Agenda item

Local Government Financial Resilience

Minutes:

Consideration was given to a report of the Director of Finance which looked at recent Local Authorities financial failures and challenges as reported in the media. The report also presented the findings of a report of the National Audit Office from earlier in 2018, concerning the financial sustainability of Local Authorities. The report also highlighted the Chartered Institute of Public Finance and Accountancy’s efforts to ensure attention on financial sustainability remained in focus through the development of a financial resilience index.

 

The Cabinet Member for Finance and Corporate Resources, the author of the report and the Assistant Director of Finance attended the meeting to present the information and to address the enquiries of the Select Committee.

 

The Portfolio Holder addressed the Select Committee explaining that many Local Authorities in the UK had lost large funding to their core budget, consequently, they had to manage significant financial challenges. In Oldham, Elected Members and Officers worked together to ensure that current financial and demand pressures were managed in line with the Council’s governance arrangements. Therefore, the sustainability of managing substantial funding reductions was ensured by regular updates to Scrutiny Committees and Full Council as well as via quarterly reporting to the Audit Committee.

 

Members sought and received clarification / commented on the following points:

-       Local Government finance settlement for 2019/20 – It was explained that Oldham might receive £1M more than what had been forecasted. However, this had to be seen in the context of increased demand for services. For example, Children’s Services had required an additional spend of £18M since 2017. Furthermore, £12M were still needed to fill the gap in 2019-20 budget.

-       Use of reserves and sustainability for Local Authorities – It was explained that Oldham Council looked at the use of reserves with extreme cautiousness. Reserves had been used diligently and carefully to ensure the best outcomes for residents. Since 2010, the demand for social care had increased significantly. In the same period, Government funding for Local Authorities had been reduced by 49.1%. Therefore, use of reserves and reductions in other spend had become more important in terms of balancing budgets.

In Oldham, the key task would be not to rely on reserves and, through the Medium Term financial planning, maintaining a forward look at the level of cuts required, review services and put forward adequate strategy to meet service demand.

-       Different levels of needs in different Local Authorities – It was explained that the Government was about to launch a consultation paper on fair funding to Local Authorities. A new formula would be devised to decide how financial resources should be distributed at local level to fund services. An option might be a national funding formula for all the Local Authorities and an additional pot for Adult Social Care and Children’s Services which would vary according to local needs. 

-       Financial sustainability issues mainly involving County Councils – It was explained that as County Councils did not provide full range of local services like single tier authorities, they did not have the same flexibility to manage resources against the demand for certain services.  Another underlining issue was that they had not increased their Council Tax.

-       National Audit Office’s recommendations to the Ministry for Housing, Communities and Local Government (MHCLG) to develop a long term plan to address the current financial and demand pressures in the sector and to secure its financial sustainability.

 

RESOLVED that:

1.    The content of the report be noted;

2.    The report be distributed to all Councillors.

 

Supporting documents: