Agenda item

Draft General Fund Budget 2023/24 and Medium Term Financial Strategy Update


The Acting Director of Finance introduced the report and stated it usually gave Councillors a firm indication of the proposed budget, but highlighted that this report only gave a budgetary indication for this point in time, due to the impact of the S114 notice and the request to government for exceptional financial support (EFS). He stated that the budget position of the Council was still fluctuating and would need reassessment during the 2023/24 financial year. He highlighted appendix 1 of the report, which outlined the Medium-Term Financial Strategy (MTFS) and the request to government for EFS, which had reduced from £184m to £182.5m following further assessment. He explained that the MTFS brought together all elements of the Council’s budget, for example council tax income, inflation, and levels of growth. He added that the Council could be affected by rising costs and inflation, including the rising cost of energy, and growth pressures in Adults and Children’s Social Care. The Acting Director of Finance clarified that £160m of the Council’s deficit stemmed from issues regarding the Minimum Revenue Position (MRP) and investments, but £20m was an operational deficit, which did not include £8m of departmental savings already made. He stated that he would be producing an S25 statement regarding the robustness of the budget and reserves, however the budget remained flexible as the government had not given an indication regarding the level of support they would provide, or the possibility of raising council tax above referendum limits. He confirmed that the proposal of raising council tax above referendum limits had not been included in the budget, as a final position on this had not been decided.

The Acting Director of Finance explained that the committee were being asked to comment on the budget, whilst considering the context of the reliance on government for EFS. He stated that the S25 statement would not be issuable without government intervention and conversations were still ongoing. He added that although the budget was currently not certain, he hoped for a response regarding the levels of council tax, and how this could affect the level of EFS granted, and this would be presented to the appropriate committees when ready.

The Acting Director of Finance highlighted section 3 of the report, which set out his assurances for the budget and the context of the financial situation. He added that separate reports on the Treasury Management and Capital Strategies were also included on the agenda for the meeting, and these would discuss the Council’s debt in more detail. He added that the Council were working to divest investments, which would reduce the MRP charge, and could be critical to the future financial sustainability of the Council. The Acting Director of Finance clarified that Thurrock would be unable to resolve its financial issues without support from central government, but selling investments would help to reduce the need for EFS, and this was understood by central government. He stated that the 2023/24 budget could only be delivered with EFS, and the S25 statement would confirm this, whilst examining the budget, reserves, and savings proposals. He described how the Council had to make tough decisions to deliver savings, and these would be subject to Cabinet approval. The Acting Director of Finance highlighted that some savings within the Council had already been made and this had helped prove the Council were taking decisive actions. He added that all savings proposals were now accompanied by a delivery risk assessment, which was led by the corporate transformation team alongside commissioners. He added that work continued to identify further savings, and these would be outlined in the in-year budget.

The Acting Director of Finance moved on and explained that the Council would be maintaining a level of general fund reserves, which would help allow for operational delivery. He added that transforming the Council would need resources to support delivery and reserves could help with these short-term capacity needs. He added that these needs would be identified through the Best Value Inspection (BVI) and with commissioners. He felt hopeful that all directives from the government had now been released, but as only interim findings had been issued, more directives could still be given. He confirmed that the BVI report was expected in late February, and would be presented to the appropriate bodies and committees. He added that the budget also included monies to help deliver transformation and fund the intervention. He highlighted the commissioner statement which commented on the progress of the Council and noted that further actions, for example a full review of fees and charges, and the pay policy, would be expected. The Acting Director of Finance explained that the government’s directives had referenced the MTFS and Treasury Management Strategy, and he felt that the new Treasury Management Strategy was compliant with this directive. He added that work would be ongoing with this strategy, and this would be outlined in future reports.

The Acting Director of Finance detailed the council tax comparators listed in the report, as this showed that Thurrock was on the lower end of the council tax scale, and would remain there unless there was a change. He added that there was risk in the overall budget as there were lots of moving parts, such as the delivery of savings, inflation, the divestment of investments, and interest rates on borrowing. He added that officers were working to take actions on these risks, and would work to ensure transformation through Spend Panel monitoring and other processes.

The Chair queried why the request for EFS had reduced from £184m to £182.5m. The Acting Director of Finance explained that the budget was created based on assumptions at a point in time, and the outline of savings made last year had changed. He explained that savings now went through a more rigorous and robust assessment process, which meant additional savings could be made and the level of EFS requested could be reduced. He added that there were still wider savings to be made, which would go through the assessment process, and this could affect the level of income and financial settlement from the government. He added that there was currently movement in all areas of the budget, for example there had recently been a pay award in line with NJC recommendations.

Councillor Holloway highlighted that Cabinet had already identified and signed-off on savings in different service areas. She asked if more detail could be provided on these savings, as the report presented to committee was broad and lacked some detail. The Acting Director of Finance explained that the savings proposals would go to Cabinet for approval, and these would also be brought to the relevant scrutiny committees. He stated that this budget had been presented in short timescales, but as the process moved on, there would be more time to assess savings proposals.

