing. In order to
borrow from the PWLB, local authorities are now required to submit
a summary of their planned capital spending and PWLB borrowing for
the following three years. The Capital Strategy and Treasury
Management Strategy are compliant with the new code and do not
include capital investment activity for commercial yield only.
7.4
The Modernisation Programme investments detailed later in the
report will be incorporated into the full Capital Strategy
alongside new and perennial capital investments that will support
sustainability and carbon reduction schemes, improved transport
infrastructure, provision for school places, major regeneration
projects, and major housing build, acquisition and improvement
programmes. Key decisions are required in respect of strategic
funds including IT & Digital investment, Strategic Investment
Funds (supporting regeneration) and Asset Management Funds. The
Capital Strategy forms part of the General Fund budget report to
ensure that the link between capital and revenue decisions is
maintained and to ensure that budget resourcing decisions are taken
in the context of the full range of proposed revenue and capital
budgets, resources, investments and savings.
Capital
Investment Programme
7.6
A significant element of the council’s capital investment is
within rolling programmes. The key programmes, including those
re-focused to support Corporate Plan priorities, are as
follows:
·
Investment in Housing Stock and acquisition through the Housing
Revenue Account;
·
The Education Capital programme, which provides investment from
central government for New Pupil Places, Education Capital
Maintenance and Devolved Formula Capital for schools;
·
Disabled Facilities Grants to help maintain people in their
homes;
·
The Carbon Neutral Investment Programme
·
The Local Transport Plan (LTP) to support sustainable transport and
transport infrastructure;
·
The Information Technology & Digital Investment Fund and
Modernisation Fund;
·
The Asset Management Fund (AMF) to ensure the strategic elements of
the Asset Management Plan can be supported;
·
Corporate Planned Maintenance (PMB) to ensure the operational
elements of the Asset Management Plan are supported and that
backlog maintenance does not build up unduly;
·
The Strategic Investment Fund (SIF) to support the advancement of
major regeneration schemes and initiatives;
·
Vehicle Fleet and plant replacement annual programme.
7.7
The current strategy identifies longer term capital investment
plans as well as a funding strategy and the potential outcomes for
each investment plan. This strategy includes major investment
requirements such as investment in Valley Gardens Phase III,
investment in the seafront infrastructure and heritage lighting,
partnership investment through major projects such as the Housing
Joint Venture, and investment in the City’s environment
including parks, sports facilities and trees. Longer term
investment for coast protection is also incorporated into the 5
year strategy which includes potential government
match-funding.
7.8
Capital receipts from the sale of surplus land and buildings
support the capital programme and the projections are regularly
reviewed. The council will continue with its strategy of
re-balancing the property portfolio by disposing of low or
non-performing commercial properties and reinvesting in more viable
property investments. This ensures costs can be minimised and
rental growth optimised to ensure best value, including social
value, is achieved. However, this must now be achieved without
reliance on PWLB borrowing which is prohibited where assets are
acquired purely for commercial yield to support the revenue
budget.
7.9
The detailed capital programme is set out in Appendix 1 (The Budget
Book) and shows the approved and proposed capital investments for
each directorate. As well as rolling programmes noted above the
programme will cover existing and new scheme proposals
including:
·
New investment for retrofitting and renewable investment in council
housing as well as expansion of the additional council homes
investment through the HRA;
·
The Carbon Neutral Investment Programme and the Climate Assembly
Action Fund, and further investment in the Warmer Homes capital
investment programme;
·
Similarly, investments in active travel including covered cycle
racks, support for green spaces and tree planting, and sports
facilities and pitches are proposed to improve air quality and
promote public health improvements.
7.10
The overall Capital Investment Programme for 2022/23 is
£222.788m. The proposed investments are summarised as
follows:
|
Table 5: Capital Investment Programme 2022/23
|
£m
|
|
New Housing including New Homes for Neighbourhoods, the Home
Purchase scheme, the Hidden Homes programme, the Housing Joint
Venture, Temporary Accommodation purchases and conversions, and
Housing First accommodation
|
95.226
|
|
Sustainability & Carbon Reduction including the Carbon
Neutral 2030 Fund, Warmer Homes, Street Lighting, BikeShare
and Solar PVs
|
17.061
|
|
Parks & Open Spaces including playground refurbishments,
Kingsway to the Sea LUF, Parks infrastructure including tree
replacement and Stanmer Park redevelopment
|
7.879
|
|
Transport & Highways reflecting the Local Transport Plan
(LTP) allocation for 2022/23, Pothole Action funding and
development of the Strategic Transport Model.
|
6.750
|
|
New Pupil Places (Basic Need) to provide educational places
for pupils based on demographic changes in the city
|
15.296
|
|
Regeneration including Madeira Terraces, Black Rock, Valley
Gardens, Royal Pavilion Estate and Saltdean Lido
|
35.872
|
|
Tackling Inequality including Disabled Facilities Grant
(DFG) projects and the Knoll House redevelopment
|
13.235
|
|
Building Maintenance including the Workstyles programme,
Planned Maintenance, Education Buildings Maintenance, the Asset
Management Fund and various security, fire and safety works
|
23.389
|
|
IT&D / Modernisation including the Modernisation Fund as
well as re-procurement of the Wide Area Network, investment in
digital services for customers, and ongoing investment in the
IT&D infrastructure
|
5.580
|
|
Vehicles & Equipment for the council’s vehicle
fleet replacement programme
|
2.500
|
|
TOTAL CAPITAL INVESTMENT PROGRAMME 2022/23
|
222.788
|
7.11
The Capital Strategy at Appendix 2 sets out how the programme will
be funded from a combination of government grants, capital
receipts, HRA direct revenue funding, external contributions and
prudential borrowing.
