Agenda item

Paul Jones, Executive Director Finance and Assets – to follow

The Director of Finance and Assets pointed out that in his 30 years of working for Cheltenham Borough Council this had been his most challenging period as a finance professional, and with this report he had endeavoured to strike the right balance between honesty and positivity.  He acknowledged the media speculation regarding the viability of councils up and down the country and he felt strongly that it was imperative that there be a record of how this Council was affected.  The assessment of the going concern was a report that he wrote every year and in laymans terms was an assessment of whether an authority, its functions and services would continue in operational existence for the foreseeable future. This report would normally sit in the background and was of little interest to anyone but clearly it had a greater prominence this year. For that reason he agreed with the Cabinet Member for Finance that this report should be presented to the Audit, Compliance and Governance Committee.  He was pleased to be able to confirm, with a great deal of confidence, that CBC was indeed a going concern.

Clearly, these were unprecedented times, affecting every local authority in the country but what made Cheltenham different was, firstly, it’s estimated additional costs from this pandemic, excluding slippage in savings programmes amounted to circa £1.3m and to date, it had received just over £1.3m in this financial year.  Of more concern to CBC was the lost income from sales, fees and charges; as members would be aware, the vast majority of CBCs losses related to car parking.  It was therefore pleasing to hear the commitment from Government a few weeks ago that stated where losses were more than 5% of a council’s planned income from sales, fees and charges, the Government would cover 75p for every pound lost. His calculation suggested that CBC would receive just over £712k for every million reported as lost income. MHCLG were due to release the detail on how this data would be captured and he would provide further updates when they are available. 

He had mentioned previously that CBC held reserves that could be put forward to offset these losses and he stressed that there may be a need to reprioritise some of the initiatives planned in the February budget to ensure the Council remained financially viable. £1.5m of our reserves had already been identified that could be applied to meet the current fallout from COVID-19 and in addition the council had made debt overpayments in excess of £1m that could be applied if needed (subject to getting formal agreement with the external auditor); this represented £2.5m of CBC money already identified if the need arose.  In summary, he had confidence that the in-year projected losses were covered based on information and work undertaken to date and so he moved onto the longer term viability of the council.  Some income-streams like car parking may never return to the pre-COVID levels and so work continued looking at alternative options to replace that income through the use of CBCs significant asset portfolio.  Fundamentally, this was why Cheltenham was so unique compared to many of its neighbouring authorities; it had assets valued at in excess of £0.5Bn and was the overwhelming reason why it would continue to be a going concern.  It had significant land ownership including the recently purchased 120 acres at West Cheltenham, owned many assets including an airport, 4,000 houses, the freehold interest in the Regent Arcade, a Sainsbury’s supermarket, almost 2 Hundred Thousand square feet of prime office accommodation, a depot, parades of secondary retail outlets, industrial units, start-up units, theatres, cultural venues, a Lido, a leisure centre, multiple car parks and many more.  He noted that a team of Officers had been tasked with re-energising the asset portfolio and making sure they were being used to maximum effect and advised that some assets may be considered surplus to requirements, such as the Arle Nursery site and in any such instance the council would look to generate maximum receipts from sale proceeds and this work would also provide resilience to the future prosperity of the Council.

The Director of Finance and Assets gave the following responses to member questions:

·       The biggest concern for this council was if parking income never returned to pre-Covid levels, with a 10% reduction equating to a £0.5m loss and levels currently only at 40% of what they once were.  Without the wish to scaremonger, without a financial settlement that covered some of these losses, the council would have difficult decisions to make. 

·       The reality was that car parks represented real estate assets with a significant value but any reduction in the use/income would present opportunities for alternative uses. 

·       The Council paid huge business rates on car parks and would still face those liabilities if it were to offer free parking as was being suggested by some members.

·       He was not best placed to answer questions pertaining to public liability insurance for volunteers and would have to seek a response from the relevant Officer(s) outside of this meeting.

·       Business Rates and Council Tax were separate.  Council Tax, or the Collection Fund as it was also known, previously ran at a surplus, with growth throughout the year.  Next year however, the fund was likely to be in deficit, which was unprecedented, though it was noted that GCC and the Police took the highest precepts with only a small percentage coming to CBC.  Business rates were different and would be reported to Government as cash losses.  Retail, leisure and hospitality properties had been given 100% business rate relief for the year 2020/21 and properties that did not qualify had the option to make payment plan requests.  The Governments Section 31 Grant would reimburse some losses and they had suggested that any deficit could be spread over 3 years, but more details were yet to be released.  The business rate revaluation had been postponed until 2022 but it was certain that in the future, business rates would be less of the income generator that it once was.

A number of members took the opportunity to thank the Director of Finance and Assets for his in-depth and honest report, as well as thanking him, his finance team and the Cabinet Member Finance for the huge amount of work they had been doing and for the financial stewardship which had placed the council in the stronger than most, financial position it found itself in. 

The committee noted the conclusion that Cheltenham Borough Council was a going concern.