To consider a report concerning the Medium Term Financial Plan 2016/17 – 2018/19.
(Verbal report)
Minutes:
Officers provided Members with an update on the impact of the provisional local government finance settlement 2016/17 which had been published on 17th December. On the back of the initial settlement details Heads of Service were currently working through the budget pressures prior to the budget and Council Tax setting reports in February.
In relation to the Revenue Support Grant (RSG) which the authority received from central government to support services across the Borough, Officers had expected this to reduce to zero by 2019/20, as announced previously, and were considering plans to address this. However, as a result of the latest settlement Redditch would lose all of its RSG in 2018/19, and would move into a position of having to contribute funds totalling £330k back to the Government in 2019/20.
Officers illustrated the impact of the settlement on the Council and the loss of the RSG over the next 4 years compared to previous forecasts together with the impact for Redditch compared to other councils which was significantly higher for Redditch than many other councils nationally. There would be a £3m shortfall in funding compared to the original budget assumptions, and a £5m reduction had the RSG have increased by 1% inflation since 2015/16.
Officers explained that the assumptions on the Council improving its spending power were based on an estimate of the Council Tax base growth exceeding current expectations and therefore increasing available funding to support services. The somewhat optimistic assumptions included Council Tax base increases of approximately 1% initially (which was double the current estimations), rising to 3% increase in future years. Officers felt that this was highly optimistic based on current growth across the Borough. The impact of the growth assumptions on Council Tax resulted in a further £350k shortfall to Government expectations for the Borough finances.
There were also proposals to change the New Homes Bonus Scheme. The Council currently received a 6-year payment for any property built in the Borough and the Government was looking to change this to 4 years. Additionally, there were a number of proposals to reduce New Homes Bonus (NHB) where there was no local plan, where homes had been allowed on appeal or where the growth would have occurred anyway, meaning there was no longer any certainty with this. The potential reduction of income to the Council over the 4-year period was just over £2m. The Government had given assurances that they would look at a 4-year settlement offer, which would sit around an ‘efficiency statement’. There was some certainly around the use of capital receipts, although various uncertainties still remained overall. Earmarked balances were also affected.
Officers advised that the first consultation response on the proposed settlement was due by Friday 15th January, which Members would be sent a copy of, with the NHB consultation deadline being 15th March. A joint response from the six county District Leaders expressing their combined concerns was an option, with it being unclear at this stage as to whether 3-year budgets could be produced given the scale of the reductions and timescales involved. Officers stated that they would start with a 1-year budget, and that whilst they could project for 4 years this would not be a balanced budget. One of the key difficulties for Officers was the timescale between the settlement announcement and the setting of the Council Tax and budget. The Leader stated that he had written to the MP about the settlement and what were felt to be some unrealistic assumptions on which this had been based, as well as some inaccuracies with percentages quoted.
Officers would continue to work on customer demand and how this would best be met in the future and thanks was expressed to Officers overall for their work following publication of the settlement.
RESOLVED that
the position be noted.