Agenda item

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 increase by 2.99%. The Council proposed to use the flexibility allowed to defer a further 1% in the ASCP to 2022/23. This is of course subject to confirmation at Budget Council on 4 March 2021.

The Government proposed not to set Council Tax referendum principles for Mayoral Combined Authorities in 2021/22 but had set referendum principles for Police and Crime Commissioners (including the GM Mayor) capped at a value of £15. The Mayoral General precept (including Fire Services) had been kept at 2020/21 levels – with a Band D Council Tax Charge of £90.95. The Mayoral Police and Crime Commissioner Precept had increased by £10, giving a Band D Council Tax change of £218.30

The Cabinet was informed that the report also advised of the proposal to leave the Council Tax Reduction Scheme for 2021/22 unchanged from 2020/21. However, during 2020/21, working age Council Tax reduction recipients have benefitted from support of £150 from a Government Hardship fund. This scheme was not continuing in 2021/22 and it was recommended that the Council reviewed its financial position during 2021/22 to determine if it is able to provide any additional hardship relief.

The starting point for preparing the 2021/22 revenue budget estimates was the Month 8 2020/21 revenue budget forecast outturn position and summarised in Section 8. It highlighted a current adverse projected variance for 2020/21 of £8.330m (including COVID pressures). A reduction in this overspend position was anticipated as a result of further funding being provided by Central Government and contributions from partners alongside management actions. However, it was important to note that if there was any remaining overspending at the end of 2020/21 then it would need to be funded by the use of reserves.

Section 9 of the report detailed key budget adjustments and expenditure pressures underpinning the forecasts that provided the backdrop for the Council’s Medium Term Financial Strategy including the mid-year adjustment to estimates from a budget reduction requirement of £23.251m to £29.940m (rounded to £30.000m). The major elements of this adjustment were addressing budget reduction proposals for 2020/21 (some approved in the budget for 2019/20) that could not be achieved (£2.089m), reduced treasury management 4 income of £6.600m and an assumption that Flexible Use of Capital receipts at a value of £2.000m would support the budget.

Since the mid-year budget review, there had been further changes to the estimates. Key expenditure adjustments following the mid-year review included:

·         £0.441m for additional treasury management and education services pressures.

·         £7.737m for pressures arising from COVID fully financed by Government grant.

·         A net reduction of pressures of £2.777m due to:

o   a revision of estimates for the cost of financing capital expenditure (Investment Fund) at a reduction of £1.650m.

o   reducing the estimate for pay inflation (£1.017m).

o   releasing unallocated Development Fund resources of £0.825m but in effect using it to finance pressures relating to a contract with a third party supplier (£0.500m) and costs no longer chargeable to the Dedicated Schools Grant (£0.265m).

o   the release of £0.050m of resources that were previously allocated to support additional Coroners Service pressures identified through the 2020/21 Revenue Monitoring Process.

·         £0.166m reduction in spending relating to a revision to assumed passported Adult Social Care precept and Parish Precepts.

·         A net reduction in levies of £0.393m.

In relation to income, the report highlighted:

·         A reduction in Central Government Business Rates Top Up Grant and Grants in Lieu of Business Rates at a combined value of £1.087m.

·         £13.202m of increased Unringfenced Grant Funding, primarily £7.737m of COVID Grant, £3.183m Local Council Tax Support Grant and an increase of £1.993m for the Social Care Support Grant.

·         A reduction in Locally Generated Retained Business Rates income of £0.364m.

·         A reduction in the Council Tax Tax base (due to the impact of the increase in claimants of Council Tax Reduction resulting in a total reduction in Council Tax income of £2.597m from that expected of which £0.175m relates to ASCP that cannot be passported to the service

Section 9 also advised of a Collection Fund deficit that would be charged to the General Fund of £25.809m. Of this sum £0.353m related to an adjusted 2020/21 balance using flexibilities allowed by Central Government. The balance was a technical adjustment required to the budget as a result of the Collection Fund deficit caused by the Government introducing Business Rate reliefs for retail, leisure, hospitality and nursery businesses after the 2020/21 budget had been set. The estimated sum (the final figures would only be confirmed at the end of the financial year) was £25.456m. Government was paying the Council grant compensation for this loss of Business Rates income through 2020/21 and this would be carried forward as a reserve. This would then offset the Collection Fund deficit but had a significant impact on the overall use of reserves.

Based on the latest estimates, the budget reduction requirement for 2021/22 has decreased from the previously reported figure of £29.940m to £27.623m, increasing to £53.079m after the technical adjustment.

Section 10 of the report detailed the Administration’s budget reduction proposals. There was a total of 43 proposals expected to deliver savings of £8.920m in 2021/22 (of which one was a use of reserves), leaving recurrent budget reductions of £8.793m. In 2021/22, if approved in full, those recurrent proposals further reduced the budget reduction requirement to £44.286m for 2021/22.

Sections 11 and 12 explained the approach to balancing the 2021/22 budget. Importantly, the budget strategy of using £29.000m of reserves to support the budget over a two year period (2021/22 and 2022/23) was outlined together with the use of the opportunities provided by the ability to use Capital Receipts to support spending on transformational projects up to a value of £2.000m in 2021/22. A number of specific and corporate reserves would be used to address the balance as follows:

·         £25.456m of Section 31 grant received in 2020/21 held to support the Collection Fund Deficit in 2021/22 as a result of Business Rates relief for retail, leisure, nursery and hospitality businesses (a technical adjustment);

·         £0.127m as a result of budget reduction proposal REF-BR1-432;

·         £1.000m of 2020/21 Earmarked Reserves created as a result of the Local Tax Income Guarantee grant; and

·         £15.703m of other reserves brought forward from 2019/20.

