Minutes:
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.
RESOLVED: That:
The Committee:
1. Commented on the assumptions and financial implications set out
in the report.
Supporting documents: