Agenda item

Medium Term Financial Strategy and Budget Proposals


The Corporate Director Resources and Place Delivery introduced the report and stated that it provided an update on the financial situation of Thurrock Council. He explained that two reports had been presented to Cabinet in July and September that outlined potential savings, and a draft budget would be presented to Cabinet in January, before coming to the Corporate Overview and Scrutiny Committee and returning to Cabinet and Council in February. He stated that the budget gap had been £34million over the next two years, but due to actions undertaken, the gap was now £3.9million. He highlighted section two of the report which outlined the Council’s financial base, and explained that Thurrock had one of the lowest council tax bases in the country, as 70% of properties were within Bands A-C. He mentioned that Southend-on-Sea Borough Council had a council tax base approximately £15million higher than Thurrock. He added that business rate collection had been impacted by COVID-19, and Thurrock could only keep 3% of business rates collected, the rest being given to central government for redistribution. The Corporate Director Resources and Place Delivery moved on and explained the CIPFA Resilience Index, which he felt was a useful tool to compare local authorities around the country. He explained that, according to the CIPFA Resilience Index, currently Thurrock’s Adult Social Care service were classified as ‘at risk’, due to the low council tax base and therefore comparatively low percentage spend on adult social care.

The Corporate Director Resources and Place Delivery highlighted the government’s comprehensive spending review which had occurred in October, and had stated that local authorities would receive a funding increase of 5.4% from central government. He explained that this increase would be calculated from a re-based position, and therefore the percentage increase would not take into consideration funding that had been granted from central government for COVID. He added that a more detailed announcement from central government was expected on 15 December 2021, and the team would then work on identifying the impacts and implications for the Council. He stated that previously the Department for Levelling Up, Housing and Communities (DLUHC) had provided a three year funding settlement to local authorities, but they had recently indicated that the distribution of this funding would be changing, which created uncertainty for local councils.

The Corporate Director Resources and Place Delivery explained that the government had retained the council tax increase cap at 1.99%, but had granted an additional 1% adult social care precept increase. He explained that this would be voted on by all Members at the February Full Council meeting. He added that the government had also increased National Insurance contributions, which would go towards funding the NHS and social care. He explained that the Council’s National Insurance contribution would also increase by between £900,000 and £1million, but central government could reimburse this to the Council, although this could come out of additional funding.

The Corporate Director Resource and Place Delivery highlighted points 3.1 and 3.2 of the report and stated that the Medium Term Financial Strategy (MTFS) assumed core funding would increase by approximately £1.7mn, due to assumed council tax increases and other savings. He stated that the council’s finances might be affected by areas such as: a reduction in council tax collection next year due to the ongoing impacts of COVID-19; a reduction in government grants, an increased spend on pay awards, and could be affected by the proposed increase in inflation, for example regarding contracts and fuel payments, which could all affect the assumptions outlined the MTFS. He stated that spending on the treasury would also increase due to the phasing out of maturing investments, increased interest costs due to increased borrowing costs and debt, and an increase in Minimum Revenue Provision (MRP) from set aside debt repayments and funding the capital programme. He explained that the Council would also have to deal with other pressures such as social care, the reduction of COVID grants and the phasing out of reserve usage, as this was not a sustainable method of managing the MTFS in the long-term. He stated that in 2023/24 the Council would not use reserves or capital receipts to balance the MTFS.

The Corporate Director Resources and Place Delivery explained that the Council had begun the savings process by looking at individual services, but it had been hard to identify large enough savings areas. He stated that the team had then started to look at subjective budgets, which looked at where money was spent within the Council overall, such as staff and contracts. He explained that the Council had 16 subjective budgets that were over £1mn, which were outlined in points 4.6 and 4.7 of the report. He stated that the largest budget was staffing cost at £100mn, followed by adult social care placements at £40mn; children’s social care at £30mn; interest payable at £16mn; and the MRP at £9mn. He stated that the Council could not alter spend on the MRP, and spend on interest payable also brought in £30mn profit through investment. He stated that there were other budgets over £1mn such as concessionary fares which was a central government scheme and could not be altered, and home to school transport which was already under consideration. He added that the Council were also considering the assets budget which equated to £3mn and would be discussed during the next report.

The Corporate Director Resources and Place Delivery explained that the Council would therefore be targeting employee costs by reducing posts, and were aiming to reduce employee costs by £20mn within the next two years. He stated that this would equate to roughly 500 full time employees (FTEs) with an average salary of £40,000. He stated that assets had been targeted in July with a proposed savings target of £1mn, but this savings target had been reduced to £850,000, which would be met through the proposed closure of the Thameside Complex and the decision not to renew the lease on the multi-story car park. He explained that the detail of this was included at appendix 1 and 2 of the report. He stated that even with these proposed savings the Council was still facing a budget gap of £3.3mn next year and £500,000 the following year, so significant staff savings still needed to be identified. He explained that appendix 1 outlined the decisions that would need to be agreed by Cabinet, after discussion at the relevant overview and scrutiny committees, and appendix 2 outlined decisions that could be made by director delegation. The Corporate Director Resource and Place Delivery summarised and stated that the July finance report to Cabinet had considered a new charge for the collection of green garden waste, but this had not been supported by the Portfolio Holders so had been removed from this report.

