Agenda item

Draft General Fund Budget and Medium Term Financial Strategy Update


The Director of Finance, Governance and Property introduced the report and stated that an updated version of Appendix 2 had been provided to Members, as the table had been realigned. He described how the report explained the Council’s current financial position, and had been discussed by Cabinet last week. He then outlined that in the previous six month’s there had been considerable pressures in some areas, and highlighted one area of pressure as children’s social care, which had received additional funding and improved their OFSTD score at the last inspection. The Director of Finance, Governance and Property also highlighted that adult’s social care was under financial pressure, which was common on a national scale, and pressure on the Housing General Fund, which was due to increased numbers of people presenting themselves as homeless.

The Director of Finance, Governance and Property then moved on to the forecasted financial position in 2020/21 and clarified that an indicative financial assessment had been carried out before Christmas, but the Council were still waiting on the final allocations of this due to purdah delays. He explained that preliminary findings from this appeared hopeful, and budget allocations had already increased, so he felt the Council were in a good financial position. He added that last year the Council had undertaken a Spending Review and Fair Funding Review, but due to only one-year spending agreements from central government, these were not at the forefront, although the Council could make an estimate for the next two to three years. He stated that additional funding received would go towards adult and children’s social care, and increased homelessness grants.

The Director of Finance, Governance and Property then moved on to discussing council tax and the governance process for setting this. He explained that the Cabinet recommendation to increase council tax would go to the relevant scrutiny committee for comment, which would then feedback into Cabinet in February, and would be sent to Full Council for decision. He stated that the proposed budget would see an increase in 2% for the adult social care precept, which was the maximum it could be raised by, and an increase in general council tax by 1.49%, which was not the maximum of 1.99%. He commented that this would increase the Council’s base going forwards, as tax was a more stable income compared to investments.

The Director of Finance, Governance and Property drew the Committee’s attention to paragraph 4.4 on page 9 and clarified the figures outlined in the table, including the current council tax banding, total number of properties, and average net charge, which took into account discounts, tax schemes and support provided. He stated that council tax bands A-C made up 70.4% of all properties, and a 1% council tax rise would equate to an additional 19p per week. He then drew the Committee’s attention to the Medium Term Financial Strategy (MTFS) on page 13 of the agenda, which outlined that the increase in council tax and adult social care precept would increase funding to the council by £1,337,000 working total, which would increase the surplus next year to £4million. He added that even with the proposed increase in council tax, the Council’s surplus would only raise to £1.4million in year 2 and £45,000 in year 3. He clarified that without an increase in council tax, the council would be in deficit in the financial year 2020/21.

The Chair opened debate and stated that in total council tax would be rising by 3.49%. He queried the background to this, and asked what central government’s policies were on local authorities increasing taxes, particularly special precepts. The Director of Finance, Governance and Property stated that the government had only proposed a one-year funding settlement, but central government had also struggled to fund adult social care. He stated that local authorities had ongoing powers to increase council tax and precepts, but local authorities were currently waiting on a White Paper for further clarification. The Chair then highlighted point 2.3 on page six of the agenda, and asked how the council were reducing staff expenditures. The Director of Finance, Governance and Property replied that this was a continuing aspect of the council’s budget, and included reducing sickness related expenditure and overtime costs; and monitoring the amount of agency staff compared to permanent staff employed by the council. He mentioned that this was regularly considered at Directors Board, and in previous years, a target had been set to reduce staff expenditure, but that was not the case in this financial year. He summarised and commented that a reduction in staff expenditure would not be achieved through staff redundancies.

The Chair then queried the increase in budget allocation and asked how much revenue was included in this. The Director of Finance, Governance and Property replied and highlighted page 13 of the agenda, which stated that in 2020/21 an increase in tax would increase revenue by £3.1million, as well as an increase in business rates. He stated that almost £2.5million would be received from central government. The Chair asked if the working total surplus could be achieved in 2020/21 without increasing council tax, to which the Director of Finance, Governance and Property replied that a net £2.6million could be achieved, but the surplus could not be carried forward.

