Agenda item

The Committee received a report setting out an update on the Medium-Term Financial Plan (MTFP) and progress with the Financial Recovery Plan.

The Committee noted that the Council had agreed the 2023-24 budget in February 2023 with a £3.3m shortfall requiring further work to remove this gap, with the fallback position being the deployment of usable reserves.

An updated MTFP position had been presented to full Council on 25 July 2023 which set out the key issues and the position in which the Council was now left.  In summary, this had been a remaining in-year deficit of £1.7m and a budget gap of £18.3m over the MTFP period to 2026-27.

A Financial Recovery Plan had been presented to full Council at its extraordinary meeting on 30 August and updated at its last meeting on 10 October. This had set out the immediate and medium-term actions being taken to address both the in-year and medium-term budget gaps.

In October, the Interim s151 officer had concluded that sufficient progress had been made to avoid the need for a s114 report to be issued but that significant work was still required to produce a balanced budget for 2024-25 and beyond.

In addition to providing an update on the MTFP position, potential funding changes, and progress on the Recovery Plan workstreams, the report presented to the Committee had also set out the outcome of the review of the Capital Programme.  If approved, this would remove £96.6m from the Approved and Provisional Capital programmes which, in turn, would reduce the Council’s projected borrowing needs.

The report had also provided a high-level update on the potential remaining budget gap to be addressed and the actions ongoing to address this. The work to date on the Financial Recovery Plan had reduced the July MTFP gap of £18.3m to £7.3m.  Although excellent progress had been made, significant further work was still required to produce a balanced budget for 2024-25.

The Interim Section 151 Officer informed the Committee that he was hopeful that when the finance settlement was announced by Government in December the New Homes Bonus, which was one the funding assumptions that had been built into the July MTFP update, would continue for the next financial year.

During the debate, the Committee made the following comments:

·      In response to a question as to whether increased housebuilding was factored into future Council Tax funding assumptions and whether it had much of a significant effect, the Interim Section 151 Officer confirmed that the finance team had built an assumption each year, both around the actual increase in Council Tax, assuming that the capping limit would remain at 2.99%, and also an assumption of taxbase growth year on year.

·      Concern that measures to be actively implemented over the four-year period only constituted approximately half what was assumed to be the total range of measures that would be needed to get the Council back to the financial position in which it wanted to be.  In response, the Interim Section 151 Officer confirmed that approximately half of the £18.3 million budget gap effectively comprised of additional borrowing costs, but that other workstreams being undertaken as part of the Financial Recovery Plan such as income reviews, for example around car parking were generating a significant contribution towards closing that budget gap.  Contract renewals, such as utilities, were likely to generate further significant savings.

·      Concerns over proposals in the approved capital programme to delay flood resilience measures, and traveller transit site provision.  A response from the relevant heads of service, setting out the reasons for the delay would be circulated to the Committee.

·      In response to a question as to whether extra car park revenue of approximately £950,000 would be achieved in the current year, the Interim Section 151 Officer confirmed that was his expectation, and that it may even be exceeded. It was noted that approximately £80,000 of that figure was expected to comprise parking fines.

·      It was noted that the wording of paragraph 11.2 of the report needed to be updated to reflect the fact that the revised projected budget gap over the MTFP period was now £7.3 million, rather than £18.3 million. This would be corrected.

·      It was noted that not all of the £96 million of the reduction in the capital programme attracted MRP, and the revenue saving was only £2.5 million.  It would be useful to understand what the implications for MRP were for each of the proposed reductions in the various capital projects. In response, the Interim Section 151 Officer indicated that this could be incorporated into the report on the Capital & Investment Strategy to be taken to the budget Council meeting in February.

·      Support the assumptions in the report about capital asset disposal.

·      Query the pay assumption at 3.3% when inflation was still high.  The Interim Section 151 Officer stated that the average pay award over the three-year period was 3.3%, but understood that it was frontloaded in the provision for next year.

·      Concern was expressed, and clarification was sought, in respect of the Council’s intentions in relation to the Shaping Guildford’s Future project. The Interim Section 151 Officer informed the Committee that it was proposed to remove the capital allocation of £4.1 million within the programme, and that there would be some revenue impacts which would be brought forward as part of the budget proposals in February.

·       Clarification was sought in respect of the reference in paragraph 9.2 of the report that the 2023-24 in-year position was balanced whilst the table in paragraph 9.1 had indicated that the remaining target to be achieved in 2023-24 was £600,000. In response, the Interim Section 151 Officer explained that in terms of balancing the budget for the current financial year, many of the actions taken, for example, holding vacancies and stopping some discretionary expenditure, were of a one-off nature, and would not be repeated as base budget adjustments for the next financial year. The £600,000 referred to needed to be addressed as extra base budget savings to balance the budget in the next financial year.

·      Clarification was also sought in respect of the reference in the report to possible policy changes (accounting and discretionary policies) as one of the potential further measures to reduce the shortfall. In response, the Interim Section 151 Officer explained that this related to matters over which the Council had some discretion such as reviewing the charges we make both into and out of the Housing Revenue Account, which impacted on the General Fund.

·       The report needed to be explicit and honest about the climate change and sustainability implications of some of the proposed changes to provisional schemes in particular. For example, energy efficiency compliance, flood resilience, and electric waste vehicles were being delayed, and the sustainable movement corridor was no longer required.

Having considered the report and noted that this matter would also be considered by the Executive at its meeting on 23 November, and by Council on 5 December, the Committee

RESOLVED: That the recommendations to the Executive and full Council contained in the report be supported, subject to the comments referred to above made by the Committee during its debate.

Reasons:

To enable the Council to protect the current level of reserves and to set a balanced budget and a robust Medium-Term Financial Plan.

(Councillor Bob Hughes requested that his abstention in respect of the vote on this matter be recorded)