Modernisation Programme Funding (‘Modernisation
Fund’)
7.12
As noted earlier, over the previous 4 years, the council has
focused on identifying and supporting the delivery of savings
through its Modernisation Programme supported by significant
capital investment. This is enabled by generating capital receipts
from the sale of surplus assets to create an invest-to-save budget
using the government’s capital receipt flexibilities, which
allowed capital receipts to be applied to revenue saving projects
and programmes.
7.14
The Modernisation Fund is kept under review as budget plans develop
and spend-to-save opportunities and investment requirements emerge
in more detail over the planning period. The indicative profile of
the Modernisation Fund from 2021/22 onward is shown in the table
below.
|
Table 6: Indicative
Modernisation Fund
|
|
Programme Area
|
2020/21
|
2021/22
|
2022/23
|
2023/24
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Invest to Save (4-Year Plans)
|
0.650
|
0.550
|
0.450
|
0.350
|
2.000
|
|
Customer Digital
|
1.750
|
1.750
|
1.550
|
1.050
|
6.100
|
|
Modernisation enablers
|
1.510
|
0.920
|
0.930
|
0.940
|
4.300
|
|
Managing staffing changes
|
0.700
|
0.500
|
0.200
|
0.600
|
2.000
|
|
IT Modernisation Investment
|
0.800
|
0.300
|
0.000
|
0.000
|
1.100
|
|
Total
|
5.410
|
4.020
|
3.330
|
2.740
|
15.500
|
7.15
The Modernisation Fund is expected to be deployed as follows:
·
Invest-to-Save Budget Proposals: Based on the experience of
the previous 4 years and 2020/21 to date, a further £0.800m
is estimated to be required to support implementation of specific
savings and efficiency programmes including service redesigns,
recommissioning and process improvements. Investment requirements
are currently being reviewed and finalised and will be refreshed
each year. This resource will be held in a reserve and only
released through review of business cases by the officer Corporate
Modernisation Delivery Board (CMDB). Committee approvals are also
sought where required by Financial Regulations and the
council’s constitution.
·
Customer Digital: £2.600m is anticipated to be
required over the next 2 years to support ongoing investment in
digital infrastructure and applications and to support continued
development of the council’s digital services and integration
of data across systems and services to improve the accessibility,
efficiency and ease-of-use of on-line services. The importance of
these services and the digital infrastructure has been highlighted
by the pandemic which required numerous on-line application portals
to be developed very quickly to enable people and businesses to
apply for grants and financial assistance remotely.
·
Modernisation Enablers: £1.870m is estimated to be
required to support ongoing change and modernisation programmes
over the next 2 years. This includes everything from an effective
project management support team, business improvement analysts,
workstyles property team support, investment in ‘Our People
Promise’ for staff development and skills programmes,
together with additional specialist support where required.
·
Managing staffing changes: efficiency programmes and a
continual drive for improved value for money will often result in
changes in the level or mix of staffing and skills required across
the council. Changing staffing levels or skills will often need
financial consideration in order to effect voluntary severance for
roles or posts no longer required or needing to be replaced or
re-trained with different roles or skills. Estimated resources of
£0.800m are required to meet severance costs to manage change
over the next 2 years.
·
IT Modernisation Investment: Investment in IT equipment,
software, systems and services (e.g. voice and data) is important
to enable the organisation to remain secure, resilient and
efficient. Historically, the organisation has suffered from long
periods of under-investment which has had to be addressed over the
last 4 years through approval of large IT Capital Schemes including
Windows 10 roll-out, replacement of the Housing and Social Care
systems, General Data Protection Regulation (GDPR) security
upgrades, etc. This backlog of investment has now been
substantially addressed and provision has also been made in the
core revenue budget to provide financing for future investment to
ensure that infrastructure is properly maintained and upgraded.
8
STAFFING IMPLICATIONS (GENERAL FUND SERVICES)
8.1
An estimate of the posts to be deleted in relation to the draft
budget proposals has been made and indicates that approximately 19
full time equivalent (fte) posts are expected to be deleted from
the council’s staffing structure. Many of these posts are
already being held vacant in lieu of savings proposals but some may
initially result in staff being potentially placed at risk of
redundancy. This is difficult to estimate with certainty but
approximately 8 fte staff have been identified as potentially at
risk at this early stage of the process. This information has been
shared with the council’s recognised trades unions and the
staff affected in advance of the release of the Policy &
Resources report.
8.2
As in previous years, actual numbers will be dependent on the
detailed options proposed and on the results of formal consultation
with staff and unions. As previously experienced, it is likely that
some of these will be resolved through turnover, or through
redeployment to other vacancies across the council, thereby further
minimising the risk of redundancies.
8.3
As always, if the forthcoming proposals do potentially place any
staff at risk of redundancy the council will support them by:
·
Providing appropriate support to staff throughout the change
process to enable them to maximise any opportunities available;
·
Controlling recruitment and ensuring there is a clear business case
for any recruitment activity;
·
Managing redeployment at a corporate level and maximising the
opportunities for movement across the organisation;
·
Managing the use of temporary or agency resources via regular
reports to Directorate Management Teams (DMT’s);
·
Offering voluntary severance where appropriate to staff affected by
budget proposals on a case by case basis.
These measures will remain in
place as consultation with trade unions, staff and other
stakeholders is undertaken. Where necessary, a targeted voluntary
approach to releasing staff in areas undergoing change will be
managed to support service redesigns whilst ensuring that the
organisation retains the skills that will be needed for the
future.
9.1
The Budget Book at Appendix 1 aims to support understanding and
transparency of the council’s budget by providing:
·
Information at sub-divisional levels to aid understanding of the
wide range of services and teams in each service directorate;
·
Analysis of spending and income by category (subjective
analysis);
·
Staffing information for each service;
·
Analysis of budget movements between years;
·
Analysis of savings, investments and service pressure funding by
category;
·
Information on capital investments.
9.2
The Medium Term Financial Strategy (MTFS) planning assumptions,
resource and expenditure estimates are also included within the
Budget Book at Appendix 1. The MTFS has been revised to reflect the
latest cost, income and demand pressures and the proposed 2.99%
council tax increase, including a 1% Adult Social Care
precept.
9.3
The MTFS 2022/23 to 2025/26 is presented in summary form in the
Budget Book but the intention is to develop the MTFS as a
stand-alone strategy that will provide more detail on the
programmes and strategies that will underpin the council’s
finances over the 4-year period, enabling it to demonstrate its
plan and approach to achieving financial sustainability. The
summary MTFS is presented in the table below:-
|
Table 7 Medium Term
Financial Strategy
|
2022/23
|
2023/24
|
2024/25
|
2025/26
|
|
£m
|
£m
|
£m
|
£m
|
|
Sub-total Net Budget
Requirement B/Fwd
|
219.722
|
199.853
|
239.768
|
251.418
|
|
Reset budget MTFS
smoothing
|
|
1.983
|
1.403
|
-0.876
|
|
Standard inflation -
Pay and prices
|
6.569
|
7.276
|
7.910
|
8.059
|
|
Costs of new
National insurance/Care levy
|
0.963
|
|
|
|
|
Changes to pay
including adjusting for the 2021/22 pay award, pay negotiations and
market supplements
|
5.047
|
|
|
|
|
Standard inflation -
Income
|
-1.286
|
-2.664
|
-2.851
|
-2.935
|
|
Changes to S31
grants and reserves relating to Business Rates Retention
reliefs
|
-31.141
|
30.828
|
1.142
|
-0.170
|
|
Changes to financing
costs
|
-2.468
|
0.891
|
1.851
|
0.849
|
|
Removal of one-off
Covid-19 grant allocation
|
8.023
|
|
|
|
|
Expected
unringfenced grant reductions
|
|
0.883
|
0.100
|
0.090
|
|
New funding for
social care from government and NHS (including the Services
Grant)
|
-7.922
|
-1.000
|
-1.000
|
-1.000
|
|
Investment in
modernising IT & Digital services
|
0.500
|
0.500
|
0.500
|
|
|
Other changes to
commitments
|
0.912
|
0.320
|
0.251
|
0.118
|
|
Changes to 3-year
collection fund smoothing
|
|
0.297
|
1.468
|
0.000
|
|
Demographic and
other cost pressures
|
12.125
|
7.750
|
6.000
|
5.250
|
|
Corporate Plan
priority investments
|
0.958
|
1.031
|
|
|
|
Contribution from
(-) / to (+) Reserves for MTFS smoothing
|
-1.983
|
-1.403
|
0.876
|
2.510
|
|
Repayment of
Covid-19 one-off costs (10 years)
|
0.152
|
0.233
|
|
|
|
Savings Package
2022/23
|
-10.318
|
|
|
|
|
Savings programme -
operational buildings
|
|
-0.250
|
-0.500
|
-0.500
|
|
Savings programme -
service redesigns and digital efficiencies
|
|
-0.500
|
-0.750
|
-0.750
|
|
Budget Gap (further
Savings Requirement)
|
|
-6.250
|
-4.750
|
-3.718
|
|
Budget Requirement
C/Fwd
|
199.853
|
239.768
|
251.418
|
258.345
|
|
Funded by:
|
|
|
|
|
|
Revenue Support Grant
|
6.877
|
7.014
|
7.154
|
7.297
|
|
Locally retained Business Rates
|
51.038
|
65.667
|
68.064
|
70.002
|
|
Business Rates - Collection Fund Deficit
|
-19.564
|
-1.207
|
|
|
|
Council Tax - Collection Fund Deficit
|
-2.150
|
-1.520
|
|
|
|
Council Tax - 1% Adult Social Care Precept
|
1.588
|
1.650
|
1.695
|
|
|
Council Tax - including a 1.99% increase
|
162.064
|
168.164
|
174.505
|
181.046
|
|
Total Funding
|
199.853
|
239.768
|
251.418
|
258.345
|
9.4
The Medium Term Financial Strategy above includes estimates for pay
awards, price inflation, and pension changes based on Office for
Budget Responsibility (OBR) forecasts for deflators alongside
actuarial pension forecasts in the context of the
government’s assumption adopted in the 2021 Spending Review.
