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 2022/23, having regard to the Provisional Local Government Finance Settlement published on 18 December 2021.

This report presented the Council’s Revenue Budget for 2022/23 including the Administration’s revenue budget proposals for 2022/23. The report set out the key policies

and strategies that influenced the budget process, the initial budget reduction requirement for 2022/23, how that had been adjusted to arrive at a revised budget reduction requirement

and then the means by which the budget was balanced.

Section 1 presented an introduction to the report and explained the report format.

Section 2 set out key Council Policies and Strategies including the Oldham Plan, Corporate Plan/COVID-19 Recovery Strategy, Constitution and Rules of Procedure, as the framework

within which the Budget had been prepared.

Section 3 presented Local Government Finance developments which were likely to be taken forward during 2022/23. It also highlighted the Chartered Institute of Public Finance and

Accountancy (CIPFA) Financial Resilience Index, the CIPFA Financial Management Code and a commentary on financial resilience, all of which were of importance when considering

the Council’s financial standing in the context of budget setting for 2022/23.

The starting point for preparing the 2022/23 revenue budget estimates was an underlying base budget of £237.349m and the 2021/22 revenue budget forecast outturn position presented

in the month 8 Financial Monitoring Report. This was summarised in Section 4. It highlighted a current favourable projected variance for 2021/22 of £2.672m. This consisted of net COVID pressures of £3.311m and a favourable business as usual variance of £5.983m.

In considering this position, it was important to note that the Council had received £7.737m of general grant as support for COVID related expenditure from the Government for 2021/22

and an estimated £0.352m of compensation for Sales, Fees and Charges; a total of £8.089m. This was being used to offset an overall pressure of £11.400m caused by the pandemic. As highlighted later, this COVID pressure had to be addressed in 2022/23 as the Government was not providing any additional specific funding to support COVID costs in 2022/23.

Sections 5 to 9 set out how the expenditure pressures that contribute to the budget gap had been determined.

Section 5 summarised the revisions to the estimates since the initial budget gap for 2022/23 was assessed at £31.900m. An updated budget gap was estimated at £24.431m arising from

a range of adjustments to both expenditure pressures/variations and incomeincreases/decreases.

Looking first at expenditure pressures, these were adjustments to the base budget outlined in Section 6, expenditure adjustments (Section 7), use of the Development Fund (Section

8) and the impact of levies (Section 9). In this regard:

• Section 6 presented eight adjustments whichhad to be made to the base budget. These included adjustments to ensure that one off items from 2021/22 (expenditure funded by one-Government grant, the impact of the use of reserves and the flexible

use of capital receipts) were correctly presented. The overall impact was an increase to the budget of £8.297m a reduction of £2.178m compared to an original estimate of £10.475m.

Section 7 presented a range of expenditure pressures that contributed to the £24.431m budget gap. The original estimate was that such pressures would total £10.786m but after further review, this had increased to £26.281m. The most significant

amendment was £12.000m for costs associated with COVID legacy. This would be built into the budget estimates to reflect the expected on-going costs. This estimate aligned to the COVID costs reported at month 8 of £11.400m as advised above.

A further pressure, albeit directly funded by Council Tax (the Adult Social Care Precept) was increased expenditure to support the adoption of the National Foundation Living Wage by Care Providers.

Section 8 highlighted the use of the original £1.500m Development Fund plus a further £0.180m on Administration priority initiatives.

Section 9 set out the impact of the payment of levies and contributions to the Greater Manchester Combined Authority (GMCA) and a levy to the Environmentcy (EA). It advised that the levies and contributions budget pressures had reduced from £0.678mto £0.267m.

Sections 10 to 14 presented the impact of the Provisional Local Government Finance Settlement announced on 16 December 2021 and income related adjustment to the estimates.

Section 10 provided a commentary on the Spending Review 2021 and the Provisional Local Government Finance Settlement (PLGFS) including unringfenced funding allocations made available to the Council by the Government to help support

the budget process and address the budget gap. A summary of all grants notified or anticipated (for which a sum has been assumed) as included in the PLGFS totalled £75.761m which was £9.792m higher than the forecasts previously presented.

This had to provide support for COVID legacy costs, which as advised above, were estimated to be £12.000m.

The PLGFS confirmed referendum limits for a general purpose Council Tax increaseand the Government would permit rises of up to 2% per annum for  /23 without the need to hold a referendum.

The threshold for Adult Social Care Precept (ASCP) increased to a maximum of 1% for 2022/23 alongside the ability to add up to an additional 3% of unused ASC Precept from 2021/22. Oldham Council had 1% of unused precept from 2021/22

(after an increase of 2%) so therefore the total applicable referendum limit for Oldham for the ASCP for 2022/23 was 2%. There remained a requirement to evidence that the funds generated from this precept were used for Adult Social Care

expenditure.

Section 11 outlined the main ringfenced grants that must be used in accordance with specific guidance but nonetheless helped the Council deliver its services. A value

for a number of these grants had yet to be confirmed.