The Chair moved onto discussing the position of investment and highlighted page 13 of the agenda. The Director of Finance, Governance and Property stated that borrowing was not just investment, but related to the amount of capital expenditure. He added that temporary revenue from borrowing could be used for investment and Thurrock Regeneration Limited (TRL), and that the base amount of investment related income was £1.7million, with the rest going to TRL. He clarified that the majority of information relating to investment was discussed in the next item, but the headline figure was £30million net income from investment. The Chair then asked about the CIPFA guidance, outlined at point 4.31 on page 8 of the agenda, and queried how much confidence officers had in this investment income, and whether CIPFA would change the guidelines relating to investment for Councils. The Director of Finance, Governance and Property responded that CIPFA only produced guidelines, and explained that the Council’s investments were capital backed, compared to CIPFA guidance that mainly discussed non-capital backed investments. He stated that CIPFA were mainly worried about councils investing in property outside of the borough, particularly in areas such as housing and shopping centres. He commented that Thurrock were investing bond issues in the energy sector, and no property investment had been purchased. He clarified that he had spoken with the Ministry of Housing, Communities and Local Government (MHCLG) and the National Audit Office, who had never said to not undertake investments, and were moving towards local government self-financing. He summarised and stated that he did not know if CIPFA or government regulations might change in the future, but if they did then the Council would revisit their investment approach. The Chair commented that if the rules were to change then that revenue stream would be at risk and issues would arise with investments, which would lead to a loss of funding. He asked if the investments revenue could be made-up from other streams if it were lost. The Director of Finance, Governance and Property replied that if central government did change the rules regarding investments then a transition period would be put into place, and many other local authorities used investment in the same way as Thurrock. He stated that Thurrock had built into the budget increased interest payable which helped to stabilise long-term investments.

Councillor Fletcher asked three questions, the first being if officers were concerned that council tax was not being increased to its full amount, as officers had been concerned last financial year that it would have an impact. He then asked about potential population increases, as 32,000 new homes were being proposed across the borough, and if this would have an effect on council tax income and had been factored into the budget. Finally, Councillor Fletcher asked about potential problems that were associated with capital projects, such as overspend and delays, and if these were included in the budget. The Director of Finance, Governance and Property replied to each question in turn and stated that in answer to the first question, officers felt worried when council tax was not increased to its maximum, as even a 1.49% increase reduced the Council’s income by £4-500,000 per year. He stated that if council tax were increased by the maximum amount of 1.99%, the budget would be in surplus of £1.2million or £1.3million in year 3, compared to the current outlook of £45,000. He clarified that council tax was the most sustainable form of income for the council, as it was not affected by national changes, and because of this, he felt that council tax should increase by 3.99%. The Director of Finance, Governance and Property then answered Councillor Fletchers second question and stated that some modelling work had been undertaken relating to the increased population and increased costs. He stated that expenditure would change if the population increased, for example, more would be spent on adult and children’s social care, as well as the potential for a new waste collection round. He described how the finance team had been working with the planning team to discuss the increased amount of council tax that would be collected through population growth, as well as the increased expenditure. He summarised and stated that new houses, even with the increase in council tax associated with this, would increase the pressure on services for the Council. The Director of Finance, Governance and Property then answered Councillor Fletcher’s third question and stated that the capital programme would be discussed as part of Item 6, but if a project overspent then funding would have to be found. He stated that the funding options were ranked, so external funding bids were the best way to fund projects, then through capital receipts, and finally through borrowing as there was costs associated with this such as interest and MRP, also known as depreciation. He commented that recently there had been lots of discussion regarding the funding of the A13 project, which had been through the audit process, but this would not affect the Council’s funding until next year or the year after. He summarised and stated that when the funding results of this project were finalised, they would be built into the budget.

