Agenda item

Report of Director of Resources enclosed.

The Director of Resources submitted a report asking committee to approve the revised Revenue Budget for 2020/21 and to recommend a Revenue Budget and Council Tax Requirement for 2021/22 to Council on 2 March 2021.

She gave a brief overview of the current year’s revised budget for 2020/21 highlighting the main reasons for net expenditure having increased by £44k.

The impact of Covid-19 had been considerable and to date £803,272 of unringfenced emergency funding had been received from the Government as well as £……... The Director of Resources informed committee how this funding had been allocated over the Covid expenditure pressures. They had also launched an income support scheme to recognise the impact the pandemic has had on income from sales, fees and charges and introduced a co-payment scheme to compensate councils for relevant unforeseen losses that are irrecoverable. The Spending Review had confirmed that the Government would also compensate local authorities for 75% of irrecoverable losses in council tax and business rate income in respect of 2020/21.

The Chief Executive informed committee that impacts of additional work due to Covid-19 had mainly been covered by existing staff including the running of a lateral flow testing site in the council chamber.

A significant element of our income was business rate growth and the Director of Resources outlined the latest estimate of Ribble Valley’s share of business rate income for the current year.

When setting the original budget it had been agreed to use £875,514 to fund the revenue budget and £60,880 to fund the capital programme. Based on the latest position we expect to receive £2.092m, use £100,200 to fund the capital programme, use £875,514 to fund the base revenue budget and use £32,220 of further revenue in year expenditure approved by the Emergency committee; therefore the revised difference of £1,083,776 would be added to the business rate growth reserve.

She informed committee that there were further in year complications due to the late announcement in March 2020 of 100% retail discount and the issuing of new regulations in December to enable the repayment of collection fund deficits arisng in 2020/21 to be spread over the next three years rather than the usual period of a year.

The forecast transfers to and from earmarked reserves compared with the original estimate were highlighted, in particular the addition of £2.999m largely due to timing differences in receipt of section 31 grants paid to us from the Government for 100% business rate retail discount that would need to be carried forward to offset the deficit to be faced next year.

The overall position showed that instead of taking £142k from general fund balances at the end of the year, based on revised estimates it would be £186k from balances.

Looking forward to 2020/21, the Director of Resources briefly highlighted the key elements of the provisional grant settlement for 2020/21; rural services delivery grant; lower tier services grant; future years government funding and the reforms due to come on Fair Funding Review, Business Rate Retention and New Homes Bonus scheme.

The report went on to detail the Council Tax Base and the Council Tax Referendum criteria. The Director of Resources highlighted the fact that the current band D tax of £155.69 meant that Ribble Valley was in the bottom quartile of all district councils at 30^th out of 188 and the lowest across Lancashire districts. The report outlined the potential amount of income that would be generated by increasing the Council Tax by £5 (the maximum allowed for next year). This would generate £120,035 in extra revenue and in addition the increase in the tax base would generate a further £59,785.

Reference was made to the New Homes Bonus scheme and the Director of Resources informed members that we currently rely on £1.105m each year to fund the revenue budget. Should reforms take place the balance of unused funds of £2.8m would cover the funding gap on the revenue budget for 2022/23 and 2023/24.

With regard to the Business Rate Retention Scheme the NNDR1 return had been submitted and based on the share of business rate income from the Lancashire Business Rate Pool it was anticipated that the total business rate income for next year would be £1,455,212 of which £675,514 would be used to fund the revenue budget leaving a surplus of £779,698.

She drew members attention to the fact that the estimated balance of the volatility reserve stands at £1.682m. This was sufficient to provide a safety net protection which we would have to forgo as a pool member of 92.5% of our business rate growth. Since reaching this level a Business Rate Growth Reserve had been created to support both the revenue and capital programme.

The Director of Resources reported that the Collection Fund was likely to produce an overall deficit of £6,855.148 this year, that consisted of a surplus for council tax of £262,369 and a deficit for business rates of £7,117,517 mainly due to the awarding in year of £6.9m of retail discount. The council tax surplus would be shared amongst all the major precepting authorities with our share being £24,995 and the business rate deficit would be jointly borne with our share being £2,725,770.

With regard to the revenue budget 2021/22 the Director of Resources outlined the provisional base position as agreed by service committees. Committee expenditure was set to fall by £14k for reasons outlined and reported to the service committees. Committee therefore needed to consider how to fund the balance of £5.985k after deducting the collection fund surplus and the business rates baseline funding level.

She highlighted the capital adjustments, movement of other items, the pay award and continuing difficulties in recruitment and retention that may need to be addressed.

The Director of Resources reminded committee that the Budget Working Group had considered the Council’s financial position and overall budget position for the next year and had made a number of recommendations in order to achieve an affordable budget:

·         That a contingency be added to next year’s budget of £150,000 for potential further income losses due to the Covid pandemic to be funded from General Fund balances.

·         That £1,105,000 of New Homes Bonus be used to fund the 2021/22 revenue budget.

·         That £675,514 of business rate growth fund be used to support the 2021/22 revenue budget.

·         That a £5 increase be made to the Band D council tax for 2021/22 to assist in bridging the funding gap generating an extra £120,035.

·         That £250,000 be used from General Fund balances.

·         That the remaining shortfall of £97,015 be met from the Business Rate Volatility Reserve.

The Director of Resources went on to inform committee of the robustness of the budget and the adequacy of the Council’s balances and reserves.

She outlined the recommended Revenue Budget for 2021/22 with expenditure of £5,637,073 which after use of balances would result in a net budget of £5,237,073. This would still leave £2.189m in general fund balances at the end of March 2021.

The Director of Resources gave committee a summary of the updated 3-year budget forecast for the revenue budget assuming that the 2021/22 budget was agreed and highlighted the budget gap over the next 3 years. She pointed out that the potential changes to the New Homes Bonus scheme and the implications of Business Rate Retention Reforms would be crucial in terms of the future budget forecast.

*** RESOLVED THAT COMMITTEE:

1.    Approve the revised revenue budget for 2020/21;

2.    Approve the Budget Working Group’s recommendations with the exception of the increase to Council Tax which should remain the same and the difference be funded from the Business Rate Growth Reserve, and set a budget and Council Tax requirement for 2020/21 as set out:

3.    And recommend the budget and Council Tax requirement to Council on 3 March 2020.