However, an increased assumption for income growth of 3% per annum
is assumed based on historic income trends. Detailed assumptions
are set out in the Budget Book at Appendix 1.
9.5
The MTFS also includes assumptions regarding future resources
including predicted taxbase growth and assumed taxation increases.
There are also modest planning assumptions of increased government
and NHS funding of £1m per annum over and above the resources
announced in the Spending Review 2021.
9.6
Many other elements of the MTFS reflect previous decisions made by
the council including the outcome of local pay negotiations, the
award of market supplements, and other approved commitments. The
MTFS also reflects the demographic and other cost pressures set out
in Table 2 above together with the Corporate Plan investments also
set out in Table 2. For 2022/23 and beyond, the demographic and
other cost pressures are estimates based on midpoint
scenarios.
9.7
However, there are other notable items in the MTFS as follows:
·
Changes to capital financing: the current high level of cash
balances (see Appendix 3 Treasury Strategy for reasons), low
borrowing rates with increasing investment rates, and substantial
delays to capital programme spending will significantly reduce
capital financing costs over the next 2 years. However, this will
eventually smooth out over the MTFS period as capital programmes
delayed by the pandemic catch up, as indicated by the reversal of
the 2022/23 reduction across later years.
·
Expected unringfenced grant reductions: this relates to New Homes
Bonus funding dropping out over the MTFS period.
·
Savings programme - operational buildings: this relates to
estimated potential savings through further reduction of the
council’s civic office estate in the light of increased
remote and mobile working and the ongoing aim of reducing the
council’s carbon footprint. The programme will need more
detailed investigation and the indicative profile of savings may
change over the course of the MTFS.
·
Savings programme - service redesigns and digital efficiencies:
similarly, the council has invested substantially in its
technology, hardware and systems in support of more efficient ways
of working including enabling remote working, increasing the use of
on-line applications and services, and increasing self-service
technologies.
·
Budget Gap (further Savings Requirement): the Budget Gaps indicate
the estimated additional savings required in future years of the
MTFS period to balance the budget and, importantly, to repay
reserves used to balance (smooth) the budget in earlier years. The
predicted budget gaps are significant but are substantially lower
than any budget gap in the previous 10 years assuming 2% Council
Tax increases and additional 1% Adult Social Care precepts are
agreed for future years. Further savings will be developed as part
of a more detailed MTFS during 2022/23 and will consider potential
income generation opportunities, examine the comparative cost of
services (benchmarking) and consider options for alternative
delivery of higher cost services, and explore further partnership
working opportunities, particularly with the NHS.
10
TREASURY MANAGEMENT AND ANNUAL INVESTMENT STRATEGY
10.1
The Treasury Management Strategy Statement (TMSS) and Annual
Investment Strategy (AIS) are now incorporated in the budget report
to ensure that inter-related financial decisions and strategies can
be considered together. The council is required to operate a
balanced budget, which broadly means that cash raised during the
year will meet cash expenditure. Part of the Treasury Management
operation is to ensure that this cash flow is adequately planned,
with cash being available when it is needed (liquidity) and that
surplus monies are only invested into counterparties and
instruments commensurate with the council’s risk
appetite.
10.2
Another important function of the Treasury Management service is
the funding of the council’s capital plans. The capital plans
provide a guide to the council’s borrowing need, which is
essentially the longer term cash flow plan, to ensure the council
can meet its approved capital spending obligations.
10.3
The recommended TMSS at Appendix 3 follows the drafting format
recommended in the Treasury Management Code of Practice. The
Treasury Management Practices and schedules identify the practices
and procedures that will be followed to achieve the aims of the
TMSS and that underpin the council’s Treasury Management
function. These practices remain unchanged from previous years and
are considered ‘best practice’ under the Code.
10.4
The Annual Investment Strategy (AIS) for 2022/23 is also
incorporated within Appendix 3 to this report. The AIS gives
priority to security and liquidity.