Councillor Hague commented that he felt lots of work had been put into this budget by officers and Members from all parties. He felt that the Council’s finances seemed stable, but asked if the increase in council tax was as low as possible, as although there was pressure on services, an increase in council tax could put additional pressure on residents. He was supportive of the increase in council tax, as it had not been increased by the maximum level, which would help residents who had their own financial priorities. He felt this would lead to growth for the council, whilst not over-burdening residents. The Chair also asked if residents in financial difficulty had been considered when writing the budget, as inflation and the cost of living had also risen. He highlighted that further mitigation to help some residents may be necessary, as some would experience a rise in rents, service charges, and council tax. The Director of Finance, Governance and Property replied that an equality assessment had been carried out and was attached as an appendix to the report and table 4.4 showed the real impact the council tax increase would have on residents. He added that the additional money raised through council tax could be used to support the borough’s most vulnerable residents. The Director of Finance, Governance and Property then highlighted that only 50% of HRA tenants paid any rent, so the most vulnerable in society received the support they needed, but he appreciated that some people would be caught in the middle.

The Chair stated he felt the situation for some residents was already difficult as the economic situation could be tough. He outlined appendix 2 of the report and felt that although £900,000 of savings was being made, this could be increased through effective spending and finding further efficiencies. The Director of Finance, Governance and Property replied all directorates were searching for savings and efficiencies, but the MTFS proposed a modest figure, as if the figure was larger, directorates would be forced to make top-down cuts. He added that although the MTFS identified almost £1million in savings, officers would not just stop once this figure was met, and would continue to try to increase income, reduce expenditure and focus on efficiencies. He highlighted the work the procurement and commercial teams had done in finding savings, in collaboration with the transformation team.

The Chair then asked about a recent motion that had been brought to Full Council regarding climate change, and asked what actions had been considered in the budget to mitigate climate change and the impact this would have on residents. The Director of Finance, Governance and Property replied that amounts from the budget surplus had been set aside specifically to look at air quality around the borough. He added that following the motion, Governance Group, which included the Leader, Monitoring Officer, and Leaders from all parties, had agreed to set up a Task Force to consider climate change, and its members would include elected Members, residents and external partners. He stated that this would fall under the remit of the Director of Place, and an update would be provided to Full Council next week.

The Chair then asked what obligations the Council had to fulfil in balancing the budget, as he understood that the budget had to be balanced for one year, not the full span of the 5 year MTFS. The Director of Finance, Governance and Property replied that a balanced budget meant one that Thurrock could afford, so the Council could run at a loss if reserves could be used to fund this. He stated that Thurrock Council did not use this definition though and for Thurrock, a balanced budget meant one where income was equivalent to expenditure. He mentioned that the Council’s Section 151 Officer he had to consider a three-year budget, and although it did not have to balance, he had to feel confident that the council could afford it. He clarified that he did not have to consider years four and five of the MTFS.

Councillor Rigby commented on the table at 4.4, and asked which residents could receive discounts on their council tax bill. The Director of Finance, Governance and Property replied that the most common council tax discount was the single person discount, which included people such as one-parent families, even if they had adult children that attended university, and widowers, who all received a 25% discount. Councillor Churchman then highlighted the residents who fell in the middle and were not overtly vulnerable, but not secure either, such as residents who were privately renting but were waiting for council housing, and had seen an increase in their service charges.

The Chair asked what the level of democratic oversight and accountability there was for corporate projects was, such as the proposed Civic Offices development. He proposed an additional recommendation which read as follows: “The Corporate Overview and Scrutiny Committee recommends to Cabinet and Council that the budget should include the following points:

1. A triple freeze be agreed for rents, service charges and council tax
2. Cabinet to scrap the Civic Offices project
3. Cabinet to agree to net zero emissions by 2030”

The additional recommendation was put to a vote, the outcome of which was as follows:

Votes for: Councillors Fletcher and Gerrish (2)
Votes against: Councillors Churchman, Hague and Rigby (3)


1. The Committee commented on the proposed council tax level with mind to the comments set out in the report.

2. The Committee commented on the draft budget as set out within this report to inform final budget proposals at Cabinet on 12 February 2020.

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