Section 12 set out the income to support the budget from Retained Business Rates and Grant in Lieu of Business Rates and how this helped to reduce the level of budget reductions required.

Cabinet at its meeting of 24 January 2022, initially set the 2022/23 Business Rates Tax base at £51.325m. However, the setting of this Tax Base was aligned to the preparation of a Government return, the NNDR1, which for 2022/23, had to be

submitted by 31 January 2022. Cabinet therefore delegated the setting of the final Tax Base to the Director of Finance in consulation with Cabinet Member for Finance and Low Carbon having regard to the contents of the NNDR1. Under

delegation, the Tax Base had been revised to £51.850m which was an increase from the initial estimate of £50.612m and the Tax Base approved by Cabinet (£51.325m).

This was despite the introduction of additional Business Rate Reliefs (which reduced the impact of collectable Business Rates) since the original estimate was made.

This was in part due to the introduction of gains from the piloting of 100% Business Rates Retention which were not anticipated.

Grant in lieu of Business Rates represented compensation for historic Government policy announcements and events that had the impact of reducing the amount of collectable Business Rates revenue. These grants were effectively a substitute for

Retained Business Rates income. Due to the introduction of Business Rate Reliefs for 2022/23 and the adjustment to factors used in the calculation, the anticipated grant had increased by £8.628m from £10.843m to £19.471m.

Section 13 presented the Council Tax position for 2022/23. It advised that the Council Tax Tax Base had been set at 57,450, which is lower than the initial estimate but 250 higher than the 57,200 Tax Base for 2021/22.

Current Council Tax policy (subject to confirmation at Budget Council on 2 March 2022) was to have a 1.99% general purposes increase and a 2% increase in the Adult Social Care Precept which is within the referendum criteria issued by the Government in the PLGFS. It was intended that resources generated by 1% of the increase would be used

to support Adult Social Care providers remunerate staff at the level of the National Foundation Living Wage.

Total Council Tax to be generated for use by the Council based on the Tax Base and the 3.99% increase was £102.932m.

The impact of the major precepting Authorities would be confirmed on 11 February 2022.

The Parish Councils both agreed their precepts in late January and confirmed figures are presented in the report.

Section 14 outlined the impact of Collection Fund (the ringfenced account within which Council Tax and Business Rates are managed). It highlighted that there were

three key issues to have regard to, the budget must be adjusted for a 2020/21 Collection Fund deficit of £2.192m (the Government passed legislation to allow deficits arising from the major impact of the pandemic in 2020/21 to be recovered over three years (2020/21 to 2022/23), the 2021/22 Collection Fund forecast outturn projection as outlined in the month 8 financial monitoring report produced a net surplus of £1.307m which would be available to support the 2022/23 revenue budget.

As in 2021/22, a technical adjustment to the budget was required in 2022/23 as a result of the Collection Fund deficit caused by the Government notifying the continuation of Business Rate reliefs for retail, leisure, hospitality and nursery businesses after the 2021/22 budget had been set and the introduction on 15 December 2021 of the COVID-19 Additional Relief Fund (CARF) to provide discretionary rate relief in 2021/22. The estimated deficit this produced in 2021/22

was £13.092m which must be addressed in 2022/23. Government was providing the Council with grant compensation for the loss of Business Rates income throughout 2021/22 and this would be carried forward as a reserve to offset the deficit in 2022/23.

Based on the latest estimates, the budget reduction requirement for 2022/23 had decreased from the previously reported figure of £31.900m to £24.431m, increasing to £37.523m after

the technical adjustment for the Collection Fund deficit of £13.092m.

Section 15 presented the first stage in the Administration’s approach to balancing the budget for 2022/23, a review of the twelve Budget Reductions that were approved within the

2021/22 Budget Report but had an impact of £6.050m on 2022/23. During the review, it was identified that four of the budget reductions would not be delivered in full, reducing the

impact to £5.467m, a reduction of £0.583m. Taking this into account, the budget gap reduced from £37.523m to £32.056m.

Section 16 of the report detailed the Administration’s budget reduction proposals for 2022/23.

There were a total of 53 proposals presented in accordance with Political Portfolios. These were expected to deliver savings totalling £6.268m and have an FTE impact of 22.60. The

proposals also had an impact on 2023/24 of £1.895m and 2024/25 of £1.150m.

All the proposals were presented in summary at Appendix 5 and in detail at Appendix 6.

Two of the proposals required investment of £0.405m in 2022/23 to deliver savings in 2023/24, these are:

a) ASC-BR1-548: Smarter Ways of Working £0.095m

b) ASC-BR1-552: Review Care and Support Plans - £0.310m

Assuming approval of the 2022/23 budget reduction proposals, the budget reduction requirement for 2022/23 reduced from £32.056m to £25.788m.

Section 17 outlined the opportunity to use capital receipts flexibly to finance expenditure leading to transformation in the sum of £2.500m. Having applied this to the budget, the

budget gap reduced from £25.788m to £23.288m.

