Agenda item

The proposed budget for 2016/17 showed a decrease of just under £300k compared with the previous year. This was after taking into account a further £169k increase in deficit pension contributions and a £265k increase in payroll costs of which £153k had been due solely to a change in Government policy on National Insurance.

 

As a result of the choice for different levels of Council Tax increase, two budget options were presented based on a Council Tax increase of 1.94% and another of £5, although Members could decide to set Council Tax at any level.

 

The financial forecast indicated that there would be between a £1.4m and £1.6m budget gap by 2020. £1m of this would not arise until 2019/20 and might be impacted by the 100% Localisation of Business Rates which was due to start in the same year. However it was noted that if savings of this magnitude were needed and taking into account the savings already made, it would seriously call into question the future financial sustainability of the Council and its services.

 

The Executive had considered a proposed budget on 9^th February 2016. However the proposals had not taken into account the changes in Government grant which had been announced the previous evening. Nevertheless the service budgets now presented were unchanged from the ones presented to the Executive. The only changes between the two budgets were due to the change in the settlement and had affected the savings required, use of new homes bonus, Government grants and the Council Tax requirement.

 

The net cost of services for 2016/17 at £11,523,632 represented a decrease of £295,918 on the previous year.

 

It was noted that not all of the net cost of services would be met by Council Tax and that the council tax requirement would be determined following deductions made to allow for sources of funding.

 

Members noted that there was no reduction in special grant to parishes to compensate them for the change to the tax base due to the introduction of the Local Council Tax support scheme.

 

It was reported that the Section 151 Officer had determined that a surplus of £600,000 could be declared on the Collection Fund for the year. Of this £448,460 would be paid to Surrey County Council, £79,370 to the police and the remaining £72,170 to this Council.

 

Whilst the level of Revenue Support Grant paid to local authorities had reduced, the amount paid out as New Homes Bonus had risen reflecting the Government’s policy to reward those which delivered housing development. However due to constraints this Council had one of the lowest levels of new and affordable housing in Surrey. The Council was due to receive £1,418k in respect of new homes bonus of which £700k had been used to support the revenue budget.  The remainder would be placed in the capital reserve.

 

It had been determined that expenditure of £746,900 should be funded from reserves relating to community grants, costs related to Transformation, community safety, property maintenance, Family Support and SANGS reserves.

 

It was noted that “Localisation of Business Rates” gave local authorities a direct financial incentive to increase economic growth activity, as measured by an increase in business rates driven by development, in their local area.  It had been assumed that Business Rates would increase by 9% over the spending review period. In 2020 Councils would be allowed to retain 100% of business rates.  However how this affected the Council would be dependent on the baseline and tariff set.  The amount the Council received was very small compared to what it collected and amounted to only 4% of the total. 

 

A national business rates revaluation was due to take place in 2017 and this would result in changes to individual authority’s baselines and tariffs. In addition, a rebalancing of business rates between authorities was due to take place in 2020.  The implication for this Council would become clear once the proposals for 100% rate retention had been revealed. The cost of any revaluations, irrespective of which year they related, fell on the Council together with any interest due. Given the continued uncertainty over the level of revaluations on appeal only the baseline level of £1.435m had been put in to the budget.

 

The Council had received notification of an indicative settlement for 2016/17 of its rate support grant of £357k on 17th December, representing a reduction of 67% in cash terms compared with 2015/16 followed by its total removal in 2017/18. This had been confirmed by Parliament in February 2016. However as a result of lobbying a transitional grant of £133k in 2016/17 and £85k in 2017/18 had been given to help manage the loss. It had been originally proposed by the Government that the grant would go negative in 2016/17, by applying a “tariff adjustment” to business rates.  However this would now not come in to effect until 2019/20.  The funding for the Local Council Tax support scheme was no longer shown separately and Councils were now expected to fund this themselves going forward.  A number of other grants had also been removed.

 

The Minister had offered to guarantee the future settlement figures provided Councils submitted, by October 2016, an efficiency plan indicating how they would deal with the challenges they present.  It was not known what was actually being guaranteed and the Government had already said that wider economic considerations might mean the guarantee had to be broken anyway. There were also no details as to what would be required for the efficiency statement or how it would be monitored.  As a result the Council was asked to authorise the Executive Head of Finance, after consultation with the Portfolio Holder for Finance, to decide whether the Council signed up for the guarantee or not.

 

Special Expenses reflected the cost of providing services to non-parished areas which in parished areas were funded by a parish precept. The charge was billed as a separate item to non parished areas in a similar way to a precept in parished areas.

 

The Government had announced that the trigger for a referendum for Council Tax would be set at 2% or £5 whichever was the higher and that there would be no offer of a grant if Council Tax was frozen.  Given the new flexibility over Council Tax increase the budget had been prepared on two bases namely:

 

·                 An increase of 1.94% being under the 2% limit;

·                 An increase of £5.

 

Given the longer term financial implications the Section 151 Officer had advised that Council tax be increased this year to by the maximum permitted of £5.  Only by doing this could income for services be protected for future years.

 

All reserves and provisions were considered appropriate and supportive of future expenditure requirements. Revenue Reserves (including earmarked reserves) were projected to be around £18m at 31^st March 2016.  However all capital reserves would have been exhausted.