10.5
Security is achieved by:
·
selecting only those institutions that meet stringent credit rating
criteria or, in the case of non-rated UK building societies, have a
substantial asset base; and
·
limiting exposure risk by limiting the amount invested with any one
institution.
10.6
Liquidity is achieved by limiting the maximum period for investment
and matching investment periods to cash flow requirements.
10.7
The main change to the Strategy for 2022/23 is the recommended
increases in counterparty limits for investments to reflect the
higher cash balances compared to previous years.
11
COUNCIL TAX SETTING
11.1
The Administration is proposing a council tax increase of 2.99%
which includes a 1% Adult Social Care precept allowed by government
within the local government finance settlement. A council tax
increase of 2.99% results in a Band D council tax of
£1,794.04 for the council’s element, an increase of
£52.16 from 2022/23; of this increase £17.37 relates to
the Adult Social Care precept.
11.2
In order to propose an overall Council Tax for the city, the
Council Tax set by the precepting authorities needs to be known and
this information will be included in the Supplementary Budget
Report to Budget Council.
Supplementary Budget Report to Budget Council
·
The final Local Government Finance Settlement 2022/23.
·
Any other grants that are announced before Budget Council.
·
The agreed Council Tax set by East Sussex Fire Authority and Sussex
Police and Crime Commissioner.
·
The statutory Council Tax calculations required under the 1992
Local Government Finance Act.
·
The full budget and Council Tax resolution for Budget Council.
12.1
Section 25 of the Local Government Act
2003 requires the Chief Financial Officer (Section 151 Officer) of
a local authority to report on the robustness of the estimates
included in the budget and the adequacy of the reserves for which
the budget provides. This report has to be considered by the Policy
& Resources Committee and the full Council as part of the
budget approval and council tax setting process.
Robustness of Estimates
12.3
For 2022/23, funding of £12.498m has been provided to support
identified cost and demand pressures in priority, demand-led
services across Adults Social Care, Children’s Safeguarding
& Care services, and Homelessness and Rough Sleeper services
and accommodation. Provision for this level of investment
substantially mitigates the predicted demand-led service pressures
at the time of setting the budget. This considerably lessens
potential forecast risks in 2022/23 but cannot completely remove
all risks and therefore services will need to continue to
contribute to the mitigation of residual risk through management of
non-statutory budget areas as normal. This minimises the level of
any risk provisions required over and above the council’s
current working balance. In addition:
·
The authority continues to demonstrate its long track record of
managing within or close to budget despite the very challenging
financial climate. At month 9 this year, the forecast overspends
earlier in the year have been managed through a combination of
government and NHS funding support (Contain Outbreak Management
Funding in particular) and financial management action detailed in
the report. The delay to delivery of a number of capital programmes
due primarily to the pandemic has also contributed through lower
capital financing (MRP) charges. The month 9 position is now a
projected underspend of £1.093m which provides much needed
one-off resources to support the high demand for one-off resources
including predicted one-off Covid-19 costs, the net Collection Fund
deficit, and financial smoothing of the 2022/23 revenue budget;
·
The authority’s track record demonstrates that it can
successfully manage risk across demand-led statutory services of
between 2% and 3% of the total net budget through effective
management of non-statutory budgets and services;
·
The authority continues to enable and achieve substantial saving
packages through its Modernisation Programmes which have enabled
re-investment to support priority areas, meet cost pressures and
growth in demand for statutory services, and address future budget
gaps;
·
The authority continues to work closely with the Clinical
Commissioning Group to jointly manage and mitigate risks as far as
practicable. This has been evidenced in the current year where the
NHS has continued to provide funding for managing Covid-related
hospital discharges. Proposals for joint funding arrangements under
the Integrated Care System (ICS) are currently being considered for
the medium term;
·
The authority has maintained adequate reserves and provisions
against other known and identified risks and has made no unplanned
drawdown of its reserves or balances. Initially, internal borrowing
from reserves (financial smoothing) of £3.971m was undertaken
to support the 2021/22 budget, repayable over a period of 10 years,
to manage the financial impact of Covid-19. However, this was later
reduced to £1.521m through allocation of £2.450m
resources from the 2020/21 outturn underspend to repay reserves
early. Limited financial smoothing is proposed to manage one-off
Covid-19 costs and to balance the budget for 2022/23 but the latter
will be managed (repaid) within the timeframe of the 4-year Medium
Term Financial Strategy;
·
The authority has set aside appropriate one-off, discretionary
resources and funding to mitigate the impacts of Welfare Reforms
including a Council Tax Reduction Scheme discretionary fund and
Welfare Reform Support fund.
12.4
Based on financial performance over the previous 5 years and taking
into account identified risks as set out in Appendix 5, the council
is recommended to maintain its minimum working balance of
£9.000m, which is approximately 5% of the net General Fund
and represents around 3 weeks’ council tax income, as well as
maintaining other earmarked reserves to manage any short term
pressures. The working balance and other usable reserves must
mitigate general legal and financial risks including appeals and
challenges, as well as potential billing failures, civil
contingencies and other emergencies.
Adequacy of Reserves
12.6
As indicated above, current analysis of authority-level risks and
past experience indicates that a working balance at a level of
£9.000m remains prudent and appropriate having taken into
account all known and foreseeable risks in relation to the 2022/23
budget.
12.7
All specific reserves have been reviewed in detail to ensure they
are set at an appropriate level as set out in Appendix 4. The
council’s earmarked reserves fulfil specific contractual,
legal or financial risk requirements, for example the Insurance
Fund Reserve, and are not therefore available to support the annual
revenue budget. However, they can be borrowed from internally
provided that provision for their replenishment is built into the
budget and medium term financial strategy.
Assurance
Statement of the Council’s Section 151 Officer
12.8
In relation to the 2022/23 General Fund revenue budget, the Section
151 Chief Finance Officer has examined the budget proposals and
considers that, whilst the spending and service delivery proposals
continue to be challenging, impacted further by continuing
uncertainty surrounding the pandemic, they are nevertheless
achievable with effective governance and accountability at all
levels.
12.9
In terms of the adequacy of reserves, the Section 151 Chief Finance
Officer considers a working balance of £9.000m for 2022/23 to
be adequate, taking into account other available reserves and the
council’s track record in budget management.
13
ANALYSIS & CONSIDERATION OF ANY ALTERNATIVE OPTIONS
13.1
The budget process allows all parties to engage in the examination
of budget proposals and to put forward viable alternative budget
and council tax proposals to Budget Council on 24 February 2022.
Budget Council has the opportunity to debate the proposals put
forward by this committee at the same time as any viable
alternative proposals. Budget Council will normally be recommended
to adopt special procedures at the start of the Budget Council
meeting, which set out the procedure and protocol applicable to any
alternative budget proposals put forward.
13.2
Any alternative proposal will need prior assessment by the
council’s Section 151 Chief Finance Officer and will not
normally be allowed where an estimate is not considered to be
robust for one of the following reasons:
i)
The risk of not achieving the saving is assessed to be high;
ii)
There is insufficient evidence or information to assess the
potential saving;
iii)
The alternative proposal is adding to or bringing forward an
existing saving without further information as to how this can be
achieved;
iv)
The alternative proposal requires one-off investment or loan
financing that cannot be supported; or
v) The
alternative proposal is beyond the powers and duties of the local
authority.
School
Balances
14.1
The level of school balances as at 31/03/21 was £6.912m, an
increase of £2.565m from £4.347m as at 31 March 2020 as
shown below.
|
Phase
|
2019/20
£’000
|
Percentage of budget
2019/20
|
2020/21
£’000
|
Percentage
of budget
2020/21
|
|
Nursery
|
40
|
5.06%
|
34
|
4.26%
|
|
Primary
|
3,395
|
4.49%
|
3,527
|
4.58%
|
|
Secondary
|
784
|
1.51%
|
3,277
|
6.28%
|
|
Special & AP
|
128
|
1.19%
|
74
|
1.24%
|
|
Total
|
4,347
|
3.12%
|
6,912
|
5.08%
|
Note –
Special and Alternative Provision (AP) includes the Connected Hub
and Pupil Referral Unit (PRU).
14.2
In total there are 10 schools (out of 63) with deficit balances,
the same number as in 2019/20. The split of deficit balances is 9
Primary and 1 Special. School budget plans for 2021/22 have
incorporated these deficits.
Schools Funding 2022/23
14.3
The Dedicated Schools Grant (DSG) is divided into four notional
blocks – the schools block, the high needs block (HNB), the
central school services block (which allocates funding to local
authorities for their ongoing responsibilities towards both
maintained schools and academies), and the early years block. Each
of the four blocks of the DSG are determined by separate national
funding formulae (NFF).
14.4
In December 2021, the Department for Education (DfE) announced the
updated DSG funding settlement for the 2022/23 financial year. This
settlement results in an increase in allocation to Brighton &
Hove of approximately £5.6m compared to 2021/22 as shown
below.
|
Financial Year
|
Schools Block
£’000
|
CSSB
£’000
|
High Needs Block
£’000
|
Early Years Block
£’000
|
Total DSG
£’000
|
|
Provisional 2022/23
|
153,922
|
2,270
|
32,983
|
15,033
|
204,208
|
|
2021/22
|
150,859
|
2,415
|
30,632
|
14,691
|
198,597
|
|
Increase
|
3,063
|
(145)
|
2,351
|
342
|
5,611
|
14.5
In addition to the core increase in DSG funding the government has
also announced additional supplementary grants for schools and high
needs in 2022/23. For mainstream schools and academies this is
estimated at £4.425m, whereas the high needs block is
anticipated to receive an additional £1.287m through this
grant.
14.6
The significant additional investment in the high needs block is in
recognition of the increasing costs of supporting children and
young people with SEND and will help the local authority manage
pressures in this area.
