Agenda and minutes

To confirm as a correct record the Minutes of the previous meeting.

RESOLVED ­– the Minutes of the previous meeting on 12 September 2019 were approved as a correct record.

To receive any apologies for absence and notification of any substitute Members in accordance with the Constitution.

Committee Members: Councillor J. Philpott (substituted for by Councillor S. Kulka), Councillor F. Kelly (substituted for by Councillor D. Allcard)

Other Members: Councillor T. Archer – Portfolio Holder for Investment and Companies

Membership change

In accordance with the Council’s Constitution and Delegation 1.29 of the Officer Scheme of Delegation, Councillor M. Brunt as Conservative Group Leader requested that the Conservative Group representation on the Overview and Scrutiny be changed as follows:

·        Councillor C. Neame, Committee Member, will become a Substitute Committee Member.

·        Councillor K. Sachdeva, Substitute Committee Member, will become a Committee Member.

The supporting Officer Decision was approved by the Head of Legal and Governance and published on our website. The change was in effect for this meeting of the Committee and was reported to Council on 31 October 2019.

Committee Chair, Councillor N. Harrison, welcomed Councillor K. Sachdeva to the meeting.

Nominations for the Budget Scrutiny Panel – it was noted that the two further Conservative nominations for the Budget Scrutiny Panel taking place on 21 November 2019 were: Councillor K. Sachdeva and Councillor D. Allcard.

To receive any Declarations of Interest (including the existence and nature of any Party Whip).

Councillor S. Walsh declared a non-pecuniary interest in Item 7 – Housing Delivery Strategy 2020-25 in respect of his capacity as a partner of a property management company.

To note the final report from the external auditors (ISA 260) on the 2018/19 audit and the published version of the Statement of Accounts.

The final report from the External Auditors on the 2018/19 Financial Accounts (ISA 260 Report) was considered by the Committee.

The Portfolio Holder for Finance, Councillor T. Schofield, gave an overview of the final report from External Auditors, Deloitte, and their conclusions. It was a challenging and thorough audit but overall the Council received an unqualified audit opinion. The approved statement of accounts, including Deloitte’s audit opinion was published on the statutory publication deadline of 30 September 2019. As this was Deloitte’s first year as Reigate and Banstead Borough Council’s external auditors, it invariably brought new perspectives on the Council’s approach to preparing accounts and the auditors had set out some areas for development on valuation of property assets and drafting the Statement of Accounts. An action plan for the 2019/20 accounts has been drawn up to address these points.

Members had a number of questions and comments in the discussion that followed:

·       Audit completion – Members noted that the accounts had been published on the statutory deadline day for signing off the accounts which they felt did not leave time to consider the final report fully. It was identified that it took significant time to work through many of the new auditors’ questions, for example, regarding information from third party suppliers on asset valuations. Challenges for Deloitte included working to new audit specifications at a time of a shortfall in experienced public sector auditors. It was reported that Reigate and Banstead was in a better position than many other local authorities in Surrey.

Members asked for assurances that there would be more time built into the reporting process for the 2019/20 Statement of Accounts.

·       Balances on Trust Funds – the Council acts as a trustee for a number of Trust Funds of specific areas of land and other facilities for use by the public such as Reigate Baths Trust which were earning interest. Members asked for a written answer about the background of each fund to understand any restrictions on how the capital could be used for the benefit of residents.

·       Pension deficit – it was noted that the net pension liability administered by Surrey Pension Scheme had increased from £71.1m at 31 March 2018 to £79.2m at 31 March 2019. This was in line with the slight increase in discount rates, movements in asset values and impact of the McCloud legal judgement.

·       Short Term Borrowing – there was a short term borrowing requirement of £12m at the end of the financial year. This was in line with the treasury management strategy and was fully repaid in early 2019/20. Members asked for a written answer on the interest rate that was paid on the loan.

·       Valuation of property assets – Members noted that the auditors identified a number of errors in the valuations of property assets which had been amended. These corrected misstatements were included in the audit adjustments in the ISA260 report. Members asked what changes would be made to learn from this next year.

The Head of  ...  view the full minutes text for item 4.

To consider the Half Yearly Treasury Management Report for 2019/20 and make any observations.

Members considered the Half Yearly Treasury Management Report for 2019/20. This progress report updated Members on the performance of the Council’s treasury management activities including the latest investment and borrowing position and updated prudential indicators and policies.

