Agenda item

Medium Term Financial Plan 2022/23 - 2026/27

Minutes:

Cabinet considered the report regarding the proposed revision to the Medium Term Financial Plan.

 

The Lead Member for Finance and Ascot informed Cabinet that This was a refresh of the MTFP published with the budget in March this year but runs for 5 years from 2022/23 to 2026/27. It represents the financial plan to deliver against the MTF strategy which remained unchanged.

 

The purpose of the report was to set the financial criteria necessary to commence the development of the 2022/23 budget.  The report indicates that in 2022/23 a Covid related loss of income from parking and leisure was likely to be £1.1M.

Some of the assumptions were;

  • Council tax levels increase in line with national limits of 2%.
  • Interest rates continue at 0.6% per annum, as advised by our Treasury Management advisers.
  • £2.2m of RSG grant protection continues for 2022/23
  • Inflation rises to 3% later this year, before falling back to 2% in future

years

  • That any growth requirements from new legislation would be fully

compensated through new burdens funding. Free Green bins could be an example.

 

The most significant risks were;

  • Inflation which could peak at the wrong time and increase the cost of contracts.
  • Any significant Government funding changes.
  • Legislation that adds a financial burden to the Council with no compensating income.
  • The rate of flow of Capital receipts which could increase interest costs.

 

Savings for the 4 years from 2022/23 to 2025/26 are little changed increasing from £12.9 M to £13.2M.  Adult Social Care Precept was factored into the MTFP but for interest, a 1% precept would deliver £780K and 3% £2.34M.

The Chairman said that we had made considerable progress over the last couple of years in terms of rebuilding and strengthening our financial position. But it's also fair to say that there was a great deal of hard work still to be done.  The Royal Borough like all English councils is facing significant financial pressures, both as a result of the covid 19 pandemic, albeit as ever grateful for governmental support.  Questions remain going into the future in terms of the legacy of the pandemic and the associated impact particularly amongst certain groups within society, but also to reflect the fact that we are facing particular demographic pressures, growth pressures that we have faced for the last number of years.

 

He mentioned the excellent work Cabinet were doing in lobbying Government around national pressures that we faced as well as pushing hard in facing the challenges ahead as well as focusing on all of the priorities that had been identified earlier.  He looked forward to setting the budget and to genuinely debating credible alternatives to our proposals when we get to that stage.

 

Mr Hill addressed Cabinet and said that RBWM’s reserves had been dipped into again this year, falling to around £6.8m, at paragraph 5.4 you note that you have insufficient reserves to sustain a budget deficit without achieving substantial savings. But you are only projecting to hit 80% of the savings targets for this year, let alone any other year.  It appeared the reserves can only go one way.

 

At paragraph 6.5 you state that you have a strategy to use in year underspends to build up the overall general reserve levels to mitigate against future risks.  But even if you achieve the £16m savings needed over the next five years, you will only sustain the general fund statically at or around its £6.7m level for the foreseeable future, that was the answer given to me at Tuesday night’s council.

 

Is a strategy to build up the general fund reserves when you know and project that it will not happen in the foreseeable future. That’s not a strategy it is just a hope.  The figures do not look promising, if you cannot hit all the savings targets this year.

 

This administration had done more than anyone to improve the integrity of financial reporting, along with the Director of Resources and her team. But you have already hit the iceberg before you took over, and there were Members telling us before to look the other way, so it hard not to be sceptical.  Have you had any discussions with government about capitalisation directions to convert assets into usable reserves, and help avoid an unbalanced budget in 2022?

 

Adele Taylor informed that we had not had discussions on capitalization as we did not believe that this stage that we need to do we remained firmly convinced that we have the ability to resolve our issues without recourse to such a requirement.  She understood his sceptical view given what went before but wanted to assure him that we are resolute and determined to consolidate and advance our hard won gains of the last couple of years in terms of looking to deliver a balanced budget.

 

The Cabinet Member for Finance and Ascot informed that in the last financial year, we created the COVID reserve which had £3.8 million that would have sat in usable reserves.   So last year we moved £7 million pounds out of the budget into usable reserves. And the strategy going forward was to do just that, whenever an opportunity was available.

 

Cllr Jones informed Cabinet that she was concerned about the assumptions regarding capital receipts as there was not a cash flow to look at, what was the amount of receipts forecast to be received during this period.  What would be the impact if the golf club development did not proceed.  She was concerned that the MTFP had made assumptions that were not backed u in this report.

The Director of Resources informed that this is the very start of the medium term financial planning process. We have only changed assumptions where there are things we know such as interest rates.  As we move through the budget setting process, we will review the capital cash flows but at this stage they have not changed.  As we progress areas such as the comprehensive spending review will become clear.  The Chairman also mentioned that they were committed to the golf club development and that the BLP was progressing.

 

Cllr Bond mentioned that this was the third MTFP he had seen recently, pre lockdown, during lockdown and now after lockdown.  The timeframe had changed and savings had increased from £15 million to £16 million.  It also mentioned the reliance of capital receipts for future years.  He asked that with regards to the LEP who carried the risk for projects and if they came forward with a new project that required joint funding how would that work.

Cabinet were informed that RBWM carried the risk for any LEP project in the Royal Borough as they would with any other capital project and if proposals for a new project joint funded was available it would be for the Council to decide.

 

Resolved unanimously:  that Cabinet notes the report and approves:

 

 

i)               The Medium-Term Financial Plan set out in Appendix A.

 

 

 

 

 

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