14.7
For mainstream schools in 2022/23, the provisional overall formula
budget allocations to schools have increased by £2.844m
compared to 2021/22 and this increase links to the rise in Schools
Block funding in the DSG. With the estimated supplementary grant
funding included, the total increase in funding is c. £7.269m
compared to 2021/22.
14.8
During autumn 2021 it was agreed that limited changes would be made
to the operation of the local school funding formula for 2022/23.
These proposals were subject to consideration by the Schools Forum
in October 2021. The key changes to the 2022/23 local formula are
summarised below and follow the principle of moving towards the
proposed National Funding Formula on a gradual basis as
follows:
·
secondary school basic entitlement age weighted pupil unit (AWPU)
rates will be adjusted to adopt differential unit rates for KS3 and
KS4 in line with the approach in the NFF;
·
the unit rate of funding for the low prior attainment factor (with
an offsetting reduction in the deprivation factor) will be
increased. This brings both factors closer to the NFF, but BHCC
still applies a higher weighting to the deprivation factor compared
to the NFF;
·
the mandatory factor has been adopted to ensure that minimum
funding per pupil levels (excluding premises factors) are set at
£4,265 for primary schools and £5,525 for secondary
schools;
·
uplifts to formula factors will be applied to reflect increases in
national funding allocations; and
·
a minimum funding guarantee of +1.00% per pupil will be
applied.
14.9
As in previous years, academies and free schools are included in
the DSG allocation to ensure all schools, academies and free
schools are funded on the same basis using the LA’s funding
formula. DfE then recoups the funding attributable to academies and
free schools and pays this directly to the establishments.
1.10
Funding proposals for 2022/23 were presented to, and agreed with,
the Schools Forum on 17 January 2022 and are subject to final sign
off by the government.
15
COMMUNITY ENGAGEMENT & CONSULTATION
15.1
General information and advice about the council’s budget
will continue to be provided through the council’s web site
which provides information and graphics on how money is spent on
services, where the money comes from and a summary of the financial
challenges ahead. These materials will continue to be promoted to
residents across the budget setting period.
15.2
The council will also publicise on-line its key proposals from the
budget along with information about council services, and questions
and comments invited from residents over the period leading to the
February Policy & Resources Committee and Budget Council
meetings.
15.3
Frequently asked questions and common themes have previously
emerged through the development of the annual budget and have been
responded to in our ‘Behind the Budget’ web page:
Behind the budget
(brighton-hove.gov.uk)
15.4
The frequently asked questions and themes include:
·
Doesn’t Council Tax [alone] pay for all council services?
·
How about using [i.e. raising or changing] parking charges
further?
·
[Why not] Cut pay instead of services?
·
[Why not] Make students pay Council Tax?
·
[Why not] Just cut councillors and/or their allowances?
·
[Why not] Charge wealthier people more Council Tax?
·
Extra Business Rates will solve the problem [won’t they]?
Other consultation
and engagement processes are as follows:
15.5
Information will be shared with Strategic Partners and community
groups as normal. Local Strategic Partners remain acutely aware of
the potential cumulative impact of funding pressures across public
sector agencies on the city. The City Management Board, attended by
all Local Strategic Partnership representatives, will therefore
ensure that information is shared across the sector to assess and
mitigate adverse cumulative impacts wherever possible and develop
joint actions where appropriate. Engagement with statutory partners
will continue on an ongoing basis to further share and understand
the potential cumulative impact of budget proposals across the city
as they take shape.
15.6
In particular, the council continues to engage fully with the
Brighton & Hove Clinical Commissioning Group (CCG) to ensure
that the budget processes of the two organisations are aligned and
communicated as far as practicably possible. As with the council,
the local CCG is likely to remain under severe financial pressure
due to continually increasing demands on the local health
economy.
15.7
There are ongoing briefings and discussions with the Economic
Partnership that cover potential funding sources and bids, city
regeneration, economic growth, employment and apprenticeship
strategies. Statutory consultation with Business Ratepayers will
also be undertaken as normal.
15.8
The Schools Forum, a consultative body attended by representatives
of all school phases, received a report on the potential areas of
interest and potential impact of the General Fund budget proposals
at its meeting on 17 January 2022, providing an opportunity to
feedback views on the proposals. This is a public, minuted meeting
and agenda and minutes are available on the council’s
website.
15.9
Similarly, officers of the council and members of the
Administration met with representatives of the Community &
Voluntary Sector on 26 January 2022 to discuss the draft budget
proposals and provide them with an opportunity to feedback their
views to the council and members.
15.10 For staff,
updates are provided via the council’s intranet and formal
consultation with Staff and Unions will be undertaken as normal
during January and February followed by appropriate consultation
with directly affected staff.
15.11 Similarly, where
appropriate or required by statute, specific consultation will be
undertaken with residents and other people directly affected by
proposed changes to service delivery.
16
CONCLUSION
6
7
8
9
16.1
The council is under a statutory duty to set its budget and council
tax before 11 March each year. This report sets out the budget
assumptions to be used as the basis for Council Tax calculations in
order to meet the statutory duty. The full details of 2022/23
revenue and capital budgets are set out in the appended Budget
Book.
