Agenda item

The Committee considered the latest financial monitoring report, which summarised the projected outturn position for the Council’s general fund revenue account, based on actual and accrued data for the period April to June 2021.

Officers were projecting an increase in net expenditure on the general fund revenue account of around £4.4million.

Covid-19 continued to impact the Council.  The direct expenditure incurred by the Council in the current financial year currently stood at £59,718.  The Government support would contribute to both the direct and indirect costs of the Covid-19 pandemic.

The indirect costs of Covid-19, particularly the loss of income, were reflected in the services forecasting.  As the pandemic continued, estimates for losses in income and increased costs had been made with the best information available, which were subject to change as the year progressed. The report considered the expenditure and income forecasted up to 30 June 2021 and would potentially be subject to substantial movement depending on the success of the Government’s roadmap for lifting all Covid restrictions. 

The Council would be able to make a claim for some of the income loss under the Sales, Fees and Charges compensation scheme; however, officers were waiting for the government to issue guidance on this scheme for 2021-22 so an estimate of how much might be claimed was not currently included within the projection.

There was a reduction (£217,940) in the statutory Minimum Revenue Provision (MRP) charge to the general fund to make provision for the repayment of past capital debt reflecting a re-profiling of capital schemes. 

A surplus on the Housing Revenue Account would enable a projected transfer of £7.2 million to the new build reserve and £2.5 million to the reserve for future capital at year-end. 

Progress against significant capital projects on the approved programme as outlined in section 7 of the report was underway.  The Council expected to spend £118.194 million on its capital schemes by the end of the financial year. 

The Council’s underlying need to borrow to finance the capital programme was expected to be £73.329 million by 31 March 2022, against an estimated position of £94.59 million. The lower underlying need to borrow was a result of slippage on both the approved and provisional capital programme as detailed in paragraphs 7.3 to 7.6 of the report.

The Council held £130 million of investments and £271 million of external borrowing on 31 January 2021, which included £192.5 million of HRA loans.  Officers confirmed that the Council had complied with its Prudential indicators in the period, which had been set in February 2021 as part of the Council’s Capital Strategy.

In considering this report, the Committee made the following comments:

·       In response to a question in relation to expenditure in the current year on the proposed Guildford Park Road development in the HRA capital programme, the Director of Resources confirmed that a small amount of expenditure on the project was forecast for this financial year.  The project was progressing and had been redesigned to omit the car park from the scheme, and it was anticipated that a planning application would be submitted in the new year.  There was therefore a likelihood that there would be some planning related costs in this financial year, but the actual expenditure on the scheme probably would not come forward until at least the next financial year, subject to receipt of a new planning permission.

·       The Right to Buy model in the report stated that no RTB receipts were at risk of repayment until 2028-29, which appeared to contradict the Lead Councillor for Resources’ statement that the Council had £7 million at risk up to 31 March 2023.  The Director of Resources commented that a great deal of work had been done in the last few months to identify new housing capital schemes and to acquire further properties in order to reduce the risk of repayment of RTB receipts.  Whilst in March 2021, there was a risk that if the Council did not take any action, there was potentially a risk of having to repay a further £7 million by 2023; the work that had been done particularly around bringing forward some of the smaller pipeline projects meant that there was currently no risk of having to repay.  This would, however, be kept under review.

·       Greater prominence should be given to the purpose for which S106 contributions are to be put, and to set out details of total contributions received, amounts allocated to Surrey County Council in relation, for example, to highways/education, balance retained by Guildford Borough Council for its purposes.

·       In relation to the trends around the estimated overspend, the Director of Resources was confident that, for period 4, there would be a slightly smaller overspend compared to the figure reported now, although the overspend would still be a significant problem.  In terms of how the Council was dealing with it, there were options to consider but the difficulty was clearly the loss of income from sources such as car parking fees and our Leisure Management contract.  In terms of scaling back expenditure beyond what the Council had already achieved with Future Guildford and what the Council had already programmed to do in respect of the Savings Strategy, it would be very difficult to find additional savings in this financial year.  The Director noted that accurate estimates of costs and savings arising from the Guildford Waverley collaboration proposals were not yet known, although indicative estimates of the potential costs had been provided to councillors in the exempt information considered at the Council meetings in July. 

·       In response to the various points raised by the Committee, the Leader commented on the continuing uncertainty around revenue streams, particularly in the leisure industry, which have impacted significantly on the Council’s financial position.  The Council was also currently reviewing its operational property needs post Covid, and this would be a matter for further discussion with Waverley as part of the collaboration proposals.  The Leader also indicated that the Council would need to review the high level of discretionary services it currently provided, with some difficult decisions to be taken.

·       Further general concern over the risk of having to return RTB receipts, grants and other external capital funding due to slippage in capital programmes, and ensuring that such risk was effectively monitored, and action taken to avoid the risk.

·       Concern over lack of explanatory commentary from service leaders in relation to, often significant, variances in the detailed service summary (Appendix 2 to the report).  The Director of Resources accepted that more detailed commentary was required but noted that the lack of information had partly been due to the need to restructure the salary budget allocation following the recent salary restructure arising from Future Guildford Phase B.

·       Concern over consistent slippage and significant underspend within capital projects in general.

Having considered the report, the Committee

RESOLVED: That the results of the Council’s financial monitoring for the period April to June 2021 be noted, subject to the corrections set out on the Supplementary Information Sheet.

Reason:

To allow the Committee to undertake its role in relation to scrutinising the Council’s finances.