Agenda and draft minutes

Budget, Cabinet
Tuesday, 23rd February, 2021 6.00 pm

Contact: Liz Drogan  0161 770 4705

Items
No. Item

1.

Apologies For Absence

Minutes:

There were no apologies for absence received.

2.

Urgent Business

Urgent business, if any, introduced by the Chair

Minutes:

There were no items of urgent business received.

3.

Declarations of Interest

To Receive Declarations of Interest in any Contract or matter to be discussed at the meeting.

Minutes:

There were no declarations of interest received.

4.

Public Question Time

To receive Questions from the Public, in accordance with the Council’s Constitution.

Minutes:

There were no public questions received.

5.

Draft Minutes of the Administration Budget Performance and Value for Money Select Committee held on 28th January 2021 pdf icon PDF 368 KB

Minutes:

Members considered the draft minutes of the Performance and Value for Money Select Committee held on the 28th January 2021.

It was reported that the Select Committee recommended to Council all of the budget reduction proposals included in the report to a value of £8.920m for approval.

 

RESOLVED – That the deliberations and comments of the Performance and Value for Money Select Committee held on the 28th January 2021 be noted.

 

6.

Draft Minutes of the Opposition Budget Performance and Value for Money Select Committee held on 9th February 2021 pdf icon PDF 496 KB

Minutes:

RESOLVED – That the deliberations and comments of the Performance and Value for Money Select Committee held on 9th February 2021 be noted.

 

7.

Revenue Monitor and Capital Investment Programme 2020/21 Month 8 – November 2020 pdf icon PDF 133 KB

Additional documents:

Minutes:

The Cabinet gave consideration to a report of the Director of Finance which provided them with an update on the Council’s 2020/21 forecast revenue budget position and the financial position of the capital programme as at 30 November 2020 (Month 8), together with the revised capital programme 2020/25.

In relation to the Revenue position, the Cabinet was informed that the current forecast outturn position for 2020/21 was a projected deficit variance of £8.330m after allowing for approved and pending transfers to and from reserves.

The position also included additional costs and pressures that have been identified by the Authority in this financial year as a direct result of the Governments ongoing arrangements to mitigate the spread of COVID-19 which commenced on 23 March 2020. The additional pressures included forecasts of both income shortfalls and additional expenditure that have impacted on the Authority’s budgets as a result of the pandemic The pandemic has affected nearly all aspects of Council service delivery; however, the most significant areas of concern are the People and Place, Children’s Services and Community Health & Adult Social Care Portfolios. Action was being taken and will continue for the remainder of the financial year to address variances and take mitigating action as detailed in the report.

 

The Cabinet noted the overall corporate position was, being offset by the application of the £24.902m unringfenced Government COVID related grant funding from the Ministry for Housing, Communities and Local Government (MHCLG), of which £7.641m was received in 2019/20 and held in a specific Earmarked Reserve to underpin the 2020/21 budget. There had been actual, in-year, receipts of £16.337m of COVID Emergency Funding, including £1.282m for the first claim for loss of income in relation to sales, fees and charges under the income compensation scheme (SFC). In addition, provision was made for the second SFC claim, calculated as £0.924m for the period August to November, which has been submitted to the MHCLG but not yet formally agreed for payment. The overall pressure was further offset by a refund from the GMCA for waste disposal contributions. In Appendix 1 to the report, both the full Government grant and the refund were presented as single sums so that it highlighted the level of variation across all Council budgets, given that there was still insufficient resource to fully offset the adverse variance. However, this summary report presents the position after applying the Government grant and the refund across Portfolio areas.

Section 4 of the report advised Cabinet of the grants that the Council had received. There have been a number of developments particularly in relation to support for businesses and to provide additional support for the Council. Further grant funding and external contributions were expected, as a result, both the overall financial position and the application of Government grant would therefore change during the remainder of the financial year. As this financial monitoring report reflected the financial position at Month 8, it could be regarded as an indicator of the potential year end position, however, management  ...  view the full minutes text for item 7.

8.

Council Tax Reduction Scheme 2021/22 pdf icon PDF 289 KB

Additional documents:

Minutes:

Consideration was given to a report of the Director of Finance which set out the proposed Council Tax Reduction Scheme for 2021/22.

Members were informed that there was a requirement to have a Council Tax Reduction (CTR) scheme to support residents who qualified for assistance in paying Council Tax. The Local Government Finance Act 2012 placed a requirement that each year a billing authority must consider whether to revise its Council Tax Reduction scheme or to replace it with another scheme. Any change to the 2021/22 scheme must be agreed by full Council in line with budget setting and no later than 10 March 2021. For Oldham, this required the Council to agree a revised 2020/21 scheme at the 4th March 2021 Council meeting. Any proposed change must be subject to prior consultation with the major preceptors and the public.

Since 2015/16 the Council’s CTR scheme had limited CTR to a maximum of 85% of Council Tax for a Band A property and removed second adult rebate for those of working age. Following a public consultation exercise in Autumn 2018, the scheme was amended from April 2019 to introduce a range of changes to the scheme largely aimed at supporting those CTR claimants who received Universal Credit (UC). These included the application of some earnings disregards and treatment of information received from the Department for Work and Pensions (DWP) about UC as a claim for CTR.

There were no changes to the CTR scheme for 2021/22.

 

Options/Alternatives considered:

Option 1 - Maintain the present level of support i.e. limiting the level of support at 85% of the Council Tax for a Band A property.

Option 2 - Reducing the maximum support to 82.5%

 

RESOLVED – That:

1.    The Cabinet approved and commended to the Council the proposed Council Tax Reduction Scheme for 2021/22 which was unchanged from the 2020/21 scheme.

2.    The financial position during 2021/22 would be reviewed to assess whether resources could be found to support additional Exceptional Hardship Payments to support those residents in most need in 2021/22 and to alleviate the impact of the loss of COVID Hardship Fund grant awards.

9.

Revenue Budget 2021/22 and Medium Term Financial Strategy 2021/22 to 2023/24 pdf icon PDF 1 MB

Additional documents:

Minutes:

Consideration was given to a report of the Director of Finance which provided the Cabinet with the forecast budget reduction requirement and the budget proposals for 2021/22 together with forecast budget reduction requirement estimates for the period 2022/23 to 2023/24, having regard to the Provisional Local Government Finance Settlement published on 17 December 2020 and associated announcements and the subsequent Final Local Government Settlement approved on 10 February 2021 and the February 2021: COVID-19 Funding for Local Government in 2021 to 2022 Policy paper.

The report set out proposals for the Council’s Revenue Budget for 2021/22 and Medium Term Financial Strategy for 2021/22 to 2023/24. The report advised Members of the key financial challenges and issues which would be faced by the Council over the forecast period and set out the Administration’s revenue budget proposals for 2021/22 together with updated budget reduction requirement estimates for the period 2022/23 to 2023/24.

Members noted the purpose and scope of the Medium Term Financial Strategy and how it had a vital role to play in enabling the translation of the Council’s ambition and priorities into action. They were advised of the national policy landscape and economic context in which the Council was setting its revenue budget for 2021/22 and Medium Term Financial Strategy to 2023/24.

The report highlighted policy announcements and implications which arose from the Government’s 2020 Spending Round published on 25 November 2020, Provisional Local Government Finance Settlement (LGFS) published on 17 December 2020 together with the complementary COVID Funding for Local Government in 2021/22 Consultative Policy Paper, Final Local Government Finance Settlement approved on 10 February 2021; and  February 2021: COVID-19 Funding for Local Government in 2021 to 2022 Policy Paper.

The LGFS confirmed referendum limits for a general purpose Council Tax increase and the Government would permit rises of up to 2% per annum for 2021/22 without the need to hold a referendum. The Government also confirmed the continued ability to charge an Adult Social Care Precept allowing a combined increase of up to 3% in Council Tax across 2021/22 and 2022/23 (ringfenced for use for Adult Social Care). The Council Tax referendum limits for 2021/22 applicable to the Council therefore allow an overall increase of 4.99% without requiring a referendum.

Members were reminded that the Council Tax policy approved within the 2020/21 budget was that for 2020/21 Council Tax would revert to its previous position. The Council would therefore increase Council Tax by 2% for the Adult Social Care Precept (ASCP) and 1.99% for general purposes; an overall increase of 3.99%. The referendum limits for 2021/22 as advised above would permit this approach. However, mindful of the financial position of the Authority but also the impact of a further increase in Council Tax on the citizens of Oldham, a revision to Council Tax policy was therefore proposed. Whilst the 2% increase in relation to the ASCP would continue, Council Tax for general purposes will increase by 0.99% rather than 1.99%. In overall terms the Oldham Council Tax would  ...  view the full minutes text for item 9.

10.

Housing Revenue Account Estimates for 2021/22 to 2025/26 and Proposed Outturn for 2020/21 pdf icon PDF 198 KB

Minutes:

Consideration was given to a report of the Director of Finance which set out the Housing Revenue Account (HRA) proposed 2021/22 original budget and the forecast outturn for 2020/21. The opportunity was also taken to present the provisional strategic budgets for 2022/23 through to 2025/26.

The Cabinet noted that HRA activities were a key element of the Council’s Housing Strategy (approved by Council on 10 July 2019) which aimed to provide a diverse Oldham Housing offer that was attractive and met the needs of different sections of the population at different stages of their lives.

After taking all relevant issues into account, the projected financial position for 2020/21 was estimated to be a £1.384m positive variance when compared to the original budget forecast for 2020/21 approved at the Budget Council meeting, 26 February 2020. Most of this variance was attributable to the re-profiling of HRA funded capital schemes into later years due to revisions to planned spending profiles. The balance at the end of 2020/21 was projected at £19.614m.

The financial position for 2021/22 showed an estimated HRA closing balance of £17.463m which was sufficient to meet future operational commitments and the potential financial pressures identified in the risk assessment.

The 2021/22 position had been presented after allowing for an increase in dwelling rents of 1.5%, the increase in non-dwelling rents in line with individual contracts, the freezing of all service charges and the setting of Extra Care Housing concierge charges to fully recover costs.

 

Members were reminded that the Government had previously advised that PFI properties were exempt from Central Government’s 1% Social Rent Reduction policy. This policy ended on 31 March 2020. Since this date, Central Government has reverted to its pre-2015 guidance for the period 2020-2025 for all properties, confirming all rents are calculated based on the Consumer Price Index (CPI) rate at September of the preceding year plus 1%. All Oldham’s budget projections for the 2021/22 budget will follow the rent setting guidance of CPI plus 1%, resulting in an increase of 1.5% (CPI is taken as at September 2020).

The financial projections for the HRA over the period 2020/21 to 2025/26 showed an overall reduction in the level of balances from £19.614m at the end of 2020/21 to £3.906m at the end of 2025/26.

This was because HRA resources were used to support several major approved housing capital projects including development within the town centre and on numerous smaller sites around the borough. There is also a commitment to purchase currently empty properties owned by private sector landlords to increase the number of Council owned housing stock.

 

Options/Alternatives considered

In order that the Council complied with legislative requirements it must consider and approve a Housing Revenue Account budget for 201/22.

Three options with regard to rent had been assessed.

  1. proposed rent increase of 1.5%
  2. proposed rent increase of 1.0%
  3. rents to be frozen for 2021/22.

Compared to a 1.5% increase, the loss to the HRA for 2021/22 in terms of rental income would be £0.044m  ...  view the full minutes text for item 10.

11.

Capital Strategy and Capital Programme 2021/22 to 2025/26 pdf icon PDF 236 KB

Additional documents:

Minutes:

Consideration was given to a report of the Director of Finance which set out the Capital Strategy for 2021/22 to 2025/26 and thereby the proposed 2021/22 capital programme, including identified capital investment priorities, together with the indicative capital programme for 2022/23 to 2025/26, having regard to the resources available over the life of the programme.

