Cheltenham Borough Council
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Agenda item

Budget Strategy and Process 2020/21

Report of the Cabinet Member Finance

Minutes:

The report was presented by the Cabinet Member Finance. She explained that the draft budget timetable attached to the report set out the sequence of events to come, leading up to the setting of the budget and council tax level for 2020/21.

 

She reported that in 2016/17, the government offered a guaranteed 4 year budget to every council that could demonstrate efficiency savings. 2019/20 was intended to be the final year, with a fair funding review, business rates review and business rates reset anticipated. This was to be ­concluded in 2019/20 and take effect from 2020/21. However, the political uncertainty surrounding Brexit had resulted in a 12 month deferral to 2021/22.

 

The Cabinet Member explained that the 2019 Spending Review had been announced in September and represented a single year spending review that covered only 2020/21. A multi-year spending review would be announced next year, with a number of aspects directly affecting local government, including the confirmation that the Fair Funding Review, Business Rates Review and business rates reset have been deferred by 12 months to 2021/22, and a £2.9bn increase in overall core spending power. Most of this additional funding was for adults and children’s services, but with £54m allocated to tackling homelessness. Clarification on its distribution has been requested. The Council Tax referendum limit was proposed at 2% but this would be subject to consultation in the Provisional Settlement. Additionally, baseline funding for business rates would be uprated by the CPI, funding to remove negative RSG had been continued for 2020/21, and legacy payments of the New Homes Bonus (NHB) would be honoured but the scheme for 2020/21 was still under ministerial discussion. She reported that 75% business rates pilots would come to an end and no new pilots were planned for 2020/21. A technical consultation would be issued on the settlement, with the provisional settlement being announced in early December.

 

The Council’s approved Medium Term Financial Strategy (MTFS) was predicated on the basis that council tax would increase by 2.99% per annum. However, the proposal to retain business rates growth achieved between 2013 and 2020 for a further year, alongside continued removal of negative RSG, should have a positive effect on the council’s funding in 2020/21.

 

She explained that the MTFS assumed legacy payments for the NHB would be honoured. However, a continuation of the same methodology for a further year could equate to an additional £250k funding in 2020/21. The MTFS projections were in the process of being updated to reflect the best estimates of the financial pressures impacting on the Council, including an updated view on business rates income and the potential impact of the fair funding review, business rates review and business rates reset in 2021/22. The estimate of the funding gap for 2020/21, based on the previous iteration of the MTFS, was £2.414m. Updated high level projections supported a revised worst case funding gap of £1.9m, and a best case of £900k.

 

The Cabinet Member highlighted that, as in the previous year, given the current uncertainty surrounding financial settlements, it was prudent to defer the full publication of the MTFS projections to the Cabinet meeting in December 2019, as part of the interim budget proposals. This would enable the Cabinet to react positively to any changes announced in the provisional settlement and ensure that the MTFS was robust and fit for purpose.

 

She explained that part of the drive towards financial sustainability included identifying new opportunities to generate income and investment in projects which provided good financial returns. The commercial strategy aligned closely with other key strategies including place-making, economic growth, digital transformation, workforce and skills development, investment and asset management which have a combined message that Cheltenham Borough Council had entered a new era of business enterprise, growth and innovation.  There would be continued work with partners who shared our ambition and values and the best interests of Cheltenham residents would continue to be at the heart of everything we do.

 

The Cabinet Member referred to the significant investment in plans by the Executive Leadership Team to drive the modernisation programme forward to include delivery of the commercial skills development programme. She explained that later in 2019, the Council’s Commercial Forum would be established to review and consider commercial businesses case proposals following the training and mentoring Officers have received.

 

The Cabinet Member reported that in June 2019, the national MJ achievement awards recognised Cheltenham Borough Council for its efforts in making significant local investments and long-term financial planning to ensure continuity of frontline services and public realm investment. This approach has helped the council manage the impact following the loss of £6.8m in funding since 2010. CBC was named Best Commercial Council for 2019.