Councillor Kent stated that savings targets in previous years had been missed, and asked how targets would not be missed moving forward. He queried how robust the savings process would be. He also highlighted that income generation targets in previous years had been missed, and asked how these would be achieved. The Acting Director of Finance explained that in previous years, savings had sat within directorates. He clarified that now, although savings still sat with directorates, these were managed through a delivery risk assessment process carried out by the corporate transformation team. He stated that their role was to challenge and monitor delivery of savings. He added that the commissioners were also involved in the savings process, who were experienced in this field, and all savings were accompanied by timescales. He added that the finance team were now more involved in directorate savings and budgets, and were made aware of issues earlier, compared to in previous years where the corporate finance team had to deal with issues retrospectively. Councillor Kent echoed Councillor Holloway’s concern regarding the lack of detail in the report, and asked to see more detailed information regarding specific directorate savings proposals. He highlighted section 5.4 of the report which outlined the Council’s key ambitions. He asked how these had been developed. He also highlighted the short timescales for publication of the Cabinet and Council reports, and asked if these deadlines would be met. The Acting Director of Finance explained that officers had already prepared the Cabinet and Council budget reports, but were waiting on feedback from government before these could be published. He stated that conversations with government were ongoing, although there was no certainty regarding an outcome. He confirmed that the key ambitions had been underpinned by the Improvement and Recovery Plan (IRP), and each ambition was the responsibility of the Senior Responsible Officer, usually the director. He added that the IRP would be presented to all Members once it had been agreed by government and commissioners, along with the BVI report.

The Chair queried the timescales for divesting the Council’s investments. The Acting Director of Finance stated that work had already begun to divest some investments, for example the solar asset which was approximately 65% of the Council’s portfolio, was currently going through the divestment process. He explained that a team had been assigned to enable the sale, and work was ongoing to clarify ownership. He stated that the solar asset was critical to divest and release funds due to the size of the asset. Councillor Kent sought clarity that Thurrock Council were the only creditor of the solar asset. The Acting Director of Finance confirmed that there was no indication of other creditors, but the team needed to undergo due diligence and assess the asset.

Councillor Arnold highlighted 5.1 of the report and asked if the S25 statements published in 2018-2022 had been inadequate. The Acting Director of Finance explained that the S25 statements published in this period had been made based on assumptions at the time, for example the MRP and value of investments. He stated that the Council now knew there had been inaccuracies in these budgets, but the S151 officer at the time had been working with different figures. Councillor Arnold highlighted 3.8 of the report and asked if other Councils were also in difficulty regarding their operational budgets. The Acting Director of Finance explained that some unitary Councils were currently concerned with their operational budgets due to increased inflation, interest rates and social care growth. He felt that many Councils were finding it difficult to manage their budgets.

Councillor Kent thanked officers for their hard work during this time, as they were dealing with many moving parts and complicated processes. He queried how the Council would deal with the longer-term financial issues, as problems would continue and worsen after six years of EFS. He also asked how the £20m operational deficit was allowed to grow, as he felt that the investment income had been relied upon and not used as a buffer to reduce this deficit. He felt concerned that not all savings were listed in the report. Councillor Kent also questioned how the Council would be able transform quickly to be able to meet the key ambitions listed at 5.4 of the report. He felt that although the Council needed to be financially sustainable, residents still needed services to continue so these demands needed to be balanced carefully, particularly if council tax increased. He sought assurance that there was hope for Thurrock Council in future, as he did not feel optimistic. The Acting Director of Finance explained that the Council were responding to directions from the Secretary of State, which stated that the Council must first address its core financial issues. He added that the S114 notice also placed strict rules on the Council regarding financial spending, and the Council had to be compliant with these. He explained that officers did have consideration for residents when making decisions, but needed to work with the government’s directives. He explained that officers were currently working on the proposal for the council tax increase above referendum limits, whilst also having conversations about how the impacts from this could be mitigated for vulnerable residents. He added that the IRP would be specific on how the quality of services provided to residents could be improved within the context of the S114 notice and EFS request, and officers would continue to navigate these issues through detailed conversations with Councillors and government.

Councillor Kent highlighted recommendation 11 and felt that even though the budget process would continue to develop in 2023/24, with in-year savings proposals, he asked officers for assurances that any savings proposals would go to the relevant Overview and Scrutiny Committee before decisions were made.

RESOLVED: That the Committee:

1. Commented on the proposed updates to the Medium-Term Financial Strategy including the deficit positions set out in each year.

2. Noted the paper assumes a council tax increase of 2.99%, as per paragraph 9.6 but also notes that this is not the final position of the Council, pending further conversations with government.

3. Supported a 2% Adult Social Care precept increase as per paragraph 9.6 and noted that this will be used to fund increased demand and provider fees within older people care services.

4. Noted the council tax requirement of £79.421m as per section 8.

5. Noted the net cost of services requirement is £319.837m as per paragraph 8.1.

6. Noted the proposed savings as per section 12 and noted these are insufficient to address the funding gap without the need to seek exceptional financial support from government.

7. Noted that exceptional financial support is required to balance the 2023/24 budget and that discussions with central government are ongoing, as per Appendix 3.

8. Noted the budget has been set based on the assumption that the request for exceptional financial support in respect of the 2022/23 budget is granted.

9. Noted a further review of the Capital Programme will be conducted in 2023/24 to ensue the requirements of the Section 114 notice are met, as set out in section 14.

10. Noted the Dedicated School’s Budget is set at £51.258m as per paragraph 15.13.

11. Commented on the draft budget proposals within this report to inform the final budget proposals to be presented to Cabinet at its February meeting, ahead of Full Council on 22 February 2023.

12. Noted further reviews have been commissioned into the fees and charges policy and the pay policy as per paragraph 9.23 and 10.4 respectively.

13. Noted the Council’s position on reserves, recognising the unique situation the Council faces and a need to revisit the adequacy of reserves as savings and service transformation are effected during 2023/24.

14. Noted that work on the budget will continue during 2022/23, with more savings required to council services.

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