Minutes:
Councillor Snell introduced the
report and stated that it outlined the Council’s latest
financial position for 2022/23 and the medium-term outlook. He
explained that the report presented a significant deterioration in
the Council’s finances since the previous financial report
presented in October 2022, following the intervention from the
Secretary of State. He explained that work had been undertaken to
identify the impairment on major investments, due to the
deterioration in their valuation. Councillor Snell added that the
Council were evaluating revenue impacts of compliance with the
Prudential Code, particularly surrounding the Minimum Revenue
Position (MRP), as well as refinancing debt and other financial
pressures. He stated that as a result of this, there was a
projected in-year deficit of £469.581m, which could be
reduced through mitigation measures to £452.38m and was
outlined in the table on page six of the agenda. He stated that in
2023/24 there would be an approximate deficit of £184m, as
outlined on page seven of the agenda. Councillor Snell felt that
this was a grave financial position for the Council, which would
mean that the Council would need to seek external support from the
government in the form of Exceptional Financial Support (EFS). He
added that the Council would also need to restrict spend and
consider all capital assets. He highlighted the table on page six
of the agenda that outlined the general fund outturn position for
quarter two, although clarified that this was subject to further
change. Councillor Snell explained that the level of potential
mitigation was also likely to change, subject to the closure of
prior years’ audits. He stated that the funding gap for
2022/23 assumed that investments would be kept, although the
Council would be working to divest some investments and therefore
reduce MRP costs. Councillor Snell summarised and explained that
the Corporate Overview and Scrutiny Committee and Cabinet would be
updated as the financial situation progressed.
The Deputy Leader highlighted that Cabinet had received the draft
Corporate Overview and Scrutiny minutes, as well as a summary of
questions that the Committee had asked at the meeting. The Leader
thanked the Committee for their feedback, and highlighted their
point regarding due diligence of auditors. He stated that he had
raised this issue with the Acting Chief Executive and the
Commissioners who would be investigating this further. The Interim
Director of Finance added that most questions at Corporate Overview
and Scrutiny had sought clarification on terms and the impact that
the S114 notice could have on the Council. He added that the
Committee had also commented on the clarity of the report.
The Leader asked when the Quarter 3 finance report would be
presented to Cabinet. The Interim Director of Finance replied that
the team were currently following standard timetables for finance
reports, and were preparing the Quarter 3 report for
February’s Cabinet and Corporate Overview and Scrutiny
meetings. The Deputy Leader highlighted Corporate Overview and
Scrutiny’s point regarding the Council’s statutory
minimum during the S114 period, and felt that some discretionary
services within Adult Social Care prevented more acute spend in
other areas. She asked if these discretionary services could
continue. The Interim Director of Finance replied that the Best
Value Inspection (BVI) would help to assess all spend within the
Council and ensure good decision-making was undertaken. The Leader
queried what it meant that KPMG were leading on the sale of assets.
The Interim Director of Finance replied that KPMG had been
appointed to sell the Toucan assets, and although it was early in
the process, KPMG was experienced at this type of activity. The
Leader felt pleased to see that the sale of this asset was
progressing and moving forward.
The Deputy Leader highlighted recommendation 5 regarding the
Council’s need to make additional savings to reduce
directorate spend pressures. She sought assurance that Portfolio
Holders and Directors would work together to ensure directorate
spend was decreased. Councillor Abbas also highlighted
recommendation 5 and queried what type of savings could be made
within each directorate. The Interim Director of Finance explained
that Directors Board and Portfolio Holders would be asked to
identify additional savings and consider all options. He added that
the Spend Panel would ensure all spend was scrutinised. He
commented that the team were also considering how residents
accessed the Council to ensure this process was as streamlined as
possible, which would improve efficiency and reduce spend. He added
that these savings would continue into 2024/25 as the Council
continued to deal with inflationary and pay pressures, whilst
ensuring the deliverability of savings. Councillor Abbas asked what
changes would be made before the S114 notice was submitted. The
Interim Director of Finance replied that no changes would be made
before the S114 notice was submitted, but the process of finding
savings would be iterative. He explained that quarterly finance
reports would continue to be presented to Cabinet, alongside other
reports such as the tail of investment report and capital savings.
He stated that there were significant pressures in areas such as
investment. Councillor Abbas queried why the income losses were
being considered as part of the Quarter 2 report. The Interim
Director of Finance replied that the funding invested in Toucan had
been held there whilst the company went into administration, and
the Council were no longer sure when this money would be
distributed. He explained that the Council were working to rectify
this as the 2020/21 audits remained open, and investments could be
attached to previous years audits.
Councillor Johnson felt that the financial picture of the Council
was grave and hoped that the BVI report would explain how the
Council got to this position. He felt that the Council needed to
undergo a cultural change, and felt pleased to see that reports
were now more transparent. He highlighted the question from the
Corporate Overview and Scrutiny Committee and asked how the Council
could ensure these investment issues did not happen again. The
Interim Director of Finance replied that an Improvement and
Recovery Plan would be introduced to respond to the financial
intervention. He explained that the Commissioners oversaw and
supported reports, and officers would work to ensure Members were
engaged and understood the financial processes being undertaken. He
stated that specific investment issues were now being tackled, for
example through the new Treasury Strategy, Reserve Strategy and MRP
policies. He thanked the Corporate Overview and Scrutiny Committee
for their comments and questions on the report and felt that
Members and officers needed to work together to build trust. He
explained that the Council were also considering Essex County
Council practices and decision-making processes as best practice
learning examples. He added that Councillor P Arnold had raised
concerns at the Corporate Overview and Scrutiny meeting regarding
the technical aspects of the report and stated that officers were
taking these comments onboard to ensure reports could be
understood, whilst including the necessary technical data. The
Leader stated that a cultural change would be undertaken across the
Council to build back trust. He thanked Essex County Council and
Thurrock Council staff for their help during this difficult time.
The Director of Legal and Governance added that if Members did not
understand aspects of the report, they could ask officers at any
time.
RESOLVED: That Cabinet:
1. Commented on the 2022/23 forecast funding gap of £469.581m
including a request for exceptional financial support from central
government.
2. Noted the request for exceptional support will be delegated to
the s151 officer.
3. Commented on the updated Medium Term Financial Strategy which
has a projected deficit in 2023/24 of £184.381m and which is
expected to require a further request for exceptional financial
support from central government.
4. Noted that the position is subject to change, as further work is
outstanding (as highlighted in the Commissioners commentary) which
is likely to lead to changes.
5. Noted additional actions will be required to identify further
savings to manage the reported General Fund budget pressures.
6. Noted that use of reserves as set out in appendix 5, subject to
the finalisation of the audit process relating to financial years
2020/21 and 2021/22 ad noted balances are subject to change.
7. Noted the proposed uses of further capital receipts projected to
arise in 2022/23 as set out in Table 5 to mitigate the request for
exceptional financial support from government.
8. Noted that further consultation with external audit will be
required to finalise the technical accounting treatments relating
to the investment valuations and the associated Minimum Revenue
Position transactions.
9. Noted the position set out in respect of the capital programme
and the reported slippage as set out in para 5.4.
10. Noted that Thurrock’s 2023/24 Schools funding formula be
implemented as stated in Appendix 6. This being consistent with
Cabinet’s decision made between 2020/21 and 2022/23 schools
funding formula as per the report in Appendix 6.
Reason for decision: as outlined in the
report
This decision is subject to call-in
Supporting documents: