Agenda and minutes

(Administration Budget), Overview and Scrutiny Performance and Value for Money Select Committee
Thursday, 23rd January, 2020 6.00 pm

Venue: Crompton Suite, Civic Centre, Oldham, West Street, Oldham, OL1 1NL. View directions

Contact: Constitutional Services  0161 770 5151

Items
No. Item

1.

Apologies For Absence

Minutes:

Apologies for absence were received from Councillor Haque.

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.

Revenue Monitoring and Capital Investment Programme 2019/20 Month 8 - November 2019 pdf icon PDF 111 KB

Additional documents:

Minutes:

The Select Committee gave consideration to a report of the Director of Finance which provided them with an update on the Council’s 2019/20 forecast revenue budget position and the financial position of the capital programme as at 30 November 2019 (Month 8), together with the revised capital programme 2019/24.

 

The Cabinet Member for Finance and Corporate Resources and the Director of Finance presented the report and addressed the enquiries of the Select Committee.

 

In relation to the Revenue position, the Select Committee were informed that the current forecast outturn position for 2019/20 was a projected favourable variance of £1.367m after allowing for approved and pending transfers to and from reserves.

 

The most significant area of concern were the People and Place, Children’s Services and Community Services and Adult Social Care portfolios. Action was being taken and would continue for the remainder of the financial year to address variances and take mitigating action as detailed in the report.

 

The Select Committee noted the overall corporate position was, to a limited extent, being managed by offsetting favourable variances, most noticeably from Capital, Treasury and Corporate Accounting budgets. Management action had been initiated across all service areas to review and challenge

planned expenditure and to maximise income. Progress was being made and this was demonstrated in the position being reported at month 8. Further work needed to be done, if as anticipated, the outturn was to move to a balanced position by the end of the financial year.

 

Information on the Month 8 position of the Dedicated Schools Grant (DSG), Housing Revenue Account (HRA) and Collection Fund was also outlined in the report. There were no significant issues of concern in relation to the HRA and Collection Fund, however the Collection Fund, whilst forecasting an in-year deficit of £0.127m, remained in a cumulative surplus position. The DSG, continued to be an area which was facing a financial challenge, with a projected deficit increase in 2019/20. Action was being taken with the aim of reducing the cumulative deficit and bringing the DSG towards a balanced position. A further update was provided on the funding that was announced earlier in the financial year.

 

With regard to the Capital position, the revised capital programme forecast spend for 2019/20 was £63.945m at the close of month 8, a net decrease of £20.387m from the original budget of £84.332m. Actual expenditure to 30 November 2019 was £33.013m (51.63% of the forecast outturn). The report also updated the forecast Capital Programme over the period 2019/20 to 2023/24.

 

Members noted it was probable that the forecast position would continue to change before the year end with additional re-profiling into future years.

 

Members sought and received clarification on how urgently overspending budgets were being addressed – they were informed that the persistent overspend was in areas of growth such as care for adults and children. Overspend was taken seriously and management action was expected. The Council’s budget had been reduced by £260m and its workforce reduced by one third in the  ...  view the full minutes text for item 5.

6.

Revenue Budget 2020/21 and Medium Term Financial Strategy 2020/21 to 2024/25 pdf icon PDF 855 KB

Additional documents:

Minutes:

Consideration was given to a report of the Director of Finance which provided the Select Committee with the forecast budget reduction requirement and the Administration’s budget proposals for 2020/21 together with forecast budget reduction requirement estimates for the period 2021/22 to 2024/25, having regard to the Provisional Local Government Finance Settlement published on 20 December 2019.

 

The Cabinet Member for Finance and Corporate Resources, the Director of Finance, the Director of Economy and the Managing Director Community Health and Adults Social Care (DASS) presented the report and addressed the enquiries of the Select Committee.

 

This report set out proposals for the Council’s Revenue Budget for 2020/21 and Medium Term Financial Strategy for 2020/21 to 2024/25. It 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 2020/21 together with updated budget reduction requirement estimates for the period 2021/22 to 2024/25.

 

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 2020/21 and Medium Term Financial Strategy to 2024/25.

 

The report highlighted policy announcements and implications which arose from the Government’s 2019 Spending Round presented on 4 September 2019, the Local Government Finance Settlement 2020/21 Technical Consultation and the Provisional Local Government Finance Settlement (LGFS) published on 20 December 2019.The report also detailed key budget adjustments and expenditure pressures which underpinned the forecasts that provided the backdrop for the Council’s Medium-Term Financial Strategy.

 

The Select Committee was informed that, based on the latest estimates, the budget reduction requirement for 2020/21 had decreased from the previously reported figure of £22.871m to £19.740m. Section 10 of the report detailed the Administration’s budget reduction proposals. There were a total of seven proposals expected to deliver savings of £3.011m in 2020/21. If approved in full, these proposals further reduced the budget reduction requirement to £16.729m for 2020/21.

