Issue - meetings

Deputy Leader and Portfolio Holder for Finance and Governance.

RESOLVED:

That the Medium-Term Financial Plan be adopted as the framework for the budget elements of service and financial planning for 2022/23 onwards.

The Deputy Leader and Executive Member for Finance and Governance, Councillor Schofield, introduced the Medium-Term Financial Plan which set out the initial assessment of the key information that would be used for budget setting for 2022/23. The Plan included a five-year forecast for the budget gap if no action was taken to reduce costs or increase income.

Councillor Schofield explained that work was underway to develop detailed budget proposals for consideration by Executive in November. The challenge to find new ways to make more efficient use of existing resources and finding new sustainable income streams remained. There was uncertainty about the timing for proposed funding changes, but it continued to be necessary to plan for implementation.

The Chairman of the Overview and Scrutiny Committee, Councillor Harrison, explained that the Overview and Scrutiny Committee had considered the Medium-Term Financial Plan at its meeting on 15 July 2021 and the Executive had received the draft minutes of the meeting. The Committee had considered the budget forecast to be appropriately pessimistic. As the forecast did not include the potential returns from various ongoing capital projects, the Committee asked if it could see the current forecast for revenues from those projects. In response, the Executive Member agreed to provide the Committee this information.

RESOLVED:

That the Medium-Term Financial Plan be adopted as the framework for the budget elements of service and financial planning for 2022/23 onwards.

To receive a report and consider the Medium Term Financial Strategy 2022/23 to 2026/27.

Members received a report and update on the Medium-Term Financial Plan 2022/23 to 2026/27 from Councillor Schofield, Deputy Leader and Executive Member for Finance and Governance.

The report to the Committee set out the background and context for the budget elements of service and financial planning for 2022/23 onwards. It provided an early opportunity for Members to consider the factors that will be taken into account when preparing draft budget estimates that are scheduled to be reported in November. Similar to other local authorities, the Council was facing a challenging financial future with an underlying budget gap. Budget efficiencies had been achieved and Reserves remained buoyant, but the Council was seeking new sustainable income streams and sources of income. The report excluded service growth and savings and the outcome of the fees and charges review as well as any government funding announcements. Councillor Schofield asked for the Committee to note the report and provide any comments which could be taken into account as work on the budget progressed.

Members welcomed the report and made the following observations and comments:

Costs and inflation – it was noted that the budget report included an updated forecast for pay cost inflation. Members asked about short and medium-term risks and cost increases and inflation, particularly with uncertainty of cuts from central government. A working assumption in the document was that there would be a similar pay rise to last year. More detail would be known when consultation started between the Council as employer and the unions. The Council recognised that inflation was rising and was keeping a close eye on this. There may be increased costs from suppliers, and, where significant, these would be reflected in the draft budget in the autumn. Cost inflation was recognised as a MTFP key risk in the report.

Borrowing for capital projects – Members welcomed the capital projects that were underway and asked about the borrowing that needed to be paid back as there would be a lag between completing a project and an income stream being established. It was confirmed that financial forecasts for each project were set out in the project business case initially and revenue budget was allocated for interest payments and capital repayments (MRP) costs. There was also a balance to be achieved between purely financial returns and wider social benefits of a project for the community. For example, the Cromwell Road development included different types of housing tenancies for social benefit. The Commercial Ventures Executive Sub-Committee analysed the financial implications of business cases to ensure they deliver value for residents.

Capital programme – the report set out the previously-approved capital programme for 2021/22 to 2025/26. This included the Cromwell Road development as well as Marketfield Way development in Redhill. Members asked if further information about the commercial returns for Marketfield Way and other capital projects and the housing programme could be included in future reports. Councillor Schofield confirmed that MTFP forecasts do not yet include revenue projections for projects not yet completed. Pat  ...  view the full minutes text for item 18