General Fund Revenue and Capital Estimates 2019-20
- Meeting of Overview Scrutiny Committee, Thursday, 14 February 2019 7.30 pm (Item 103.)
- View the background to item 103.
he Director (Corporate Services) and the Assistant Director (Corporate Services) presented the Committee with the draft revenue and capital estimates for General Fund services in 2019-20 together with the recommended level of council tax to be levied for 2019-20.
The Assistant Director (Corporate Services) highlighted the following:
· On 13 December 2018, the provisional settlement for 2019-20 was announced. The provisional settlement would be the final year of the multi-year finance settlement announced in 2016-17 and completes the Government’s intended reduction in the total level of funding for local government over the next three-year period.
The Settlement Funding Assessment (SFA) for the Council was a slightly improved position than that expected due to the decision of Government to provide an additional £153m of funding to those authorities that were due to pay negative RSG for 2019/20. For Gravesham, this amounted to £243,710 that the Council was expecting to lose by way of a reduction to its business rates retention baseline funding level.
· The council has secured indicative NHB funding for 2019-20 of £611,150 (the Council had budgeted £452,000) This is above the level of funding that was previously in the MTFP, with the increase principally due to there being 349 net additions to the housing stock of the borough between October 2017 and October 2018, above the 160 net additional homes needed to meet the 0.4% national baseline.
· Kent & Medway were unsuccessful in retaining pilot status for Business Rates in 2019-20, so GBC will revert back to being part of the Kent Pool arrangement.
· The budget reflects the second year of the pay offer made by National Employers for Local Government which represents a 2% pay rise for staff with some adjustments to the lower pay points to continue to close the gap with the national living wage and also to maintain the differentials between pay scales towards the lower end.
· The vacancy allowance has been maintained for the General Fund at £350,000 and work continues with budget holders to develop proposal for services and address the Council’s financial position.
· The funding gap, and therefore action required by the council, increased by £0.4m to £2.9m when setting the budget for 2017-18, primarily driven by the changes to the design of the New Homes Bonus Scheme. The funding gap was widened by at least a further £1m at budget setting 2018-19 due to the financial impact of low housebuilding rates in the borough, the higher than anticipated staff pay award and lower than expected interest rates.
· An update on each workstream of Bridging the Gap activity was presented to Cabinet and Overview Scrutiny in Summer 2018. Further to this, in November 2018 both Cabinet and Overview Scrutiny were presented with further Balancing the Budget Initiatives amounting to just under £1.3m in response to the budget gap identified at budget setting 2018-19.
· The council has undertaken a critical review of its council tax base to analyse movements in the tax base between 2018-19 and 2019-20. This has resulted in a slight reduction in the tax base of 0.17% in 2019-20 compared to that of 2018-19, principally derived from lower than anticipated growth in new dwellings in the borough, the impact of the Council Tax Reduction Scheme and an increase in the level of discounts and exemptions applied to individual accounts.
· Gravesham Borough Council is permitted to raise council tax by 3% or up to and
including £5 (whichever is higher).
· The referendum principles permit Gravesham Borough Council to increase its council tax by 2.97% to £203.13 (£5.85 or 11 pence per week for a Band D property).
· Medium Term Financial Plan 2018-19 Quarter Three; projected underspend of £823,330 in 2019-20 meaning the Council will draw £500,000 (instead of £1.3million)
· 2019-20 projecting a balanced budget through the drawn down of £740,000 from working balances. Due to the bridging the gap activity the Councils first savings requirement come in 2023-24
· The budget gap for the Council now sits at £1.9million. £1.2million has already been identified and the Council has a three year window to deliver the remaining £0.7million.
· There is a lot of uncertainty on the horizon with the spending review, fair funding review, Brexit and possible government concerns with the commercialisation agenda.
· An Annual Review of working balances and level of reserves has been carried out and the Section 151 officer has agreed that in 2019-20 there is a need to increase the General reserve from £2million to £4million, meaning the minimum level of working balances will go from £3.25million to £5.25million. The Council will also be re-profiling its commercial income protection reserve to 15% of rental income.
· Capital programme for the General Fund is estimated at £19.5million. New schemes include; Heritage Assets, Car Parking Machinery and the development of Council owned land.
The Director (Corporate Services) and the Assistant Director (Corporate Services) fielded questions from the Committee and highlighted the following:
· The Council is awaiting the results of the fair funding review to see the effects on the negative Revenue Support Grant (RSG) line and on New Homes Bonus before making any plans going forward.
· A letter has been sent to enquire why Kent & Medway were unsuccessful in retaining pilot status for Business Rates in 2019-20, so far no response has been received.
· The Section 151 Officer confirmed that there are no aspirational savings in the budget.
· The reason the Council has a minimum level of working balances is because it needs to make sure it maintains a certain level of cash within the organisation to meet the day to day liabilities. The other reason is to protect the Council against the risks that are on the horizon (e.g. disappearance of New Homes Bonus). Many of the Council’s funding sources carry great volatility.
· The Council is relatively well prepared in the face of future uncertainty. GBC has been building up its working balances and its reserves to replace vehicle fleets, play site equipment, invest in leisure centres and has linked the commercial income protection reserve to the level of income we receive (15% of all rental income).
Financially the Council is doing all the right things. Internally, the service review process has enabled the Council to get a handle on what it is spending its money on. Understanding the cash flow has given the Council confidence, the Council was the first in Kent to create a 10 year cash flow. Property acquisitions have also improved the Councils cash flow. The Council also has £10million in Property Funds and £10million in Multi-Asset Funds.
· An ‘un-ring-fenced grant’ means it’s not meant for any particular purpose and therefore the Council can apply it to what it wants.
The Committee voiced their grievances over the unfair nature of the current New Homes Bonus arrangement and supported the suggestion that this be fed back to central government by whoever is in charge of the Council following the Borough Election in May.
The Chair clarified that the Council has not agreed to engage in commercialisation, the Council is not outsourcing, it’s just being more aware of how the commercial market works.
The Committee congratulated the Finance Team for all their hard work.
Resolved that the Overview Scrutiny Committee noted the Cabinet recommendations that will be presented to Full Council.
- 1. GF Estimates Report 2019-20 - Summary Version, item 103. PDF 258 KB
- 2. Appendix 2 - Government Funding, item 103. PDF 188 KB
- 3. Appendix 3 -General Fund Revenue Budget, item 103. PDF 139 KB
- 3a. General Fund Budget Book Service View 19-20 V4, item 103. PDF 2 MB
- 4. Appendix 4 -Council Tax, item 103. PDF 88 KB
- 4a. Council Tax Freeze Impact 2019-20 to 2027-28, item 103. PDF 55 KB
- 4b. MTFP - V13 - 2018-19 - BMR Q3 & Budget-Setting, item 103. PDF 76 KB
- 4c. MTFP - V13 - 2018-19 - BMR Q3 & Budget-Setting CT Freeze, item 103. PDF 76 KB
- 5. Appendix 5 - GF Working Balances, item 103. PDF 68 KB
- 5a. Reserves Policy 2018, item 103. PDF 296 KB
- 5b. Assessment of GF Working Balance Level 2019-20, item 103. PDF 28 KB
- 6. Appendix 6 - Capital Programme 1920, item 103. PDF 75 KB