 

Sections 11 and 12 explained the approach to balancing the 2020/21 budget. In order to remove the requirement for further spending reductions, it was proposed to part-finance the 2020/21 budget by using the opportunities provided by the ability to use Capital Receipts to support spending on transformational projects up to a value of £3.750m and from an available Collection Fund Surplus of £1.400m. The following specific and corporate reserves would be used to address the balance:

·       £1.413m from gains anticipated in 2019/20 from the Greater Manchester 100% Business Rates Retention Pilot Scheme;

·         £1.300m of further benefit made available by the GMCA from the Greater Manchester 100% Business Rates Retention Pilot Scheme in 2019/20;

·       £3.113m from reserves relating to a refund of the 2019/20 Waste Levy; and

·       £5.753m from Corporate Reserves.

 

Approval of the proposals set out in this report in full by Budget Council would  ...  view the full minutes text for item 6.

7.

Housing Revenue Account Estimates for 2020/21 to 2024/25 and Proposed Outturn for 2019/20 pdf icon PDF 193 KB

Minutes:

Consideration was given to a report of the Director of Finance which set out the latest Housing Revenue Account (HRA) outturn estimate for 2019/20, the detailed budget for 2020/21 and strategic estimates for the four years 2021/22 through to 2024/25. The report also set out the recommended dwelling, non-dwelling rents and service and concierge charges to be applied from April 2020.

 

The Cabinet Member for Finance and Corporate Resources, the Director of Finance and the Head of Strategic Housing and Property Partnerships presented the report.

 

The Select Committee 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 2019/20 was estimated to be a £2.273m positive variance when compared to the original budget forecast for 2019/20 approved at the Budget Council meeting, 27 February 2019. 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 2019/20 was projected at £21.750m.

 

The financial position for 2020/21 showed an estimated HRA closing balance of £18.230m which was sufficient to meet future operational commitments and the potential financial pressures identified in the risk assessment.

 

The 2020/21 position had been presented after allowing for an increase in dwelling rents of 2.7%, the increase in non-dwelling rents in line with individual contracts, the freezing of all service charges and the setting of Extra Care Housing and Holly Bank 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 was due to end on 31 March 2020. In preparation, Central Government had recently issued updated guidance for the period 2020-2025 for all properties, confirming a return to rents being set based on the Consumer Price Index (CPI) rate at September of the preceding year plus 1%. All Oldham’s budget projections for the 2020/21 budget would follow the rent setting guidance of CPI plus 1%, resulting in an increase of

2.7% (CPI is taken as at September 2019).

 

The financial projections for the HRA over the period 2019/20 to 2024/25 showed an overall reduction in the level of balances from £21.750m at the end of 2019/20 to £7.713m at the end of 2024/25. This was because HRA resources were to be used to support several major approved housing capital projects including development at Princes Gate Site C, developing temporary accommodation to meet homelessness demands, developing purchase and repair / lease and repair pilot schemes in the private rented sector and financing the purchase of additional housing to add to the Council’s

HRA stock.

 

Members sought and received clarification on the following:

·       Capacity and expertise to build new  ...  view the full minutes text for item 7.

8.

Capital Strategy and Capital Programme 2020/21 to 2024/25 pdf icon PDF 290 KB

Additional documents:

Minutes:

Consideration was given to a report of the Director of Finance which set out the Capital Strategy for 2020/21 to 2024/25 and thereby the proposed 2020/21 capital programme, including identified capital investment priorities, together with the indicative capital programme for 2021/22 to 2024/25, having regard to the resources available over the life of the programme.

 

The Cabinet Member for Finance and Corporate Resources, the Deputy Chief Executive and the Director of Finance presented the report.

 

The Council’s Capital Strategy and Capital Programme were set over a five-year timeframe. The proposed Capital Strategy and Programme for 2020/21 to 2024/25 took the essential elements of the 2019/24 and previous years’ strategies and programmes and moved them forward in the context of the financial and political environment for 2020/21.

 

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 2025/26 to 2034/35.

 

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 Medium-Term Property Strategy, the Creating a Better Place Strategy, Commercial Property Investment Strategy and Fund, Housing Strategy and Income Generation Strategy. The Strategy also advised that the Council was proposing to continue the use of 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 2020/21 revenue budget would rely on up to £3.750m of such funding from capital receipts.

 

Members were informed that the projected outturn spending position for 2019/20 was £63.945m. The People and Place Directorate, which managed all of the major regeneration projects, constituted the main area of expenditure (£33.406m). Ringfenced and Un-ringfenced grants (£29.888m) followed by Prudential Borrowing provided the main source of financing (£18.967m). Actual expenditure to 30 November 2019 was £33.031m (51.63% of forecast outturn). This spending profile was in line with previous years, the position would be kept under review and budgets would continue to be managed in accordance with forecasts.

