Agenda item

To consider the report of the Chief Officer Resources.

Consideration was given to the report of the Chief Officer Resources.

At the invitation of the Chair, the Chief Officer Resources highlighted the following salient points contained within the report:

-      The Medium Term Financial Strategy (MTFS), was a key element within the Council’s strategic planning framework and provided the latest assessment of the Council’s financial position over the next 5 years and guidance on potential short, medium and long term challenges.

-      The document included a forward look over the next 5 years to assess the spending requirements the Council was likely to face to deliver the priorities set out in the Corporate Plan and highlighted the level of cuts (reducing or stopping services) that would need to be made to ensure the Council could set a balanced budget each year.

-      The MTFS proposed the approach that the Council would take to respond to the financial challenges faced over the next 5- year period. This would be an iterative process and one that would be developed and refined as the funding position from Wales Government became clearer and strategic business reviews were further developed and implemented.

-      Details of the key financial planning assumptions used for financial modelling were detailed at section 4 of the appendix and this also provided an assessment of the potential budget gaps over the period of the MTFS, building on the current assessed cost pressures and achievement of the bridging the gap proposals.

-      The cost pressures that had been identified could be categorised as existing service pressures, growth items and Covid-19 pandemic pressures.  It had been assumed that the Covid-19 pressures would continue to be funded by Welsh Government.   It was noted that a residual funding gap of between £8.6m and £11.5m had been assessed over the next 5 years.

-      Usually by this time in the year, UK Government would have already announced the provisional and final local government settlement, however, due to the focus on the response to the Covid-19 pandemic, the UK spending review had been delayed.  This had subsequently delayed the Welsh Government announcement on the provisional settlement and this was now expected on 22^nd December, 2020 with the final settlement due on 2^nd March, 2021.  This delay would have implications for the budget setting process for 2021/2022 and planning arrangements for setting a balanced budget.

-      The Council’s current MTFS contained a number of assumptions which impacted on the level of its income and expenditure. Changes in these assumptions could potentially have a fundamental effect on the budget gap over the next 5 years.  As an example, the impact of a 1% change on the main assumptions had been calculated and was detailed in paragraph 5.2.2. of the report.

Members were then invited to comment/raise questions on the report.

The Leader of the Labour Group commenced by stating that due to the delay in the announcement of the provisional local government settlement, work would need to be undertaken in January, prior to the annual budget discussions taking place and requested that the information which was made available by Welsh Government on 22^nd December, 2020 be made available to Members at the earliest opportunity together with any new bridging the gap proposals that would be required to mitigate the budget further.

Transformation Fund - in reply to a question as to whether the Transformation Fund would form part of budget going forward, the Chief Officer Resources confirmed that the draft estimates included as part of the MTFS had assumed that the Transformation Fund would continue in 2021/22 and into future years.

Minimum Revenue Provision (MRP) – The Leader of the Labour Group commenced by stating that the MRP had featured highly in this term of office because clearly without this there would have been an extra £3m budget gap.  He continued by referred to a Council report dated October 2017 (considered by Council on 7^th December, 2017) and quoted paragraph 4.4 which stated that “During the MRP reduction period, the Authority will have a longer period of time to plan and implement longer term transformational savings that will contribute towards mitigating the MRP increase at the end of year 5” and asked whether any work had been undertaken in this regard and if any savings had been put forward to contribute towards the mitigation of the MRP increase - he pointed out that the level of the financial strain i.e. £1.8m had not altered in 4 years.

The Chief Officer Resources confirmed that the financial strain had not altered at the high level but proposals and savings had been identified that would impact on the budget, which would include bridging the gap proposals and when brought forward would impact on the total funding gap i.e. whilst proposals had not been identified to specifically address the MRP cost pressure, proposals had been identified to address the cost pressure as a whole.

The Leader of the Labour Group expressed his concern that nothing had been done to mitigate the ‘tornado’ which was coming in 2022/23 – a substantial £2m of extra funding (a hidden cost pressure) would be required to be identified and said he would have thought the Council would have made advance preparations – he added that the previous year discussions had taken place regarding the need to be prudent and monies had been included to increase the level of the general reserve fund. 

He continued by pointing out that in the last 2 years almost £2m had spent on consultancy fees (almost half the life of the MRP) when it was known that this huge cost pressure would be coming.  There were clearly issues with the local authority being able to survive at its current level and this action could be interpreted as borrowing to pay for provision but going forward the Council may need to look at the services that were not needed or stopping certain services to be able to rectify this position.

Another Member expressed his concern that because no provision had been made to address the MRP cost pressure this could have implications for the next political administration in 2022.

The Chief Officer Resources advised that it was the intention of Council to ensure that the cost pressures were addressed and funded year on year.  If cost pressures continued, alternative savings proposals would be investigated to mitigate this going forward.  The MRP had enabled the Council to save £15m in the last 5 years and whilst there would be an increase in the MRP going forward, this would be less than what was being paid previously.  A conscious decision had been made not to allocate specific savings against the MRP because a cost pressure was a cost pressure whether it was the result of the MRP, lost income or other expenditure - the cost pressures would be dealt with as a collective and savings identified going forward in order that a balanced budget could be set for future years.

In reply to a question, the Chief Officer Resources confirmed that Welsh Government had now introduced legislation that prevented local authorities from backdating changes to their MRP policy – however, backdating provision was allowed at the time the Council had made that decision and implemented its policy change.

The Leader of the Labour Group concluded by stating that the Council could change its policy at any time as long as there was prudent provision but again expressed his concern that nothing had been done to prevent this onslaught and even more concerning was that this on-going cost pressure would have future implications for the next administration.

The Leader of the Council commenced by stating that whilst he understood some of the comments that had been made, his record and approach to financial prudency was well documented and he had no intention of handing over a legacy of a massive financial burden to the next administration. The decision that had been taken had allowed the Council to protect and enhance the services for the council tax payers, without any severe impact on the council tax itself.

He continued by stating that he understood the nervousness around the size of the figure but pointed out that one of the first comments he had made regarding backdating the MRP, was that there should be no major financial burden handed over to future administrations and he was confident that this would be the case and this would be budgeted for accordingly.

The financial prudency during the lifetime of this administration had been sound and pragmatic and everything that had been done had received the endorsement of Audit Wales and other agencies.  The Leader concluded by stating that the right decision had been made and he was absolutely determined that there would not be any major financial burden placed on any future administration.

The Leader of the Labour Group reiterated his concern that no mitigation measures had been put in place to address this cost pressure and this pressure would be an added strain for the Council on top of all the other pressures faced.  The retrospective nature of the change to the MRP policy had sustained the Council going forward but unless he could be advised how the £1.8m could be ameliorated, it clearly demonstrated that the Council was not considering this prudently at this stage.

It was unanimously,

RESOLVED, subject to the foregoing, that the report be accepted and Option 1 be endorsed, namely that the:

-      Medium Term Financial Strategy 2021/2022 to 2025/2026 be approved.

-      Forecast funding gap for the period of the Medium Term Financial Strategy be noted.

-      Cost pressures identified at Appendix 1 of the Medium Term Financial Strategy be noted.

-      Progress update within the Strategic Business Reviews attached at Appendix 2 of the Medium Term Financial Strategy be noted.