The Council’s Capital Strategy and Capital Programme were set over a five-year timeframe. The proposed Capital Strategy and Programme for 2021/22 to 2025/26 took the essential elements of the 2020/25 and previous years’ strategies and programmes and moved them forward in the context of the financial and political environment for 2021/22.

The Strategy also included a longer-term vision, a forward look at those projects that were likely to run beyond the five-year strategy and programme period or be initiated subsequently. This covered a timeframe for the 10 years from 2026/27 to 2035/36.

Capital Strategy

The format of the Capital Strategy reflected the requirements of the latest Prudential and Treasury Management Codes issued by the Chartered Institute of Public Finance and Accountancy (CIPFA). The Strategy therefore presented:

      A high-level long-term overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of services

      An overview of how the associated risk is managed

      The implications for future financial sustainability

The Capital Strategy ensured that all Council Members were presented with the overall long-term capital investment policy objectives and resulting Capital Strategy requirements, governance procedures and risk appetite.

The Strategy incorporated the refreshed and updated elements of the Creating a Better Place Strategy, the Medium-Term Property Strategy and Housing Strategy. Following a review of the Capital Programme, as a result of the unprecedented economic circumstances due to the impact of the COVID-19 pandemic and the revised terms for PWLB borrowing, the principles established to complement the Capital Strategy as contained in the Commercial Property Investment Strategy and Fund and the Income Generation Strategy have been removed from the Capital Programme.

The Capital Strategy section (section 1) highlighted the impact of COVID-19 and the way this has shaped capital spending plans for 2021/22 and future years. During 2020/21, the COVID-19 pandemic has had a major impact on the borough, its residents and the economy. The financial year 2021/22 would begin, at least, with a COVID-19 influence, however, it was expected, now that several vaccines were available, that normal activities 3 will be resumed and the Councils capital spending plans which had inevitably been interrupted in 2020/21, can get back on track during 2021.

The Strategy also advised that the Council was proposing to continue the use the flexibility provided by the Ministry of Housing, Communities and Local Government (MHCLG) to use capital receipts to fund the revenue cost of transformation. The 2021/22 revenue budget would rely on up to £2.000m of such funding from capital receipts. Annex D of the report set out the required Flexible Use of Capital Receipts Strategy which advised of the summary of planned receipts, use and savings  ...  view the full minutes text for item 11.

12.

Treasury Management Strategy Statement 2021/22 Including the Minimum Revenue Provision Policy Statement, Annual Investment Strategy and Prudential Indicators pdf icon PDF 596 KB

Minutes:

The Cabinet gave consideration to a report of the Director of Finance which presented the strategy for 2021/22 Treasury Management activities including the Minimum Revenue Provision Policy Statement, the Annual Investment Strategy and Prudential Indicators together with linkages to the Capital Strategy.

Members were informed that the Council was required through regulations supporting the Local Government Act 2003 to ‘have regard to’ the Prudential Code and to set Prudential Indicators for the next three years to ensure that the Council’s capital investment plans were affordable, prudent and sustainable. It was also required to produce an annual Treasury Strategy for borrowing and to prepare an Annual Investment Strategy setting out the Council’s policies for managing its investments and for giving priority to security and liquidity of those investments.

The Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Treasury Management 2017 (the Code) required the receipt by full Council of a Treasury Management Strategy Statement.

The Strategy for 2021/22 covered two main areas.

Capital Issues

      The Capital expenditure plans and the associated Prudential Indicators

      The Minimum Revenue Provision (MRP) Policy Statement

Treasury Management Issues:

      The Current Treasury Position

      Treasury Indicators which limited the treasury risk and activities of the Council

      Prospects for Interest Rates

      The Borrowing Strategy

      The Policy on Borrowing in Advance of Need

      Debt Rescheduling

      The Investment Strategy

      The Creditworthiness Policy

      The Policy regarding the use of external service providers.

The report outlined the implications and key factors in relation to each of the above Capital and Treasury Management issues and made recommendations with regard to the Treasury Management Strategy for 2021/22.

