Agenda item

Report of the Head of Strategic Finance

This report provides an overview of financial issues affecting the Council over the next five years and enables a strategy to be developed to achieve a sustainable budget and to set a Council Tax for 2013/2014.

The Panel received a report of the Head of Strategic Finance explaining the Medium Term Financial Strategy (MTFS).  He advised that there was a degree of uncertainty with regard to the following year’s financial status: a considerable number of changes proposed by Central Government would need to be factored into the budget.  At the present time, however, insufficient information had been provided and, consequently, the impact of these changes was unclear.

The Head of Strategic Finance counselled that the Panel would need to consider Revenue and Capital Outturns for 2011 / 2012, identified pressures during 2012 / 2013 and future years, Council’s progress in meeting efficiency targets and the forecast net expenditure.  Income streams which needed consideration were: Central Government funding, the Council Tax base and collection levels and levels of reserves and balances.  

In response to a question from Councillor Jeffree, the Head of Strategic Finance advised that the £84,000 Grant for the Council Tax freeze was not reflected within the MTFS as shown at Appendix 1.  The figures within the projections indicated a previous year’s  freeze grant which had been guaranteed for a four year period. 

Councillor Jeffree suggested that income could be generated through various Council departments; for example, Human Resources could also serve other authorities.  The Head of Strategic Finance advised however, that whilst this was laudable it would only generate small additional income as, being part of Shared Services, only 60% of any saving would accrue to WBC.

Councillor Derbyshire stated that he was not in favour of deficit revenue budgets and suggested that, in extremis,  the reserves be used as a short term measure to ease any deficit in the budget.

Following an enquiry from Councillor Khan, the Head of Strategic Finance advised that income was mainly derived from:

• Trade Waste including Recycle credits
• Car parking charges - this did not include Controlled Parking Zones (CPZ)
• Planning and Building Control Fees
• Land Charges fees (although this might not be available in the future)
• Leisure Centres

The Head of Strategic Finance said that a fuller explanation of revenue would be provided to Members of the Panel and that a report on fees and charges and CPZ income would be available prior to the meeting on 27 November.  

ACTION:         Head of Strategic Finance

In reply to a further question from Councillor Khan, the Head of Strategic Finance advised that income from  Commercial rents had fallen from £7 million to a current figure of £6 million.  It was anticipated that the regeneration of Charter Place would lead to an increase in revenue eventually.  He added that vacant retail units in Charter Place and the lack of a tenant in the former ‘Woolworth’ shop had  decreased the income stream. 

Councillor Khan then asked whether additional income generation had been considered.

The Head of Strategic Finance replied that a number of schemes were currently being investigated:

• It was anticipated that an increase in revenue would be accrued from ground rent from sites in Ascot Road

• Capital Shopping Centres (CSC) was anticipated to rescind the management of car parks which, it was hoped, would lead to an income increase
• Income would ensue from the Health Campus in the form of rents, an increase in the Council Tax base and the New Homes Bonus. 
• An increase in rent had recently been negotiated with the West Herts Golf Club

Referring to the New Homes Bonus, Councillor Derbyshire noted that this initiative would make a significant difference to the Council’s financial situation which would otherwise be rather squeezed.

The Chair asked how the £13 million reserves could be used.  He suggested that this could contribute to a reduction in business rates/rents.

The Head of Strategic Finance, however, counselled that business rates was a contentiouous issue at this time as the Government was likely to assume too high  a ‘target’ for the Council to achieve.  He advised that it would be unwise to support businesses against this background.

Councillor Khan noted that the General Reserves stood at just under £8.5 million; he asked whether this could be used to fund the overspend.  The Chair agreed that it would be sensible to consider using the reserves.

Councillor Taylor noted the figure for growth in public sector pay rising by 1% in the coming year and asked whether this was a somewhat conservative forecast.

The Head of Strategic Finance replied that 3% was probably a better estimate but the MTFS reflected Government strictures on the subject. If 3% were unaffordable then the Council would need to consider increasing the current 1% vacancy assumption to compensate.

Councillor Meerabux noted that some categories in the General Reserves were accorded relatively large amounts.  He asked whether any changes could be made within these headings.    

The Head of Strategic Finance said that the Economic Impact classification was a fairly recent inclusion which, it was anticipated, would be the first call upon any budget shortfalls.  With regard to the Housing Benefit Subsidy, he advised that this was intended to cover against possible errors in the Council’s grant return to Government.

Councillor Khan informed the meeting that he understood that £6 million would be the optimum reserve figure.  If this were correct, he advised, then this could fund a cut in Council Tax since the reserves currently amounted to £8.5 million. 

RESOLVED –

that Budget Panel’s comments be noted.