Section 18 advised that specific and corporate reserves from the Balancing Budget Reserve would be used to address the balance as follows:

• £13.092m of Section 31 grant received in 2021/22 held to support the Collection Fund Deficit in 2022/23 as a result of Business Rates relief for retail, leisure and hospitality and nursery businesses and the discretionary CARF scheme (a technical adjustment);

• £1.300m of 2021/22 Earmarked Reserves created to support Organisational Redesign;

• £0.100 of Earmarked Reserves to fund one-off activities in relation to the Queen’s Jubilee Celebrations;

• £0.405m as invest to save pump priming funding to enable budget reductions to be

delivered for 2023/24; and

• £10.101m of corporate reserves.

There was also a planned movement to reserves of £1.710m relating to the setting aside of gains from the piloting of 100% Business Rates Retention in anticipation of allocating the

funds to the Greater Manchester Combined Authority as its share of gains from 2022/23.

Approval of the proposals set out in this report in full by Budget Council including the use of reserves as set out above delivered a balanced revenue budget for 2022/23.

Section 19 considered the ability of the Council to address COVID related pressures in 2022/23 given the uncertainty that still prevailed and the impact of the Omicron variant.

Section 20 presents the expected level of reserves at the end of 2021/22 at £89.772m and how they supported the 2022/23 budget including the balancing budget reserve for 2022/23

which addressed the reserves requirement as set out above.

Section 21 summarised the overall budget strategy to balance the budget for 2022/23.

Other key sections in the report (Sections 22 to 23):

• set out the Administration’s proposals in relation to Fees and Charges.

• detailed the Council’s Pay Policy Statement (as required by Sections 38 to 43 of the

Localism Act 2011).

Given the importance of delivering budget reductions and embedding the programme of transformational change, during 2022/23, there would be a regular review of the progress of

existing change programmes against the delivery milestones and financial targets. It would

also ensure that there was continuous emphasis on the delivery of change and the achievement of the budget reductions required in line with the three year strategy.

The Revenue Budget 2022/23 was presented to the Policy Overview and Scrutiny

Committee on 27 January 2022. The Committee scrutinised the budget report and the other reports on the agenda that formed a core part of the Council’s strategic financial planning framework.

The Committee considered in detail the Administrations 53 budget reduction proposals for 2022/23 and were content to commend to Cabinet 52 of the 53 proposals at a value of

£6.206m.

The Committee requested that Cabinet review and consider the delivery of one remaining proposal, REF-BR1-526: Get Oldham Growing at a value of £0.062m. The Committee’s view was that progressing the proposal in its current form would have a negative impact on residents in the community that currently accessed this service.

The Committee was content with all other aspects of the report and therefore commended it to Cabinet.

 

Options/Alternatives considered:

Option 1 – Cabinet accepts the 2022/23 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 will change the resulting budget reduction requirement and financial forecasts.

Option 3 – Cabinet approves and commends to Council the contents of the report including 52 of the 53 budget reduction proposals to the value of £6.206m and the approach to the use of reserves and balances as well as Council Tax and Adult

Social Care Precept increases.

Option 4 - Cabinet considers its approach to the Budget Reduction proposal REFBR1- 526: Get Oldham Growing at a value of £0.062m having regard to the comments of the Policy Overview and Scrutiny Committee.

Option 5 - Cabinet requests that further work is undertaken on some or all of the budget proposals and the approach.

 

RESOLVED – That the Cabinet approved and commended to Council:

1.    The policy landscape and economic context in which the Council was setting its revenue budget for 2022/23

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

3.    A proposed 2022/23 Council Tax increase of 3.99% for Oldham Council services (1.99% for general purposes and 2% Adult Social Care Precept) resulting in the charges set out at Table 19 of the report;

4.    The financial forecasts for 2022/23 having regard to the Provisional LocalGovernment Finance Settlement and associated funding announcements, an overall budget reduction requirement of £37.523m;

5.    A revision to the Budget Reduction proposals approved for 2022/23 at the Budget Council of 4 March 2021 to a value of £5.467m;

6.    A total of 52 of the 53 recurrent 2022/23 Budget Reduction proposals at a value of £6.206m with a further £1.895m for 2023/24 and £1.150m for 2024/25;

7.    The Flexible Use of Capital Receipts at a value of £2.500m;

8.    The proposed use of £24.998m of reserves to balance the 2022/23 budget including £0.405m to support the delivery of budget reductions for 2023/24 and a transfer to reserves of £1.710m for Retained Business Rates;

9.    The proposal to draw on the Collection Fund for major preceptors of £121.962m for Borough Wide services and £102.932m for Council services (subject to confirmation);

10.The proposed net revenue expenditure budget for 2022/23 for the Council set at £259.639m;

11.The proposed fees and charges as set out in the schedule included at Appendix 8;

12.The draft pay policy statement included at Appendix 9.