 

In respect of the General Fund Working Balance, a risk calculation indicated that a minimum balance of £1m was needed to provide financial cover for day to day cash flow and any financial emergencies which might occur during the financial year. This would be satisfied by both options to increase the Council Tax provided all the savings were achieved.

 

A number of fees and charges had been increased and had been approved in accordance with Financial Regulations.  These changes had been reflected within the budget.  However a change in the VAT status for Local Land Charges Searches was currently awaiting HMRC confirmation.  As a result it was proposed that the Executive Head of Finance be authorised, after consultation with the Portfolio Holder, to amend the affected fees and charges to reflect the VAT change once it was confirmed by HMRC.

 

Against an uncertain background, the Council was required to consider a financial forecast which predicted the Council’s finances for the next 5 years. The Council noted the assumptions which had been made on the basis of what was known at the moment.

 

The financial forecast predicted that savings would be relatively modest until 2019/20 when they would rise to £1.6m due to the imposition of the negative tariff. Whether this would be offset in part by the 100% localisation of business rates was not known. Members noted the outcome of the financial forecast, the challenges it contained, the impact on the choice of Council tax increase and the effect this might have on the future financial sustainability of the Council.  Members also noted that there were a number of financial risks contained within the budget.

 

In accordance with the Local Government Act, the Council’s Chief Financial Officer confirmed he was satisfied that the preparation of the 2016/17 estimates had been undertaken with rigour and due diligence and provided the appropriate level of resources to meet forecast service requirements whichever budget option was adopted.  He also reported that the Council’s Reserves, Provisions and the General Fund Working Balance, supplemented by the Revenue Capital Reserves were at such levels to meet all known future expenditure requirements and fund any unforeseen or urgent spending which might arise. The Chief Financial Officer drew attention to the risks within the budget particularly around the Council’s ability to continue to deliver savings in the future.

 

It was by Councillor Moira Gibson and seconded by Councillor Richard Brooks and

 

Resolved

     

                                 (i)            to note that under delegated powers the Executive Head of Finance calculated the amount of the Council Tax Base as 36,890.20 (Band D Equivalent properties) for the year 2016/17 calculated in accordance with the Local Government Finance Act 1992, as amended;

 

                                (ii)            to note expenditure totalling £746,900 be charged directly to reserves;

 

                              (iii)            to note that £700,000 of the new homes bonus is being used to support the 2016/17 budget;

 

                              (iv)            to note the implications of an increase in Council Tax above 2% or £5 whichever is the larger is deemed to be “excessive” by Government;

 

                               (v)            to note the level of savings and Minimum Payment Range required;

 

                              (vi)            to note that the Revenue Support Grant has been reduced by 67% compared to the previous year, will disappear by 2017/18 and be negative after that;

 

                            (vii)            to note the there is no reduction in the grant given to Parishes for the Local Council Tax Support Scheme;

 

                          (viii)            to note that a council tax surplus of £600,000 is being declared;

 

                              (ix)            to note the comments in respect of the robustness of the 2016/17 budget and the adequacy of the Council’s reserves, provisions and the General Fund Working Balance;

 

                               (x)            to note the comments in respect of the financial forecast in respect of the budget gap and the potential impact on the future financial sustainability of the Council;

 

                              (xi)            to note that of the Council’s Budget requirement, £176,000 be a special expense relating to the non-parished area of the Borough;

 

                            (xii)            that the Executive Head of Finance, in consultation with the Portfolio Holder be authorised to amend the Local Land Charges fees and charges when the VAT change is confirmed by HMRC;

 

                          (xiii)            that the Budget Requirement for 2016/17 be £11,046,231 as set out in paragraph 76 of the Council agenda report;

 

                          (xiv)            that the Council Tax Requirement for the Council’s own purposes for 2016/17 be £7,425,997 as set out in paragraph 76 of the Council agenda report;

 

                            (xv)            that the Council Tax for 2016/17 (excluding special expenses and parish precepts) be set at £201.30 for a Band D property being an increase of £5 compared to 2015/16; and

 

                          (xvi)            to authorise the Executive Head of Finance after consultation with the Portfolio Holder for Finance to decide whether the Council signs up to the Government’s offer of a settlement guarantee.

 

Note: In accordance with the Local Authorities (Standing Orders) (England) (Amendment) Regulations 2014, a recorded vote was taken.  The following Members voted in favour of the decision: Councillor Dan Adams, David Allen, Richard Brooks, Bill Chapman, Vivienne Chapman, Ian Cullen, Paul Deach, Craig Fennell, Moira Gibson, Edward Hawkins, Josephine Hawkins, Paul Ilnicki, Rebecca Jennings-Evans, David Lewis, Oliver Lewis, Jonathon Lytle, Katia Malcaus Cooper, David Mansfield, Alan McClafferty, Charlotte Morley, Max Nelson, Adrian Page, Robin Perry, Chris Pitt, Joanne Potter, Nic Price, Wynne Price, Darryl Ratiram, Ian Sams, Pat Tedder, Valerie White, John Winterton.  The following Members voted against the decision: Councillors Rodney Bates and Ruth Hutchinson.  Councillor Victoria Wheeler abstained from voting.