17
FINANCIAL & OTHER IMPLICATIONS
Financial Implications
5
6
7
8
9
10
17.1
These are contained within the main body of the report.
Finance Officer Consulted: James
Hengeveld
Date: 01/02/2021
Legal Implications
17.2
Whilst the Policy & Resources Committee is being asked to
recommend, and subsequently the Council asked to agree, the revenue
budget and capital strategy, the budget decision is a resourcing
decision and does not necessarily constitute final approval of what
policies will be implemented or what sums of money will be saved
under the service proposals.
17.3
Any decisions taken as part of the budget setting process are
subject to compliance with relevant legal requirements, where
appropriate, before implementation. The revenue budget and capital
strategy recommendations in the report do not commit the council to
implement any specific savings proposal. When specific decisions on
budget reductions are necessary, focussed consultations and the
full equality implications of doing one thing rather than another
will be considered in appropriate detail. If it is considered
necessary, in light of equality or other considerations, it will be
open to those taking the decisions to spend more on one activity
and less on another within the overall resources available to the
council.
17.4
For these purposes, the “budget” includes the
allocation of financial resources to different services and
projects, and setting the council tax.
17.5
Section 52ZB of the Local Government Finance Act 1992 requires a
billing authority to determine whether its relevant basic amount of
council tax is “excessive”. If the amount is excessive,
the billing authority is required to hold a referendum, with a view
to applying an alternative amount if the excessive amount is
rejected in a referendum.
17.6
The determination of whether a relevant basic amount of council tax
is excessive must be made in accordance with principles determined
by the Secretary of State.
17.7
Policy & Resources Committee has delegated power to formulate
the council’s revenue budget proposals, Capital Strategy,
including the capital investment programme, and the Treasury
Management Strategy Statement, including the Annual Investment
Strategy, and to recommend their adoption by full Council as part
of the overall budget setting process.
Lawyer Consulted: Elizabeth
Culbert
Date: 03/02/2021
Equalities Implications
17.8
In Brighton & Hove City Council a budget Equality Impact
Assessment (EIA) process has been used to identify the potential
disproportionate impacts of proposals on groups/individuals covered
by legislation (the ‘protected characteristics’ in the
Equality Act 2010) and actions to mitigate these negative impacts
or promote positive impacts. This is a key part of meeting the
requirements of the Act and demonstrating that the council is doing
so.
17.9
In law, the potential impacts identified, and how far proposed
actions mitigate them, must be given due regard by decision-makers
when making budget and resource decisions. However, as noted under
legal implications above, in setting the budget members are making
resourcing decisions which remain subject to compliance with all
necessary legal and statutory consultation requirements.
17.10 All proposals
with a potential equalities impact in 2022/23 will have an EIA
completed and provided to all Members for the Budget Council. EIAs
are cross-referenced with savings proposals in Appendix 1. Detailed
EIAs are available at Appendix 6 and a statement regarding the
potential cumulative impact is given at Appendix 7.
Sustainability Implications
17.11 One of the key
principles for developing budget proposals, aligned with the
Corporate Plan, is whether or not proposals and investments can
contribute to the 10 year carbon reduction target to become carbon
neutral by 2030. This plays out through everything from reviewing
the council’s civic office estate and facilitating more
remote working for staff, to increasing the number of electric
vehicles in its fleet, through to working with the Climate Assembly
to identify further opportunities and actions. The capital and
revenue budget proposals for 2022/23 cannot address all of the
Corporate Plan objectives immediately but do aim to provide for
many initiatives to be supported and developed to inform future
budget rounds. This is further supported by the continued
investment in the Carbon Neutral Fund, investment in active travel
initiatives, and investment in parks, open spaces and trees.
Crime & disorder implications:
17.12 The budget
includes provision for many services that support the prevention of
crime and disorder, in particular, through the Community Safety
budget which includes budgets for supporting Women’s Safety
including those affected by Domestic Abuse, as well as budgets to
promote the council’s Anti-Racism Strategy, support efforts
to reduce anti-social behaviour and reduce drug related crime.
There are also significant budgets provided through the Community
Grants programme to third sector organisations also working across
these and other areas.
Public health
implications:
17.13 The budget
includes the ring-fenced Public Health Grant which is spent on
providing priority public health services, including advice and
support, in accordance with the Joint Health & Well-Being
Strategy (with the NHS) and Annual Public Health Reports both of
which link to national research and guidelines and involve
considerable engagement and consultation.
SUPPORTING DOCUMENTATION
Appendices:
1.
Budget Book 2022/23
2.
Capital Strategy 2022/23
3.
Treasury Management Strategy Statement 2022/23
4.
Review of Reserves
5.
Assessment of Risks
6.
Equalities Impact Assessments (EIAs) – Individual
Assessments
7.
Equalities Impact Assessments (EIAs) – Cumulative Impact
Statement
Documents in Members’ Rooms
1. None
Background Documents
1.
Budget files held within Finance