The Council received a report setting out the Council’s revenue budget for the coming financial year. Members were reminded that councils were legally obliged to set a balanced budget and were advised that the budget presented achieved this through a combination of efficiencies, increased returns from investment assets, business rates and an increase in Council Tax.
The net cost of services for 2020/21 at £14,176,572 represented an increased compared to last year. This was due to inflationary pressures in areas such as wages and contracted costs together with reductions in income from a number of areas. This had been offset by increases in investment income, use of grants, business rates and reserves. The budget also included a general savings/income target of £500k which would need to be identified during the year. However, if this was not possible the Council had adequate reserves to cover the shortfall.
The Council continued to receive no Revenue Support Grant and central funding, which included business rates, had fallen by £2.7m in 8 years.
The financial forecast showed that the Council would have future budget pressures if current services were to be maintained. To address these the Council would need to continue to employ a combination of more investment, income generation and efficient working.
Members were reminded that councils would be required to hold a referendum if their Council Tax increase was more than the lesser of 2% or £5. The budget had been prepared on the basis of an increase of £5, the maximum permitted, which represent an increase of 2.29%. It was noted that Surrey County Council and Surrey Police had applied the maximum permitted increases.
The Fair Funding Review and the changes to business rates, expected to be implemented in 2020/21, had both been deferred until 2021/22. As a result the “negative grant” had also been deferred. In addition, changes in the payment of the New Homes Bonus meant that the Council was unlikely to receive any significant payments after next year.
It was predicted that the Collection Fund would be in surplus at the end of 2019/20. The Section 151 Officer had therefore determined that a surplus of £1,500,000 could be declared for the year. Of this £1,128,000 would be paid to Surrey County Council, £202,500 to the Police and the remaining £169,500 to this Council. This would be used to support the budget for 2020/21.
All reserves and provisions were considered appropriate and supportive of future expenditure requirements. Revenue Reserves were projected to be around £35m at 31 March 2020. Some of these reserves were needed for future committed expenditure, such as SANGS, but there was also £25m of non-earmarked reserves to offset the financial risks financial risks around commercial property and interest rates as well as the potential budgetary funding gap. Members noted that this budget included expenditure totalling £1.5m which had been charged to reserves.
In respect of the General Fund reserve, a risk calculation had indicated that a minimum balance of £2m was needed to provide financial cover for day to day cash flow and any financial emergencies which might occur during the financial year.
Special Expenses reflected the cost of providing certain services to non-parished areas which in parished areas were funded by a parish precept. This charge was billed as a separate item to non-parished areas in a similar way to a precept in parished areas but did, however, fall within the borough’s overall capping limit.
The Council generated a significant income from fees and charges, of which £2m came from parking charges. It had been assumed that all charges would increase by at least inflation, 2.00% pa, and this had been incorporated into the forecast.
The Council was required to prepare a Medium term Financial Forecast so as to demonstrate that it could achieve a balanced budget in the future or that it understood the challenges in delivering one. The preparation of the forecast this year had been particularly challenging given there was no information on funding beyond 2020/21. Members reviewed the Financial Forecast and the Financial Strategy.
The Council’s Chief Financial Officer confirmed he was satisfied that the preparation of the 2020/21 estimates had been undertaken with rigour and due diligence and provided the appropriate level of resources to meet forecast service requirements. 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 reliance and volatility of income to fund services and the continuing need to make further savings and increase income, as evidenced by the Medium Term Financial Forecast, if services were to be maintained and the Council remain financially sustainable into the future.
It was moved by Councillor David Lewis and seconded by Councillor McClafferty that the resolution as set out in the agenda paper be approved which included an increase in Council Tax of £5.
An amendment was moved by Councillor Sashi Mylvaganam and seconded by Councillor John Skipper that
“1. the Council resolves to defer the setting of the 2020/21 budget for a period not exceeding 14 days to
i) permit the Chief Finance Officer to produce revised proposal based upon a Council tax increase of 1.99% which will be fairer to lower income Council tax payers than the currently proposed flate rate £5.00 increase
ii) the Chief Finance Officer to maintain a balanced budget by, if necessary, reducing (after consultation with the Leader of the Council), amounts budgeted to be paid outside Consultants to the Council, other overhead savings or from the reserves.
2. The Council further resolves to instruct the Interim Deputy Chief Executive to prepare proposals, within the next three months, for the undertaking of a Zero Based Budget (ZBB) exercise, to be carried out in time for the setting of the 2021/22 budget, on all Council Services which, based upon the latest Budget Book, account for more than 0.75% of the gross Council expenditure. Recycling and Refuse is to be excluded from the ZBB process.”
The Council received advice from the Chief Finance Officer relating to the consequences of failing to set a budget by 11 March 2020. Following this advice Councillor Mylvaganam and his seconder, agreed to withdraw the first part of his amendment but to include the second part of the amendment, including reference to the Performance and Finance Scrutiny Committee in relation to the ZZB exercise.
The second part of the amendment, was put to the vote and carried.
The substantive motion was then put to the vote and carried.
(i) to note that
a) under delegated powers the Executive Head of Finance calculated the amount of the Council Tax Base as 38,525.86 (Band D Equivalent properties) for the year 2020/21 calculated in accordance with the Local Government Finance Act 1992, as amended;
b) expenditure totalling £2,027,000 is being charged directly to reserves;
c) £185,000 is a special expense relating to the non-parished area of the Borough;
d) the budget includes provision of £200,000 representing a 2% pay increase for all staff;
e) the comments in respect of the robustness of the 2020/21 Budget and the adequacy of the Council’s reserves, provisions and the General Fund Working Balance;
f) the comments in respect of the financial forecast, strategy and future financial sustainability of the Council;
(ii) that the Budget Requirement for 2020/21 be £14,176,572 as set out at the end of Annex A to the agenda report;
(iii) that the Council Tax Requirement for the Council’s own purposes for 2020/21 be £8,616,693 as set out in Annex A to the agenda report;
(iv) that the Council Tax for 2020/21 (excluding special expenses and Parish precepts) be set at £223.66 for a Band D property; and
(v) that the Interim Deputy Chief Executive be instructed to prepare proposals, within the next three months, for consideration by the Performance and Finance Scrutiny Committee, for the undertaking of a Zero Based Budget (ZBB) exercise, and carried out in time for the setting of the 2021/22 budget, on all Council Services which, based upon the latest Budget Book, account for more than 0.75% of the gross Council expenditure. Recycling and Refuse is to be excluded from the ZBB process.”
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:
Councillors Dan Adams, Graham Alleway, Peter Barnett, Rodney Bates, Cliff Betton, Richard Brooks, Sarah Jane Croke, Vivienne Chapman, Paul Deach, Colin Dougan, Tim FitzGerald, Sharon Galliford, Shaun Garrett, Edward Hawkins, Josephine Hawkins, Rebecca Jennings-Evans, Ben Leach, David Lewis, David Mansfield, Alan McClafferty, Emma McGrath, Charlotte Morley, Sashi Mylvaganam, Adrian Page, Robin Perry, Darryl Ratiram, Morgan Rise, John Skipper, Graham Tapper, Pat Tedder, Victoria Wheeler, Valerie White, Kristian Wrenn.