Agenda item

Purpose:  To set out the financial planning assumptions for future years and how these align these with the Council Strategy to ensure that the Council Strategy will be delivered. The MTFS highlights the overarching key issues facing the Council’s finances as well as how there are many different scenarios and uncertainty concerning the future revenue streams for the Council in the future.

Councillor Iain Cottingham (Executive Portfolio Holder: Finance and Corporate Services) and Joseph Holmes (Executive Director – Resources) presented the Medium Term Financial Strategy (MTFS) (Agenda Item 4).

It was noted that the funding settlement had only just been received on the day before the meeting, which meant that the papers were already out of date.

The following points were raised in the debate:

·       It was highlighted that the local government settlement for 2024/25 would boost local authority budgets and Members asked how West Berkshire would be affected. Officers confirmed that the government had announced £600M for local authorities across the country. An increase of around £2M for West Berkshire had been assumed in the MTFS. This appeared to be fairly accurate, with the increase now expected to be around £1.9M.

·       Members queried the assumption in 3.4.2 that proposed care reforms would have no impact on funding in future years. It was explained that the government had previously proposed significant reforms to adult social care, capping contributions that individuals would have to make to their adult social care, but the reforms had been delayed and were not expected to be introduced for several years.

·       While it was noted that the main objective of the MTFS was to maintain the resilience of the Council budget, Members sought assurance that spend across the People and Place Directorates would be ring-fenced. It was explained that the Council was projected to have £4M of reserves by the end of the financial year, which equated to just 8 days of spend, leaving the Council vulnerable to unexpected events, so it was impossible to guarantee that additional savings would not be needed. It was highlighted that 10 high-needs social care clients were costing the Council £10M per year and any additional high-needs clients could quickly deplete remaining reserves. It was noted that speculative investors were making significant profits from the deregulated care market.

·       Members noted that business rates were a significant source of revenue, but the Council had no control over this and suggested that this was a risk. Officers indicated that of £100M of business rates collected, the Council retained around £30M. The Council did not have control over property valuations, nor the level of rates charged. There were also risks around appeals. A key risk was that West Berkshire was currently around £10M above the baseline set 10 years ago. Government had proposed to reset business rates, however, it was likely that there would be a transition period.

·       It was noted that the Council retained 100% rates income from renewable energy schemes and Members asked about the value of this income and if more schemes were being considered. It was confirmed that the Council benefited from all renewable schemes not just its own. The Council was proposing to build a solar farm, which would be a net financial benefit.

·       A question was asked about the new funding system to replace the New Homes Bonus, Services Grant and Funding Guarantee. It was assumed that where funding schemes ended, they would be replaced by an alternative that gave a similar funding level. However, it would be some time before Government reforms were agreed. Members suggested that this should be added as an identified risk with suitable mitigations put in place. Officers indicated that any changes would most likely have a transition period. There had been one-year settlements for a number of years. This was likely to continue until there was a wider government spending review and a return to four-year allocations. Also, this was not considered a material risk, since it was only equivalent to 0.4% of the budget.

·       Members asked about the ideal level of reserves. It was suggested that 3-4 weeks of spend would be comfortable (i.e., £8M - £8.5M of general reserves) plus risk reserves (i.e. circa £5M).

·       It was noted that reserves used to be significantly higher. Reserves were boosted during Covid due to various grants, which were subsequently allocated, but it was suggested that the Council should seek to return to pre-Covid levels of reserves. Members recognised that there had been several major unexpected events in recent years, and the Council needed resilience to cope with future events.

·       Members questioned whether the Council was seeking to replenish reserves too quickly and asked how this would be achieved. It was confirmed that this would be achieved through savings, income and transformation. It was suggested that building reserves also had benefits in attracting new staff, who would want reassurance that the Council was financially resilient.

·       It was noted that the Council had amongst the lowest levels of reserves in the country and Members asked if that mattered, given that it also had a lower level of debt than some other local authorities. It was explained that other local authorities had risk reserves to draw upon, which gave additional financial resilience. Comparator data highlighted the Council’s lack of financial resilience compared to its peers.

·       Members asked if historic data was available about the reserves of those local authorities that had issued S114 notices. While this data may be available, it was noted that some of these local authorities had thought they had higher levels of reserves than they did. Also, because external audits were often delayed, many local authorities had not had their accounts signed off. As such, results may be misleading.

Action: Joseph Holmes to provide details of where historic financial information could be accessed for other local authorities.

·       A question was asked around requirements for stress testing around anticipated risks. Officers confirmed that there were no requirements to undertake stress testing, but S151 officers were required to set out risks and set appropriate levels of reserves. The Council was required to report on various performance indicators (e.g., investment as a percentage of income, money spent on capital financing, etc).

RESOLVED to note the report.