The Portfolio Holder for Finance, Councillor T. Schofield, said the current forecast of the treasury management performance was on track and would be presented to the Executive on 7 November 2019. Performance was better than assumed in the budget as long term borrowing had not been necessary to date. It was anticipated that borrowing of up to £41.5m would be undertaken during the second half of 2019/20 to fund delivery of the approved Capital Programme. As the Capital Programme expenditure plans became more certain, the supporting borrowing and investment forecasts had been refreshed. The treasury forecasts in the report also reflected the £25m that had been delegated to the Commercial Ventures Executive Sub-Committee (CVESC) for commercial investment.

It was noted that the update on expected movements in interest rates in the report, provided by the Council’s advisers, did not anticipate the recent announcement from the Treasury of a 1.0 per cent increase in the Public Works Loan Board (PWLB) loan interest rate.

There were a number of questions in the discussion that followed:

·       Capital Expenditure and Financing (Table 1 in the report) ­­– Members asked for follow-up information about the £1.704m actual spend on capital expenditure.

·       Public sector borrowing ­– Members asked what the impact would be on the Council’s investment plans because of the unexpected rise in the PWLB interest rate rise. It was noted that this added 1.0 per cent to all borrowing interest rates irrespective of the loan term. It was reported that the CVESC and finance teams were looking into the impact on capital expenditure plans and revenue expenditure forecasts. It does not have any impact on the Minimum Revenue Provision charge but, as PWLB interest rates are now 3.0 to 3.5 per cent, it will reduce the forecast return on new commercial investments.

Members asked how the interest rate rise might affect cash flow and how best to mitigate the cost to the Council.

·       Treasury Investments – it was noted that the total treasury investments were £36m at 30 September 2019. Members asked if some of these funds could be used instead of borrowing money. It was identified that the Council was required under treasury rules and regulations to keep minimum balances. If it falls below a certain limit (£10m) then this restricts the types of investment the authority may make with consequent impacts on investment returns. An updated Treasury Management Strategy for 2020/21 would be presented to Members early next year and a key factor will be to confirm the minimum balance required going forward.

·       Brexit – the commentary in the report on the impact of Brexit was noted, along with subsequent recent developments. Updates on the outcome of Brexit on the economy and investments would be reflected in future reports.

·       Investment portfolio – non-Treasury investments –  ...  view the full minutes text for item 5.

To receive a briefing from the Organisation Portfolio Holders regarding the Organisation business area and their portfolios.

Members received a briefing from the Organisation Portfolio Holders on the Organisation business area and their portfolios. The three Organisation Portfolios Holders were: Finance, Investment and Companies, and Corporate Direction and Governance. These three portfolios were aligned with the themes set out in the Council’s current and emerging Corporate Plans.

Finance Portfolio

Councillor T. Schofield, Deputy Leader and Portfolio Holder for Finance, gave an overview of the ongoing work in the Finance area which included Service and Financial Planning, Treasury Management, legal services, procurement and land charges. A report to the Committee set out a progress update on the Finance Portfolio’s objectives. These objectives included adopting a Capital Investment Strategy, approval of the Medium Term Financial Plan 2020-25, a procurement review, developing an asset management strategy and establishing working groups to guide key areas such as a Budget Advisory Group with Portfolio Holders.

The draft budget proposals for 2020/21 were due to be considered by the Executive on 7 November and reviewed by the Budget Scrutiny Panel on 21 November 2019 before it was reported back to this Committee.

Members commented on the following areas:

Procurement – Members noted the review of the procurement and contract management processes. They requested sight of the report and its recommendations when it was completed so improvements could be made to these areas.

Budget 2020/21 status – It was confirmed that Legal services which had overspends in previous years was expected to be on the existing budget from 2020/21. The new legal support arrangements were welcomed.

Investments and Companies Portfolio

The Portfolio Holder for Investments and Companies, Councillor T. Archer, was unable to attend the meeting, so Portfolio Holder for Finance, Councillor T. Schofield gave an overview of the Investment and Companies area of business. This included the Council’s assets and management, companies and commercial investments.

A report to the Committee set out progress on objectives which included ongoing oversight on existing companies via the Commercial Ventures Executive Sub-Committee, determining the Horley Business Park investment approach, considering new investment opportunities as they arose and ensuring effective monitoring and reporting of existing investments.

Members commented on the following areas:

·       Performance of companies – noted that a report on the performance of the companies owned or part-owned by the Council was considered under Agenda Item 8 of the meeting.

·       Updated asset management strategy – work was being undertaken to review the Council’s current assets to maximise returns from its commercial properties and land. The review would also be looking in detail at each asset held. The updated Asset Management Strategy would be considered for approval by the Commercial Ventures Executive Sub-Committee once completed. It was noted that the Committee requested a report, when the review is completed, on the assets held in terms of purchase price, value and overall returns.

·       Building energy ratings – Members asked if information was held on the building energy ratings for properties we lease to ensure compliance with new regulations.

Corporate Direction and Governance Portfolio

Councillor V. Lewanski, Portfolio Holder for  ...  view the full minutes text for item 6.

To consider the draft Housing Delivery Strategy 2020-2025 and, where appropriate, provide feedback for the Executive on 5 December 2019.

Members considered the draft Housing Delivery Strategy 2020-25 and provided feedback on the strategy prior to it being finalised for the Executive on 5 December 2019.

The Director of People Services gave an overview of the Housing Delivery Strategy. The Executive Portfolio Holder for Housing and Benefits Councillor G. Knight was not present at the meeting.

The strategy document was an important step towards delivering the Corporate Plan 2020-25 housing objective to develop and implement a housing delivery strategy. It outlined the Borough’s housing priorities, considered affordability issues as well as the planning policy background and construction challenges.  An all-Member briefing had taken place on 26 September. The strategy set out six objectives to enable more households working or living in the Borough to have a home that is affordable to them. Underpinning these objectives was a commitment to partnership work with housing associations, public landowners, investors, developers and others. An Action Plan 2020-25 was set out in the document.

Councillor S. Walsh declared a non-pecuniary interest in respect of his capacity as a partner of a property management company.

Committee Members had a number of questions and comments in the discussion that followed:

·       Affordable housing – Members noted the Council had a good track record of meeting the Government’s affordable housing target each year but the target for delivering affordable housing on Council land was still small. Members asked if affordable housing schemes could be expanded on current development projects such as Cromwell Road in Redhill town centre.

Members asked if the objective to deliver housing to meet local needs through planning policy (objective 6) could set out more detail about how the plans for building affordable housing were linked with transport strategies and support for local businesses through employment opportunities.

Members asked whether the aim to provide more affordable homes could be set out in the housing vision so it was clear for residents that the housing strategy was not only about building more homes. Clear statements setting out the legal definitions of affordable housing, affordable rented and shared ownership and shared equity also would be helpful for residents who did not feel schemes were currently affordable for them. It was noted that if more affordable housing was not built then young people would move outside the borough to Croydon and Crawley where there was more social rented housing.

It was noted that the Council had increased the affordable housing requirement on greenfield sites to 35 per cent in the Core Strategy. The Corporate Plan committed Reigate and Banstead Borough Council to deliver a minimum of 30 per cent affordable housing on all Council development schemes. Members asked if the 35 per cent target could apply for the Council’s own schemes. They also commented whether the 35 per cent figure could be achieved on greenfield sites due to the high cost of land. Members pointed out that building on the green belt led to additional costs to put in infrastructure such as roads and other services. It  ...  view the full minutes text for item 7.

To receive an update on the performance of the companies currently owned, or part-owned, by the Council.

Members considered a report on the performance of the companies owned or part-owned by the Council. To support good governance of the Council’s companies the Overview and Scrutiny Committee received six-monthly updates. These companies currently consisted of Greensand Holdings Ltd, Horley Business Park Development LLP, Pathway for Care Ltd and RBBC Ltd. All these companies were currently considered to be performing in line with the Council’s objectives.

Greensands Holdings currently held one property which provided a rental income sufficient for the company to meet its repayment and loan obligations to the Council and to generate an income.

Horley Business Park Development was a joint venture set up to bring forward planning and subsequent development of land in the Horley area.  The business park site was allocated for employment purposes in the Reigate and Banstead Development Management Plan (2018-2027) which was adopted by full Council on 26 September 2019.

Pathway for Care which provided supported living facilities and support for their residents at a number of sites in the borough was projected to generate a net profit in 2020. The Council was a minority shareholder in the company with the majority shareholding sold to Paul Green, a founder and former director of Fairhome Group PLC (the previous majority shareholder) in September 2019. 

RBBC Ltd (Pathway Digital) was a potential digital technology business but as no external investment was secured the company was inactive and in the process of being closed.