Cabinet noted that the Audit Committee, the body charged with the detailed scrutiny of Treasury Management activities considered the proposed Treasury Management Strategy report at its meeting on 21 January 2021. It was also presented to the Overview and Scrutiny Performance and Value for Money Select Committee on 28 January 2021. Both the Audit Committee and the

Overview and Scrutiny Performance and Value for Money Select Committee were content to commend the report to Cabinet.

 

Options/Alternatives considered

The Council was required to comply with the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Treasury Management the Council and has no option other than to consider and approve the contents of the report. Therefore, no options/alternatives were considered.

 

RESOLVED -That the following be accepted and recommended to Council:

  1. Capital Expenditure Estimates as per paragraph 2.1.2 of the report.
  2. Minimum Revenue Provision policy and method of calculation as per Appendix 1 of the report.
  3. Capital Financing Requirement (CFR) Projections as per paragraph 2.2.4 of the report.
  4. Projected treasury position as at 31 March 2020 as per paragraph 2.3.3 of the report.
  5. Treasury Limits as per section 2.4 of the report.
  6. Borrowing Strategy for 2021/22 as per section 2.6 of the report.
  7. Annual Investment Strategy as per section 2.10 including risk management and the creditworthiness policy at section 2.11 of the report.  ...  view the full minutes text for item 12.

13.

Statement of the Chief Financial Officer on Reserves, Robustness of Estimates and Affordability and Prudence of Capital Investments pdf icon PDF 356 KB

Minutes:

Consideration was given to a report of the Director of Finance which recommended that the Cabinet considered the level of balances necessary to support the 2021/22 budget underpinned by the agreed policy on Earmarked Reserves, setting a properly balanced revenue budget which included the financing of capital investments within the present investment proposals.

Members were informed that, in order to comply with Section 25 of the Local Government Act 2003; the Authority’s Chief Financial Officer (the Director of Finance) was required to report on the robustness of the estimates made for the purposes of the revenue budget calculations and the adequacy of the proposed reserves. This information enabled a longer-term view of the overall financial resilience of the Council to be taken. It also reported on the Director of Finance’s consideration of the affordability and prudence of capital investment proposals. The level of general balances to support the budget and an appropriate level of Earmarked Reserves maintained by the Council in accordance with the agreed Council Policy on Earmarked Reserves, were an integral part of its continued financial resilience supporting the stability of the Council.

There had been several reports issued on the subject of the financial resilience of Local Authorities alongside the publication by the Chartered Institute of Public Finance & Accountancy (CIPFA) of a Local Authority Financial Resilience Index and the implementation of a Financial Management Code. These issues were highlighted in Section 5 of the report but were largely prompted by the financial challenges at Northamptonshire County Council during 2018 followed by both Nottingham City Council (NCC) and the London Borough of Croydon Council (LBC) in 2020 and the raising of significant concerns about the financial stability of other Local Authorities. On 10 February it was announced that four other Councils were to be provided with financial support by the Ministry of Housing, Communities and Local Government (MHCLG) in the form of a capitalisation direction. This was to ensure that they are able to set a balanced budget for 2021/22

Whilst the Council had prepared a detailed revenue budget within a five-year Medium Term Financial Strategy (MTFS), a five year capital programme and continued the closure of accounts within an appropriate timeframe allowing early focus on the upcoming challenges and a robust financial transformation programme, there continued to be a reliance on the use of reserves to balance the revenue budget.

Since 2016/17, reserves of £32.945m had been used to underpin the Council’s revenue budget. For 2021/22, there was a proposed use of reserves of £10.008m combined with a number of one-off measures totalling £5.150m.

Included within the Medium Term Financial Strategy was the required use of reserves of £29.000m over the next two financial years. For 2021/22, it was proposed to use corporate reserves of £16.703m and specific reserves of £0.127m together with £25.456m to offset the Collection Fund deficit arising from the awarding of business rates reliefs in 2020/21 (this is a technical accounting adjustment) combined with one-off measures totalling £2.000m. The remaining corporate Balancing Budget  ...  view the full minutes text for item 13.