 

The Council had set out its Capital Programme for the period 2020/21 to 2024/25 based on the principles of the Capital Strategy. The Capital Programme and Capital Strategy had been influenced by the level of resources considered available at the time of preparation. If additional resources became available, projects that met the Council’s strategic capital objectives would be brought forward for approval.  ...  view the full minutes text for item 8.

9.

Treasury Management Strategy Statement 2020/21 pdf icon PDF 592 KB

Minutes:

The Select Committee gave consideration to a report of the Director of Finance which presented the strategy for 2020/21 Treasury Management activities including the Minimum Revenue Provision Policy Statement, the Annual Investment Strategy and Prudential Indicators together with linkages to the Capital Strategy.

 

The Cabinet Member for Finance and Corporate Resources, and the Director of Finance presented the report.

 

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 2020/21 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 2020/21.

 

The proposed Treasury Management Strategy was presented for scrutiny to the Overview and Scrutiny Performance and Value for Money Select Committee so that any comments could be incorporated into the report before it was considered by Cabinet.

 

Members sought and received clarification on the following:

·       Page 393 of the report, Table 1 – this showed unallocated funds that could be used for new projects and could provide a Capital Programme contingency. The amount increased in proportion to the programme.

·       Page 394 of the report, Table 2, HRA figures – these aligned with those in the HRA report. The figure for 2020/2021 had been increased by the re-profiling from 2019/2020.

·       Ethical investment – the Council has an ethical investment policy and the fourth principle of investment was an ethical approach. It was difficult to always ensure and tools were being developed to track investments and show where they ended up. The Council was very risk-averse and would always make sure investments were safe.   

 

RESOLVED that the following be accepted and recommended to Cabinet:

1.     Capital Expenditure Estimates as per paragraph 2.1.2;

2.     MRP policy and method of calculation as per Appendix 1;

3.     Capital Financing Requirement (CFR) Projections as per paragraph 2.2.4;

4.     Projected treasury position as  ...  view the full minutes text for item 9.

10.

Council Tax Reduction Scheme 2020/21 pdf icon PDF 283 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 2020/21.

 

The Cabinet Member for Finance and Corporate Resources, and the Director of Finance presented the report.

 

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 2020/21 scheme must be agreed by full Council in line with budget setting and no later than 10 March 2020. For Oldham, this required the Council to agree a revised 2020/21 scheme at the 26 February 2020 Council meeting. Any proposed change must be subject to prior consultation with the major preceptors and the public.

 

The Council’s current CTR scheme 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.

 

As more working age Housing Benefit (HB) cases moved to UC, Local Authority CTR schemes were in transition, as the number of cases aligned to the HB model of assessment reduced and the number of UC cases aligned to the UC structure increased. It was therefore considered pragmatic to wait until

more cases had migrated to UC to introduce a fully revised CTR scheme which would appropriately link with the design of UC. This would avoid the administrative complexity of running two distinct working age CTR schemes concurrently and would mean that the CTR scheme would remain unchanged in 2020/21.

 

RESOLVED that the Council Tax Reduction scheme be unchanged in 2020/21.

11.

Statement of the Chief Financial Officer on Reserves, Robustness of Estimates and Affordability and Prudence of Capital Investments pdf icon PDF 338 KB

Minutes:

Consideration was given to a report of the Director of Finance which recommended that the Select Committee considered the level of balances necessary to support the 2020/21 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.

 

The Cabinet Member for Finance and Corporate Resources, and the Director of Finance presented the report.

 

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.

 

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 £22.937m had been used to underpin the Council’s revenue budget. For 2020/21, there was a proposed use of reserves of £11.579m combined with a number of one-off measures totaling £5.150m. The continued use of reserves and one-off measures had the impact of deferring the changes that were required to balance the revenue budget by on-going sustainable means. The implementation of the next phase of the transformation programme in 2020/21 was expected to begin to address this challenge. The expected benefits of the transformation programme would be phased over several financial years and it was anticipated that there would continue to be a need to utilise reserves until the programme was complete.

 

As detailed within the Council’s Audit Completion Report, presented alongside the Statement of Accounts, the External Auditors concluded that for 2018/19 the Council had made proper arrangements to deliver financial sustainability in the medium term. However, it was also pointed out that “the use of reserves to support revenue budgets in the longer term is not sustainable, and the Council will need to ensure that its longer term financial sustainability does not deplete its reserves to unsustainably low levels”.

 

Members noted that financial resilience depended in part on the Council maintaining an adequate level of reserves. In order to scrutinise the level of reserves held by the Council, the policy on earmarked reserves was considered by the Audit Committee in June  ...  view the full minutes text for item 11.