Agenda and minutes

There were no apologies for absence.

There were no items of urgent business received.

There were no declarations of interest received.

There were no public questions received.

The Select Committee 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.

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

In relation to the Revenue position, Members were 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 had 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 had impacted on the Authority’s budgets as a result of the pandemic

The pandemic had affected nearly all aspects of Council service delivery; however, the most significant areas of concern were the People and Place, Children’s Services and Community Health & 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.

Members were informed that the overall corporate position was partly 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 had been submitted to the MHCLG but not yet formally agreed for payment. In Appendix 1 to the report, the full Government grant was presented as a single sum 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, the summary report presented the position after applying the Government grant across Portfolio areas.

An update detailing the major issues driving the projections was contained within Annex 1, Section 3.

Section 4 of the report advised the Select Committee of the grants that the Council had received. There had 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 change during the remainder of the financial year.

As this financial monitoring report reflected  ...  view the full minutes text for item 5.

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

The Cabinet Member for Finance and Corporate Green, 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 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 2021/22 scheme at the 4 March 2021 Council meeting. Any proposed change must be subject to prior consultation with the major preceptors, such as the Greater Manchester Combined Authority, and the public.

Since 2015/16, the CTR scheme had limited CTR to a maximum of 85% of Council Tax for a Band A property and removed the second adult rebate for those of working age. Following a public consultation exercise in Autumn 2018, the scheme was then amended from April 2019 to introduce a range of changes to the scheme largely aimed at 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 2020/21.

The number of CTR claimants of working age had increased during the COVID-19 pandemic and this impacted on the level of Council Tax that could be collected by reducing the Council Tax Tax Base. Local Council Tax Support Grant funding of £3.183m had been allocated for Oldham to offset the

impact of increased caseloads on the tax base and this would be allocated to support financial position of the Council for 2021/22.

The economic impact of the pandemic in 2020/21 for those CTR claimants of working age had been partly offset by Government support in the form of the Hardship Fund grant, which offered an additional reduction in Council Tax bills of up to £150. The Council also used the Hardship Fund grant to ensure CTR claimants were not detrimentally affected by the change in Housing Benefit

earning disregard regulations introduced under the Social Security (Coronavirus) (Further Measures) Regulations 2020 (SI 2020/371). This Hardship Fund protection would not be in place in 2021/22.

However, there was continued uncertainty about future impacts of the pandemic for residents and the local economy which would impact on the Council’s ability to accurately model any proposed changes to the 2021/22 CTR scheme.

Members noted that the Council Tax was accounted for in the Collection Fund and had an impact on the General Fund budget of the Council one year in arrears. The Collection Fund challenges  ...  view the full minutes text for item 6.

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 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.

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

This 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.

The report presented 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.

It also 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 the local strategies and policies relevant to the Medium Term Financial Strategy and set out developments in Local Government Finance.

Policy announcements and implications arising from the Government’s 2020 Spending Round published on 25 November 2020 and the Provisional

Local Government Finance Settlement (LGFS) published on 17 December 2020 were highlighted.

Key items of funding confirmed in the 2021/22 Provisional LGFS were:

·         Continuation of the expected Improved Better Care Fund Grant at a value of £10.858m;

·         An increase to the Social Care Support Grant of £1.993m taking the total allocated to £8.947m. The £1.993m had been used to support the budget by offsetting assumed pressures in the children’s and adults social care budgets;

·         A new 2021/22 allocation for Lower Tier Services Support Grant (£0.407m). This new grant had been used to support the 2021/22 budget;

·         A Local Tax Income Guarantee grant for 2020/21. A sum of £1.000m was anticipated and would be incorporated into the accounts for 2020/21. This would then be taken forward as a reserve to support the budget for 2021/22;

·         The notification of a new Local Council Tax Support Grant at a sum of £3.183m. This had been used in full to support the 2021/22 budget;

·         The allocation of unringfenced COVID grant of £7.737m. This had been used to finance COVID related pressures that had been anticipated of £3.741m. The balance offsets anticipated further pressures;

·         The continuation of Sales, Fees and Charges grant compensation in 2021/22. The availability of this potential funding stream was part of the budget strategy to address COVID;

·         The switching of unringfenced homelessness grant funding of £0.358m to a new ringfenced grant, the Homelessness Prevention Grant of £0.532m; and

·         A reduction in the Business Rates Top Up grant of £0.399m, leading  ...  view the full minutes text for item 7.

