Agenda item - MEDIUM TERM FINANCIAL STRATEGY 2018-2023

REPORT OF THE STRATEGIC DIRECTOR OF FINANCE, POLICY AND GOVERNANCE

To consider the key issues in respect of the Medium Term Financial Strategy 2018-2023.

RESOLVED:

(1) That work be undertaken on the following aspects of the Medium Term Financial Strategy 2018-2013:

· Pay Inflation – modelling work on the impact of pay inflation in excess of the 1% increase currently assumed, particularly in the light of the impact of the national pay review and the salaries paid by neighbouring authorities;

· Capital – modelling work on the best use of Capital resources and the tolerance of risks associated with potential significant Capital Investment on schemes aimed at generating revenue income; and

(2) That any further Member comments on the Medium Term Financial Strategy 2018-2023 be provided to the Head of Finance, Performance and Asset Management as soon as possible, and by no later than 23 June 2017.

REASON FOR DECISION: To allow Members the opportunity to comment on the process, assumptions and policies to be used in the Medium Term Financial Strategy 2018-2023.

The Head of Finance, Performance and Asset Management presented the report of the Strategic Director of Finance, Policy and Governance in respect of the process, assumptions and policies to be used in the Medium Term Financial Strategy (MTFS) 2018-2023.

The Head of Finance, Performance and Asset Management advised that the draft MTFS will be considered by Cabinet at its meeting in July 2017, and recommended on to Council in August 2017 for adoption. The MTFS provided an estimate of the funding available to the Council and then details the assumptions and policies on which these forecasts were based. The report gave the Committee a chance to comment on the process, assumptions and policies to be used in the MTFS. These comments would be considered by the Executive Member for Finance and IT and the Cabinet in determining the draft MTFS for 2018-23.

The Head of Finance, Performance and Asset Management stated that Table 1 in the report showed the forecasts for funding, expenditure and use of balances that were part of the budget agreed by the Council in February 2017.

The Head of Finance, Performance and Asset Management explained that it had been expected that there would be a move to 100% Business Rates Retention by 2019/20, but the General Election in June had meant that the required legislation for this would now not be in place in time for this to take place. It was also possible that this legislation would not be a priority for a new Government, and so it may be the case that it be delayed until at least 2020/21.

The Head of Finance, Performance and Asset Management commented that the forecast of Business Rates was based on what Central Government determined to be the Council’s baseline need, which was a prudent assumption. The Council did get to retain some of the growth in Business Rates and the assumption to reflect this could be changed. However, any growth was highly uncertain and as well as being affected by the number of businesses in the District, was also affected by collection rates, revaluations and the status of appeals.

The Head of Finance, Performance and Asset Management advised that, for the 2017/18 budget, the Council had agreed to a £5 increase in Council Tax for a Band D property (2.4%). Council Tax for other bands had increased by the same percentage. This was the maximum amount that Council Tax could be increased by without the need for a local referendum. The current forecasts were based on this £5 per year increase continuing. The increase in rate of Council Tax was combined with an assumption of a 99% collection rate and a 0.5% growth in the Council Tax base (the number of properties in the area which were liable for Council Tax). However, the Council Tax base growth assumption could be increased.

The Committee noted that last year’s MTFS determined the following strategies for reducing expenditure and/or increasing income:

· Transformation of services so that they could be delivered at lower cost. This may involve up-front investment to allow the transformation to take place. This could include sharing of services with other organisations to make best use of resources from economies of scale. There may be some changes to the way that resident’s received services; and

· Looking at ways to make use of the Council’s assets (e.g. capital resources) to generate revenue income (or reduce revenue costs). This would include increasing investment returns from the Council’s assets.

The Head of Finance, Performance and Asset Management stated that the budget for 2017/18 was set based on having a General Fund balance of £6.4million at the start of the year, and by the end of 2020/21 this would be reduced to £3.2 million. By 2020/21, the forecast income and spend would be approximately equal. The actual General Fund position at the start of 2017/18 was £8.2million. This could give the Council the opportunity to plan to balance its funding over a longer period.

The Head of Finance, Performance and Asset Management referred to some of the other policies contained within the MTFS that may need to be reviewed as part of the refresh for 2018-23. These were:

· Pay inflation (expenditure) – currently assumed at 1% per year;

· General inflation (expenditure) – currently assumed to be zero;

· Discretionary fees and charges (income) – increases currently set at Consumer Price Index + 2%; and

· Annual reappraisal of all capital schemes – to ensure that they continued to meet Council Priorities and offered Value for Money.

In debating the report, the Committee agreed that the following work be undertaken:

· Pay Inflation – modelling work on the impact of pay inflation in excess of the 1% increase currently assumed, particularly in the light of the impact of the national pay review and the salaries paid by neighbouring authorities; and