The Chair highlighted page 23 of the agenda and clarified that the finance report would be presented to Cabinet in December rather than September. Councillor Okunade queried the savings proposals on page 26 of the agenda at appendix 1, and asked if the £100,000 proposed saving on town centre cleansing would have an impact for residents. The Chair asked if any town centres had been identified in terms of these savings. The Corporate Director Resources and Place Delivery stated that this proposed saving had been reported to the relevant Overview and Scrutiny Committee, and explained that although the team would work to ensure the saving would have a limited impact on residents, this could not be guaranteed. He stated that Thurrock’s financial pressures were not unusual, and Council’s around the country were having to deal with pressures and make savings. He added that the Portfolio Holder and Director would be making the decision regarding which town centres would be impacted by this saving.

Councillor Kent highlighted the savings figure of £20mn over the course of two years in regards to staffing costs, and asked how many redundancies this would be. The Corporate Director Resources and Place Delivery replied that the team estimated it would be between 200 and 250 redundancies over two years, working on an average salary of £40,000. He explained that the Council would work to protect staff as much as possible through re-training and redeployment. Councillor Kent queried which directorates these jobs would come from, as well as how senior officers would identify these posts. The Corporate Director Resources and Place Delivery replied that the first stage of redundancies would have a minimal impact on the community as it would be a transformational programme that would include robotic process automation. He stated that a digital efficiency review would be carried out and would review up to 200 posts. He stated that each director would be assessing their entire directorate to find post savings, which would then be taken to Directors Board and recommendations would be brought forward. Councillor Kent stated that £10mn of staff savings had already been identified, and asked if process notices had been given to the staff affected by this. The Corporate Director Resources and Place Delivery replied that the majority of this saving had been met through vacant posts. He explained that where people were in post, a three month consultation on redundancies was being undertaken, that was due to finish at the end of November. He stated that phase two of redundancies would be begun in the New Year, and Members would receive the detail of this when completed. He stated that unions had been briefed on the redundancies and consultations. Councillor Kent queried how these redundancies would be funded. The Corporate Director Resource and Place Delivery replied that pay awards had not been granted in 2021, the monies from which equated to £1.5mn and would be used to fund redundancies. Councillor Kent then highlighted point 3.2 on page 19 of the agenda, and the £12.1mn of treasury spend. He felt that not a lot of detail on this spend was outlined in the report, and queried how this policy would be taken forward. The Corporate Director Resources and Place Delivery stated that CIPFA were currently undertaking a Prudential Code update, which could potentially affect the Treasury Management Policy. He stated that no new investments would be undertaken by Thurrock Council as this was no longer supported by the Public Works Loan Board (PWLB) or central government. He added that any treasury borrowing would be used for the capital programme and Thurrock Regeneration Limited.

The Chair queried how savings could be made on vacant posts. The Corporate Director Resources and Place Delivery explained that the all actual posts were included in a directorate’s budget, even those posts that were vacant. He stated that if those vacant posts were removed, the directorate would therefore make savings equivalent to the posts salary. The Chair asked if the £1mn retraining fund would be enough, and queried how the team had arrived at this figure. The Corporate Director Resource and Place Delivery replied that this budget had been derived from the pay awards of £1.5mn that had not been granted in 2021. He stated that this money had been kept separate and would be spent on severance or retraining, and if not enough then could be increased through reserves.

Councillor Halden thanked the Corporate Director Resources and Place Delivery, and the finance team, for their hard work on the report, particularly decreasing the budget gap by approximately 90%. He stated that the Council were unable to change the council tax base, other than through the Local Plan, and felt that financial pressures in social care could only be resolved through local government reform, such as expanding unitary authorities or devolution. The Corporate Director Resources and Place Delivery stated that local authority reorganisation decisions would be taken by Members, and would be resourced by officers. He stated that capacity in Thurrock would reduce due to a reduction in staffing. He felt that both adults and children’s social care were experiencing funding issues around the country, and fundamental changes in local authority funding would need to be implemented. He highlighted that all local councils were currently unaware of what local government reform would look like, but once the detail was known then officers would begin to implement this for Thurrock. 

Councillor Kent questioned why Members were only being asked to comment on appendix one in the recommendations, and why appendix two was not mentioned. The Corporate Director Resources and Place Delivery stated that the Corporate Overview and Scrutiny Committee only had the remit to consider the whole budget, rather than individual responsibilities, but would take this point on board and update the recommendation. He explained that comments made at scrutiny would be included within the Cabinet report in December.

RESOLVED: That the Committee:

1. Noted and commented on the financial forecasts included within the report.
2. Considered the proposals set out within the report, and provided comments to Cabinet.

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