Consideration was given to a report of the Director of Finance which set out the latest Housing Revenue Account (HRA), the detailed budget estimates for 2021/22, the strategic estimates for the four years 2022/23 through to 2025/26 and outturn estimate for 2020/21. The report also set out the recommended

dwelling, non-dwelling rents and service and concierge charges to be applied from April 2021.

The Cabinet Member for Housing presented the report.

The Select Committee noted the report set out the HRA proposed 2021/22 original budget and the forecast outturn for 2020/21 along with the provisional strategic budgets for 2022/23 through to 2025/26.

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%, an 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 noted 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 had reverted to its pre-2015 guidance for the period 2020-2025 for all properties, confirming all rents were 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 would follow the rent  setting guidance of CPI plus 1%, resulting in an increase of 1.5% (CPI was 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. HRA resources were to be used to support several major approved housing capital projects including development within the town centre and on numerous smaller sites around the borough. There was also a commitment to purchase currently empty

properties owned by private sector landlords to increase the number of Council owned housing stock.

The HRA detailed budget for 2021/22 and strategic estimates for the four years 2022/23 to 2025/26 and  ...  view the full minutes text for item 8.

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 Director of Finance introduced the report.

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 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.

The format of the Capital Strategy reflected 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 was presented at Appendix 1. It was prepared in 15 sections and 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 had been removed from the Capital Programme.

The Capital Strategy section (section 1) highlightedthe impact of COVID-19 and the way this had shaped capital spending plans for 2021/22 and future years. During 2020/21, the COVID-19 pandemic 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 would be resumed and the Councils capital spending plans which had inevitably been interrupted in 2020/21, could get back on track during 2021.

The pandemic had presented significant challenges for the feasibility, design and delivery of capital projects. As well as practical issues associated with maintaining safe working arrangements, supply chains and similar issues, it had been necessary to revisit significant elements of the strategy to ensure the priorities for capital investment remained appropriate in the context not only of the Council’s challenging financial position but having regard to the potential longer-term  ...  view the full minutes text for item 9.

Consideration was given 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.

The Director of Finance introduced 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 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 limit 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.

The report included an economic background commentary which had been updated to reflect the latest position, especially in relation to the UK leaving the EU on 31 December 2020.

The proposed Treasury Management Strategy was presented to the Overview and Scrutiny Performance and Value for Money Select Committee to enable scrutiny of the report so that any comments could be incorporated into the report before it was considered by Cabinet on 23^rd February 2021.

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 at 31 March 2021 as per paragraph 2.3.3.

5.    Treasury Limit’s as per section 2.4.

6.    Borrowing Strategy for 2021/22 as per section 2.6

7.    Annual Investment Strategy as per section 2.10 including risk management and the creditworthiness policy at section 2.11.

8.    Level of investment in specified and non-specified investments detailed at Appendix 5.

Consideration was given to a report of the Director of Finance which recommended that the Overview and Scrutiny Performance and Value for Money Select Committee 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.

The Director of Finance introduced 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.

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.

Whilst the Council had prepared a detailed revenue budget within a three 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 alongside a number of one-off measures. In 2020/21, £10.008m of reserves and £5.150m of one-off measures were used to support the revenue budget. 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 £16.988m and specific reserves of £0.127m together with £25.463m 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 reserve of £12.012m would be used to support 2022/23.

There was, therefore, a considerable reliance on the use of reserves to balance the budget in 2021/22 and also 2022/23.  ...  view the full minutes text for item 11.