Agenda item

Report of Deputy Chief Executive and Chief Finance Officer.

Cabinet lead member:  Councillor Gill Mattock.

(1) Updated medium term financial strategy and associated plan 2016-20, as summarised in appendix 2 of the report, approved.

(2) Balance of assumptions made in the strategy agreed.

(3) Emerging budget proposals for 2016/17 to be brought to Cabinet in December prior to detailed consultation.

(4) Principal risks of the strategy in appendix1 of report approved.

13.1 Cabinet considered the report of the Deputy Chief Executive and Chief Finance Officer.  The councils medium term financial strategy (MTFS) was a rolling 4 year strategy that took into account:

• The external financial environment
• The overall financial demands of services
• The council’s existing and projected financial resources
• The council’s political priorities and stated aims
• The council’s sustainable service delivery strategy
• The council’s corporate plan
• The major service strategies and plans

13.2 Over the life of the last parliament the coalition government had effectively reduced the general support to the council by some 40% in cash terms which equated to over 50% in real terms.  Government funding was expected to fall a further 30% over the next parliamentary cycle to 2020.  The government had set an objective to eliminate the nation’s budget deficit by the end of the parliament.  This would involve various measures that will reduce the amount of resources to local government including:

• A further reduction in general central government support 2016-2020.

• Reducing the amount of resource available to DCLG as it was not a “protected” department which would impact on specific grants.
• Increasing in the funding for new homes bonus (NHB) paid for by further reducing the revenue support grant (RSG).
• A further year on year reduction in housing benefit administration grant (on top of the £200,000 reduction in the last 4 years).

13.3 The Deputy Chief Executive gave an update on measures announced in the Chancellor’s budget statement made earlier in the day of this meeting.  This confirmed the assumptions made in the MTFS of a further 30% reduction in government grant to 2020.  The anticipated cost to the council of the proposed increase in the national minimum wage for those over 25 would be offset by the cap to be imposed on public sector pay of 1% (against an assumed MTFS provision of 2%).

13.4 In order to protect front line services the council had put in place a priority based budget system that had kept pace with the scale of cuts to funding and made provision for reinvestment in services. The council had set out its stall to become less dependent on day to day revenues to run services, instead opting to use any spare financial capacity to enhance the capital programme.  The council’s DRIVE programme provided the programme to deliver efficiencies that support the council’s corporate plan. The MTFS and capital strategy identified and directed resources at a strategic level, which were then compounded via the service and financial planning and budget setting process.

13.5 In setting the last six annual budgets the council had achieved its “golden rule” of meeting its ongoing budget requirement from ongoing resources in each year.  Technically, the rule applied to the cycle of the MTFS, and it was reasonable to use reserves to smooth out the budget as savings accrued over the cycle.  By not using reserves in this manner it had meant that reserves over the minimum level were available for one off investments in services decided via the service and financial planning process.

13.6 The council, as a registered social landlord, was obliged to run a housing revenue account (HRA) that was statutorily ring-fenced from its general fund.  A 30 year rolling business plan had been adopted for the HRA.  The council was working in partnership with Eastbourne Homes Ltd. (EHL), a wholly owned subsidiary, to deliver efficiency savings in partnership using shared services.  All savings accruing to the HRA were reinvested in housing services.  During the last 2 years over £500,000 of ongoing efficiencies had been realised and built into the EHL budget.

13.7 The report set out the council’s strategy in relation to dealing with the effects of inflation in the costs of goods and services and pay, pension costs, fees and charges, interest rates, council tax, government grants and retained business rates, savings, the scope for new or enhanced service provision the housing revenue account, reserves and the mitigation of risks.  Appendix 1 to the report set out the potential risks and mitigating measures available to the council.  Appendix 2 provided a summary of the MTFS 2016/2020 and showed that the general reserve would be reduced over the life of the MTFS to an estimated £3m excluding any windfalls or underspends.  In order to maintain sustainable finances and fund its ambitions, the council would need to make new efficiency savings or income streams averaging £0.6m per annum for the next four years; a cumulative saving of approximately £2.5m.

13.8 Resolved (key decision): (1) That the updated medium term financial strategy and associated plan 2016-20, as summarised in appendix 2 of the report, be approved.

(2) That the balance of assumptions made in the strategy be agreed.

(3) That that the emerging budget proposals for 2016/17 be brought to Cabinet in December prior to detailed consultation.

(4) That the principal risks of the strategy in appendix1 of the report be approved.

(Note: See minute 11 above for personal interest declared by Councillor Tutt.)