Members noted the report and asked questions on the following points:

·       Horley Business Park Development ­– Gatwick Airport and its published Masterplan proposed to use a small part of the Council’s land for storing construction works. If the airport was expanded, and use of the reserve runway received consent from the Secretary of State, would a neutral position be agreed? It was confirmed that the Council had not yet adopted a position regarding Gatwick’s proposals or formally responded as a local authority to a possible future application for a Development Consent Order.

·       Governance arrangements – was there an update on the review of governance issues including those of non-executive directors? It was confirmed that work on new governance arrangements for the Council’s companies was ongoing including resourcing these companies and commercial activities. A report from the Monitoring Officer would be considered by the Commercial Ventures Executive Sub-Committee early in the new year which would address the issue of non-executive directors.

·       Greensand Holdings – it was noted that David Beck had been appointed by the Commercial Ventures Executive Sub-Committee as an interim Council Property Advisor to a vacant director post in the company in May 2019. This was a temporary post which was an external resource to ensure that the appropriate number of directors were on the Board.

The Commercial Ventures Executive Sub- Committee had approved the appointment and had oversight of his work.

RESOLVED that:

(i) the Companies Performance Update as set out in the report (17 October 2019) and the Exempt information be noted

(ii) the observations of  ...  view the full minutes text for item 8.

To consider any updates to the Work Programme for the Overview and Scrutiny Committee for 2019/20 and to consider the Action Tracker from the previous meeting.

Members reviewed the Future Work Programme for the Overview and Scrutiny Committee for 2019/20 and considered the Action Tracker from the previous meeting.

It was noted that the report from the Budget Scrutiny Panel: Service and Financial Planning 2020/21 would be considered at 11 December 2019 Overview and Scrutiny Committee meeting.

The Chair noted that the Staywell contract to run three community centres was due to end on 31 March 2020. A cross-party consultative group was being established looking into the work to transfer the services back to the Council. The Committee requested a report on the transfer before the 1 April due date.

Projects update – as requested at the September Overview and Scrutiny meeting and set out on the Action Tracker, Members had received a written response on current timescales of major development projects ­ – Marketfield Way, Cromwell Road, Lee Street and Pitwood Park.

Members requested further detailed information be provided in order to understand in more detail the current performance of these projects. It was suggested that reporting of the RAG status of these projects would be helpful with regards to time and budget for instance. 

It would also be useful for Members to receive detailed information such as spend to date, design status, number of tenders received and any other relevant information.

It was noted that Committee Members currently received detailed performance updates via quarterly reports which included the capital programme within the established governance framework. All projects and programmes were reviewed in detail on a monthly basis with the relevant Portfolio Holder Executive Member and any significant changes reported to them.

The requirement for programme and project reporting was identified as a new request from the Committee.

It was agreed that Councillor N. Harrison would progress this request with the relevant officers.

RESOLVED that: updates to the Future Work Programme for 2019/20 and the observations on the Action Tracker be noted.

To consider any items arising from the Executive which might be subject to the ‘call-in’ procedure in accordance with the provisions of the Overview and Scrutiny Procedure Rules set out in the Constitution.

It was reported that there were no items arising from the Executive that might be subject to the ‘call-in’ procedure in accordance with the provisions of the Overview and Scrutiny Committee Procedure Rules.

To consider any item(s) which, in the opinion of the Chairman, should be considered as a matter of urgency - Local Government Act 1972, Section 100B(4)(b).

(NOTE: Under the Committee and Sub-Committee Procedure Rules set out in the Constitution, items of urgent business must be submitted in writing but may be supplemented by an oral report.)

There were no items of urgent business.

The meeting closed at 9.40pm.

RECOMMENDED that members of the Press and public be excluded from the meeting for the following item of business under Section 100A(4) of the Local Government Act 1972 on the grounds that:

(i)  it involves the likely disclosure of exempt information as defined in paragraph 3 of Part 1 of Schedule 12A of the Act; and

(ii)  the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

RESOLVED: that members of the Press and public be excluded from the meeting for the consideration of Item 12 of the agenda (Medium Term Financial Plan Update (Exempt)) under Section 100A(4) of the Local Government Act 1972 on the grounds that:

(i) it involves the likely disclosure of exempt information as defined in paragraph 3 of Part 1 of Schedule 12A of the Act; and

(ii) the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

To consider any exempt information in relation to the Companies Performance Update.

Members noted the information in relation to the Medium Term Financial Plan Update in the Exempt part of the meeting.