 

The Cabinet believed the longer term approach to finding efficiencies to close the funding gap was fundamentally through economic growth and investment and the efficient utilisation of our assets; linking our Place and Commercial Strategies to ‘Invest in Cheltenham, for Cheltenham’.  This had seen a place-focused investment approach offering long term investment, income through rents and other social and financial benefits. ELT’s collaborative approach had enabled considerable progress. Examples of this approach included the Workshop Cheltenham project, which would create new jobs, regenerate the surrounding area and bring in rental and business rates, but most importantly act as a growth magnet, encouraging investment and footfall on the fringes of the town centre.

 

ELT were working closely with Cheltenham Borough Homes to deliver the £100m investment in housing across the borough. This investment would deliver an additional 500 homes across the Borough which matched the needs of our residents. This investment would also provide a commercial return in addition to capital appreciation.

 

The Cabinet Member reported that in August 2019, the council completed the purchase of 112 acres of strategically important land which formed part of the West Cheltenham JCS allocation. This was the most expensive land purchase ever made by CBC. It would enable the delivery of the Cyber Central vision, and was a significant step forward in achieving the council’s corporate plan priority of becoming the UK capital of cyber.

 

She then went on to say that the starting point for constructing the 2020/21 budget had been a projected mid-range funding gap of £1.2m. Closing a gap of this size represented a huge challenge but was being met by a proactive approach to identify budget inefficiencies, carried out by the Cabinet and ELT. This work had already made significant progress towards bridging the gap, having identified at this early stage potential efficiency savings and additional income of £0.8m.

 

It was the Cabinet’s intention to meet the shortfall in funding in 2020/21 from the budget strategy support earmarked reserve in order to deliver a balanced budget. Work remained to be done towards building a robust base budget for 2020/21 and this may result in the funding gap increasing.  In addition, the Government’s final financial settlement may be worse than currently indicated. It was therefore important that the work of identifying budget efficiencies should continue up to the publication of the draft budget proposals and beyond.

The Cabinet Member Finance explained that government legislation on council tax required councils proposing excessive rises to hold a local referendum allowing the public the right to veto. The proposed referendum threshold for council tax increases was 2 per cent for all local authorities, a 1% reduction of the previous figure.

In terms of service growth, Members would need to base decision-making, particularly requests for additional resources, upon the priorities in the Council’s business plan. The Budget Scrutiny Working Group and the Overview and Scrutiny Committee would be invited to review and feedback to the Cabinet their priorities for relevant bids received. These priorities would be considered by the Cabinet when compiling the consultation budget.

 

Business Rates Retention, Pooling and Pilot arrangements for Cheltenham have higher than anticipated levels of business rates in 2019/20. Taking into account the redevelopments at the Brewery, John Lewis and Jessops Avenue, they were significantly above the baseline funding, which would result in Cheltenham still being liable to a levy. Taking this into account, the Section 151 Officer believed that this Council would benefit from remaining in the pool in 2020/21, as it would result in a reduction in the levy payment.

 

The Budget Scrutiny Working Group will continue to support the budget process by considering options for addressing the funding gap, reviewing the work programme, developing Members’ scrutiny skills and understanding of financial matters, and developing the approach to budget consultation.

 

Finally, the Cabinet Member Finance stressed that the priority must be to ensure that government funding cuts did not feed through into significant council tax rises or frontline service cuts. She thanked officers for their commitment and hard work.

 

 

 

RESOLVED THAT:

 

1.    the budget setting timetable at Appendix 2 be approved;

2.    the budget strategy outlined in section 5 be approved;

3.    the intention for this Council to remain in the Gloucestershire Business Rates Pool in 2020/21 as outlined in section 6 be noted;

4.    the Executive Director Finance & Assets and the Cabinet Member for Finance be requested to consider suggestions from the Budget Scrutiny Working Group in preparing the interim budget proposals for 2020/21, as outlined in section 7.

Supporting documents: