Agenda item

Financial Update


The Corporate Director of Finance, Governance and Property introduced the report and stated that this was the third financial update that had been brought to the Committee in this municipal year and included the impact of COVID-19 on the Council. He outlined that section 3.2 and 3.3 of the report outlined additional government support being given to Thurrock Council, which included £3.48million for general funds and brought the total level of government support to £14.42million. He stated that the Council were currently going through the claim process in regards to lost income for fees and charges, but mentioned that approximately 71% of these losses would be covered. The Corporate Director of Finance, Governance and Property then outlined other government funding which included £100,000 towards COVID enforcement and compliance; £1.2million for residential care homes; additional support for schools transport; and £190,000 for the Thameside Theatre. He added that Thurrock were still waiting for their allocation from central government of cold weather funding. He stated that Thurrock had also received £523,000 for the COVID winter grant scheme, which would run between December and March, and would support those most in need with food, energy and water bills, and free school meals.

The Corporate Director of Finance, Governance and Property then outlined support for businesses which included four new business support schemes from the government, two of which were applicable to Thurrock. He commented that the first scheme covered those businesses which had been forced to close during this lockdown period, who would receive a grant of £1334, £2000 or £3000 depending on their business. He added that the second scheme was a discretionary scheme allocated at £20 per head of the population which would be used to support businesses who had been impacted by the second lockdown, but had not been forced to close. He mentioned that officers were still working through the details of these schemes as the government were still producing guidelines, but these schemes would go live to businesses next week.

The Corporate Director of Finance, Governance and Property then moved onto describing the financial situation for this financial year, and stated that before the start of the secondary lockdown, the Council had predicted an overspend of £2million for this financial year. He stated that this prediction used all £4million of the Council’s surplus, plus the first three tranches of the government grant. He added that the latest government announcement would cover the deficit, as he expected the current financial situation to deteriorate further. He stated that to help mitigate some of these problems there had been a review of the capital programme, and all non-essential vacant posts had been frozen. He commented that whilst there had been an increase in residents receiving Local Council Tax Scheme (LCTS) support, he felt that the full impact of COVID was not yet known, and would not be known until government support such as furlough was ended. He stated that a significant number of Thurrock businesses were being supported through business rate relief, but commented that the wider longer-term impact of COVID on these businesses was also not yet known. He stated that due to these impacts, the Council’s tax base would not be as high as in previous years. The Corporate Director of Finance, Governance and Property then outlined the impact that COVID would have on capital projects and commented that all ongoing projects were working to ensure they were COVID compliant. He stated that the impact on the Housing Revenue Account (HRA) had largely been limited to an increased debt risk due to a reduction in rent collection, but felt that the impact would not be known until employment protection schemes were phased out. 

The Corporate Director of Finance, Governance and Property then moved on to outlining the Medium Term Financial Strategy (MTFS) and the impact COVID had had on this, and stated that the Council were now predicting a £34million budget gap over the next three years, £19million of which would be during the next financial year. He stated that this is due to a loss in council tax and business rates; increased spending on social care to ensure market resiliency; a reduction in fees and charges; and a pause in the capital strategy including Thurrock Regeneration Limited (TRL) and capital investments. He stated that the financial challenge in 2021/22 was too big to be met with sustainable savings in the time-scale that the Council has, and commented that the Council were currently examining a number of immediate short-term relief measures. He mentioned that these included the use of reserves and a freeze on recruitment for non-essential current vacancies, which would save approximately £4million. He stated that central government were considering a referendum limit on the maximum increase of council tax, but this would not be known until mid-late December.

The Corporate Director of Finance, Governance and Property stated that a draft budget would be presented to Corporate Overview and Scrutiny and Cabinet in January. He stated that central government had announced that this would only need to be a one-year settlement, so the Council would not certainty regarding the 2022/23 until December 2021. He added that the Council were currently undertaking a full asset review, a targeted transformation programme, and were reviewing Council staffing budgets. The Corporate Director of Finance, Governance and Property then moved onto discussing investments and stated that they were working well, and although there had been pressures on returns, all investments were still safe. He stated that investments were being reported to a Shadow Investment Committee, and that the Council’s investment strategy now focussed around longer-term Public Works Loan Board (PWLB) investment, rather than shorter term borrowing from other Councils. He stated that due to the current financial situation other Councils were not lending as much, and had removed Thurrock from their lending list due to negative press surrounding Thurrock’s investment strategy. He added that although both lender and borrower had been benefitting from these short-term lending strategies, other Councils had not wanted to risk any bad press. He stated that this shorter-term debt had now been swapped and re-financed for PWLB debt, and this would be reported to the Standards and Audit Committee.

The Chair thanked the Corporate Director of Finance, Governance and Property for his report and questioned whether the refinancing for PWLB debt had had an additional cost to the Council. The Corporate Director of Finance, Governance and Property replied that it had had an additional cost, but all investments were still profitable, although this profit had been diluted due to an increased borrowing cost. The Chair then asked about the end of year financial outlook for 2020/21 and queried how the Council had moved from a £4million surplus to a £2million deficit, and asked if this could decrease further before the end of the financial year. The Corporate Director of Finance, Governance and Property replied that before the last announcement from central government, Thurrock had only received £3million in support, and stated that any previous surplus would now be put towards the future deficit. He stated that the £2million funding gap had been before the announcement of the second lockdown, and did not include any winter social care pressures that the Council would experience. He stated that the Council currently had £11million in general fund reserves, which would only be used as a last resort, as well as £1.5million social care reserve and £3.5million general reserve.

The Chair then queried the 2021/22 budget and asked if TRL had been paused due to COVID-19 or if other factors had been involved. The Corporate Director of Finance, Governance and Property replied that due to COVID-19 the capital strategy and investment activity had been paused. He stated that there was currently a TRL target of £1.8million each year, which now had to be funded through reserves. He added that TRL was currently undergoing a governance review, which included going to the General Services Committee, Housing Overview and Scrutiny Committee, as well as Cabinet, and stated that if the Council went forward with TRL then those targets would be put back in place. The Chair then asked if the Council had a back-up plan if investments stopped delivering. The Corporate Director of Finance, Governance and Property responded that the Council were looking into additional funding streams, but other incomes such as fees and charges were only small compared to the investment income. He added that plan B of a council spending review was currently running alongside plan A, but had been accelerates due to the pandemic.

The Chair then queried how the funding gap would be met, and asked what the level of potential staffing redundancies would be. The Corporate Director of Finance, Governance and Property responded that this work was still in very early stages, but the size of the funding gap and the speed at which the pandemic was moving would not allow the Council to make permanent changes currently, as the consultation process was too long. He stated that the Council would continue to limit recruitment and maintain vacancy freezes, but there was likely to be a reduction in the number of posts at the Council. He added that the Council were also in the very early stages of asset review, which included putting together a catalogue of all council assets and challenging the use of the buildings, which included 60 operational buildings; 50 community assets; and 180 areas of land and other buildings.

Councillor Duffin stated that other Council’s had also had to change their investment approach due to the pandemic. He stated that he felt disappointed due to some media reports regarding the investment approach, which had caused the Council to lose investment streams and therefore money for the frontline. He asked that all Members be aware of the facts before talking to any media outlets. Councillor Rice queried the overspend of the A13 and asked how this funding gap would be covered. The Corporate Director of Finance, Governance and Property responded that this topic would be covered in the Standards and Audit Committee, as well as Planning, Transport and Regeneration Overview and Scrutiny Committee. He added that any overspend on the A13 would not impact the budget in this financial year, and would only potentially start to have an impact in 2021/22. He added that currently the level of spend was within the original budget envelope, and was grant-backed through the South Essex Local Enterprise Partnership (SELEP). He stated that the Council had a contract with Kier to complete the works, even during the difficult COVID pandemic, and if necessary would seek additional funding through grants or private bodies. He commented that any outstanding balance on the scheme, if grants could not be found, would be paid for through capital receipts of prudential borrowing.

The Chair then queried the Investment Committee and asked if the Director could update the Committee on their work. The Corporate Director of Finance, Governance and Property replied that Councillor Hebb had invited group leaders to a meeting to discuss the Investment Committee and how this would be set up. He stated that the group had looked at the governance surrounding the new committee had it had largely been supported. He added that officers were currently looking at timescales, membership, the Terms of Reference, and any updates needed in the Constitution, but until this had been completed the Committee would run as a Shadow Committee comprised of the group leaders.


The Committee:

1. Commented on the assumptions and financial implications set out in the report.

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