Agenda item

Cabinet Members' Items - Report of the Corporate Finance and Governance Portfolio Holder - A.7 - Financial Performance Report - In-Year Performance against the Budget at end of the Second Quarter 2019/20 and Long Term Financial Forecast Update

To provide an overview of the Council’s financial position against the budget as at the end of September 2019 and to present an updated long term forecast.

Decision:

RESOLVED that –

(a) in respect of the financial performance against the budget at the end of September 2019:

(1) the current position be noted;

(2) the proposed in-year adjustments to the budget, as set out in Appendix H to item A.7 of the Report of the Corporate Finance and Governance Portfolio Holder, be agreed;

(3) in respect of the Council’s Treasury Management Practices, the aggregate amount of money that can be placed overnight with the Council’s bankers be increased temporarily from £1.000million to £1.500million for each day the Council’s offices are closed over the Christmas break; and

(4) the Council continues to be a member of the Essex Business Rates Pool in 2020/21 if it remains financially advantageous to do so.

(b) in respect of the Updated Long Term Forecast, the updated forecast be agreed and the Resources and Services Overview and Scrutiny Committee be consulted on the latest position.

Minutes:

The Cabinet gave consideration to a comprehensive report of the Corporate Finance and Governance Portfolio Holder (A.7) which provided it with an overview of the Council’s financial position against the budget as at the end of September 2019 and also presented it with an updated long term forecast.

In respect of the in-year financial position as at the end of September 2019:

It was reported that the position to the end of September 2019 showed that, overall, the General Fund Revenue Account was overspent against the profiled budget by £1.483million. It was acknowledged that expenditure or income trends could still be emerging with the position to date largely reflecting the timing of expenditure and/or income. However, any significant issues arising to date had been highlighted and comments provided as necessary within the Portfolio Holder’s report.

Cabinet was informed that in respect of other areas of the budget such as the Housing Revenue Account, capital programme, collection performance and treasury activity, apart from additional details provided within the report, there were no major issues that had been identified to date. Any emerging issues would be monitored and updates provided in future reports which would include their consideration as part of updating the long term financial forecast.

Members were made aware that some necessary changes to the 2019/20 budget had been identified and which were set out in Appendix H, with an associated recommendation also included within the report. The net impact of all of the budget adjustments would be moved to, or from, the Forecast Risk Fund as necessary. At the end of the second quarter, it had been necessary to call money down from the fund (£0.147million) rather than make a contribution to it. Although this trend might not continue, it did present a challenging situation given that the long term forecast was based on the identification of £0.500million of in-year outturn savings. It would be important to review this situation at the end of Quarter 3.

Cabinet was advised that a half year treasury management review had been carried out which had resulted in an associated recommendation to temporarily increase the aggregate limit of funds that could be placed overnight with the Council’s bankers for the period that the Council’s offices would be closed over the Christmas break.

Cabinet recognised that 2020/21 might be the last year of Essex Authorities being able to enter into business rates pooling arrangements, given the move to a 75% rates retention model from 2021/22. Given the financial benefits that the current pooling arrangements had had over the last few years, it was proposed to continue to remain a member of the Essex Pool in 2020/21.

In respect of the updated long term financial forecast:

It was reported that the forecast had been reviewed and updated at the end of Quarter 2. An increase in unavoidable / on-going cost pressures was still expected in 2020/21, which had had a knock on impact on the level of annual on-going savings required. Based on the initial forecast, the savings target had been increased from £0.300million per year to £0.450million per year, with nothing emerging during Quarter 2 that had fundamentally changed that position. An initial assessment of potential savings along with an updated list of cost pressures was set out in Section 2 of the Portfolio Holder’s report.

It was felt that, overall, the revised forecast could still provide an effective method of managing financial risk and although the annual deficit or surplus position for each year of the forecast had been amended, they could still be accommodated within the overall projected long term financial position, supported by the Forecast Risk Fund that had been set up to underwrite such risks.

Members were made aware that a detailed review of risks associated with the long term forecast was subject to on-going review and was separately reported within Appendix K. In terms of delivering against the forecast for 2020/21 and beyond, work remained on-going across the five key work strands of:

1) Increases to underlying income;

2) Limiting expenditure / inflationary increases where possible;

3) The identification of savings / efficiencies;

4) Delivering a positive outturn position each year; and

5) The mitigation of cost pressures wherever possible.

Having considered all of the information and advice contained within the report and its appendices:-

It was moved by Councillor G V Guglielmi, seconded by Councillor P B Honeywood and:-