There was also a reserve held at a value of £12.297m to support the 2022/23 budget if required. Approval of the proposals set out in this report in full by Budget Council would deliver a balanced revenue budget for 2021/22.

Other key sections in the report:

·         summarised the forecast reserves and balances position supporting the Council’s financial resilience;

·         set out the Administration’s proposals in relation to Fees and Charges; and

·         detailed the Council’s Pay Policy Statement (as required by sections 38 to 43 of the Localism Act 2011).

The final section of the report set out the Council’s MTFS covering the period 2021/22 to 2023/24, a shorter timeframe than is usual practice given the uncertainties created by COVID and the lack of clear direction Government funding intentions for future years. It was important to note that as the Government has only provided grant funding notifications for 2021/22, the MTFS estimates for 2022/23 to 2023/24 were based on a series of assumptions and therefore must be considered indicative at this stage. This has generated significant uncertainty and hindered effective planning by the Council both financially and operationally as future Government funding intentions are difficult to assess.

This position, together with the transformational and organisational plans for change that the Council would implement to address the financial challenge were outlined in Section 17 of the report.

After having addressed the £27.623m (adjusted for the technical Business Rates issue), the budget reduction requirement for subsequent years was forecast to be £31.900 m for 2022/23 and £21.849m for 2023/24.

The MTFS highlighted the plan to deliver significant savings from 2022/23 onwards. Whilst it was anticipated that the Council will continue to rely on the use of reserves to support the revenue budget in 2022/23 at a value of £12.297m, additional budget reductions were expected to be achieved as part of the Council’s transformation programme.

Given the importance of delivering budget reductions and embedding the programme of transformational change, during 2021/22, there would be a regular review of the progress of existing change programmes against the delivery milestones and financial targets.

The Revenue Budget 2021/22 and Medium Term Financial Strategy 2021/22 to 2023/24 was presented to the Overview and Scrutiny Performance and Value for Money (PVFM) Select Committee for consultation and scrutiny on 28 January 2021. The Select Committee scrutinised the budget report and the other reports on the agenda that form a core part of the Council’s strategic financial planning framework. The Select Committee was content to commend the report to Cabinet without additional comment. It is important to note that the report and financial information within it would continue to be revised as estimates are confirmed and external funding or charging notifications are received.

Options/Alternatives considered:

Option 1 – Cabinet accepts the assumptions and resulting financial forecasts presented within the report and the budget position at Appendix 4.

Option 2 – Cabinet proposes amendments to the assumptions which would change the resulting budget gap and financial forecasts.

Option 3 – Cabinet approves and commends to Council all the budget reduction proposals included in this report to the value of £8.920m and the approach to the use of reserves and balances as well as Council Tax and Adult Social Care Precept in increases.

Option 4 - Cabinet requests that further work is undertaken on some or all of the budget proposals and the approach to reserves and balances.

RESOLVED – That:-

1. The Cabinet accepted and commended to Council:

1.    The 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;

2.    The impact of Oldham Council Policies and Strategies on the Council’s budget setting process and the development of its Medium Term Financial Strategy;

3.    The financial forecasts for 2021/22 to 2023/24 having regard to the Final Local Government Finance Settlement and the February 2021: COVID-19 Funding for Local Government in 2021 to 2022 Policy Paper and associated funding announcements.

4.    The key issues to be addressed in continuing to respond to the financial challenges facing the Council;

5.    The proposal that the Council reviews its financial position during 2021/22 to determine if it was able to provide additional Council Tax hardship relief;

6.    The reaffirmation of the Council’s commitment to the modified Housing Benefits scheme, a discretionary local scheme which allows the Council to disregard the value of any War Disablement Pension or War Widows Pension over and above statutory disregard limits;

7.    The recurrent 2021/22 Budget Reduction Proposals at a value of £8.793m;

8.    Flexible Use of Capital Receipts at a value of £2.000m

9.    The proposed use of £42.286m of reserves to balance the 2021/22 budget including £0.127m for a one off budget reduction;

10.The proposed use of £12.297m of reserves to support the 2022/23 budget;

11.The approach to managing the budget during the COVID pandemic and the continuation of budget management measures introduced in 2020/21 as outlined in Paragraphs 12.6 to 12.11;

12.The proposed fees and charges schedule included at Appendix 7;

13.The draft pay policy statement included at Appendix 11;

14.A proposed Council Tax increase of 0.99% for Oldham Council General Purposes.

15.A proposed 2.00% increase for the Adult Social Care Precept for 2021/22 and a further 1.00% increase for 2022/23.

16.The specific 2021/22 charges set out at paragraph 15.3 and Table 29 of the report and in detail at Appendix 8;

17.The proposal to draw on the Collection Fund for major preceptors of £116.241m for Borough Wide services and £98.552m for Council services;

18.The proposed net revenue budget expenditure for 2021/22 for the Council set at £253.561m;

19.Revised estimated budget reduction targets of £31.900m for 2022/23 and £21.849m for 2023/24 before any use of reserves and indicative budget proposal.