To recommend a budget to Council for 2016/17. 

That it be RECOMMENDED TO COUNCIL:

i.       That a net budget of £9,663,342 be APPROVED.

ii.      That a Band D Council Tax of £104.36, an increase of £5.00 per annum, be APPROVED.

iii.     That the use of New Homes Bonus, as proposed in Paragraph 3.5 of the report, be APPROVED.

iv.     That the capital programme, as proposed in Appendix A to the report, be APPROVED.

v.      That the capital prudential indicators, as proposed in Appendix B to the report, be APPROVED.

vi.     That the annual Minimum Revenue Provision (MRP) statement, as contained in Appendix B to the report, be APPROVED.

vii.    That the mid-year 2015/16 Treasury Management update, as contained in Appendix C to the report, be APPROVED.

viii.   That the 2016/17 Treasury Management Strategy, as proposed in Appendix D to the report, be APPROVED.

ix.     That authority be delegated to the Finance and Asset Management Group Manager, in consultation with the Lead Member for Finance and Asset Management, to apply to the Government for a four year Settlement if he believes it to be in the best interests of the Council. 

79.1           The report of the Finance and Asset Management Group Manager, circulated at Pages No. 32-75, set out the proposed budget for 2016/17. Members were asked to consider and make a recommendation to Council thereon. The recommendations included a delegated authority for the Finance and Asset Management Group Manager, in consultation with the Lead Member for Finance and Asset Management, to apply to the Government for a four year settlement if he believed it to be in the best interest of the Council.

79.2           Members were advised that the Council had considered the Medium Term Financial Strategy at its meeting on 8 December 2015. That document outlined the current budget pressures facing the Council, as well as those in future years, and depicted the gap between the estimated net budget of the Council and the estimated funding available to finance that net expenditure. The deficit over the five years of the Strategy was estimated to be approximately £2.9 million with a gap in 2016/17 of approximately £1,090,000. Since the production of the Medium Term Financial Strategy, the conclusions of the Government’s Comprehensive Spending Review had been announced with the headlines being a 46% reduction in core government grant support over the next four years (56% in real terms); greater support to upper tier authorities for the provision of social care, partly funded from an extra 2% levy on Council Tax and partly funded from redistribution of existing funding; and a consultation on the future of the New Homes bonus scheme with the intention of reducing the financial envelope by at least £800 million equating to 2/3 of the current spend. The Council had also received the provisional Local Government settlement for 2016/17 together with the promised New Homes Bonus consultation. All of that information, along with general information on the financial climate, had been brought together to make a proposal for the budget for 2016/17 and the resultant Council Tax.

79.3           The Finance and Asset Management Group Manager explained that details of the local government settlement for 2016/17 were contained at Paragraph 2.0 of the report. It should be noted that this was a provisional settlement at this stage and, although it did not usually change, the final settlement would not be received until the following week. Assuming the provisional figure remained the final one, table one at Page No. 35 of the report showed the significant reductions to core government support that were expected over the next four years. This was in line with the projections in the Medium Term Financial Strategy but the profile of the reductions was more gradual meaning that the Council was losing less support in the next couple of years compared with estimates. For 2016/17, the reduction was £451,000 which was approximately £110,000 better than anticipated. The government had made an offer to local authorities to apply for a four year fixed settlement which, in theory, would give the Council certainty as it prepared its Medium Term Financial Strategy; however, there was a lack of detail surrounding the offer, particularly what the Council would have to do to receive a multi-year settlement. It appeared that an efficiency plan would be needed which would include an intended use of reserves to support the budget. It should also be borne in mind that, although a four year deal would be agreed in principle, there were circumstances, for instance economic shock, when the government may not honour that deal. Of particular concern were the details regarding business rates and the future of New Home Bonus funding and, since more information was awaited regarding those issues, it was suggested that delegated authority be given to the Finance and Asset Management Group Manager, in consultation with the Lead Member, to consider the offer and, if deemed beneficial to the Council, to apply to the government.

79.4           Paragraph 3.0 detailed the New Homes Bonus allocation for 2016/17 which was based on housing growth and bringing empty properties back into use between October 2014 and 2015. The allocation for 2016/17 was £659,431 and gave the Council a total allocation of £3,401,162. In terms of the consultation the proposals included: a reduction in the number of years for which payments were made; that New Homes Bonus funding be withheld if there was no local plan in place; the loss of a percentage of funding if the local plan was not up-to-date; a reduction in payments for homes allowed on appeal – either 50% or 100%; and payments only made for housing growth above a baseline to allow for growth that would happen regardless of an incentive scheme being in place. The Council’s forecast of future New Homes Bonus receipts had been reworked based on the government’s preferred approach and those were set out at table two on Page No. 36 of the report. The proposed use of New Homes Bonus monies included support to the base budget; a base budget contingency; a business rates reserve; asset (IT and property) management; community grants; business transformation; and an uncommitted balance. The uncommitted balance would be spent through reports to the Executive Committee requesting a ‘draw down’ of funds as and when required. This would give flexibility to respond to the emerging needs of projects such as regeneration, public sector housing, the public service centre and vehicle purchases.

79.5           Referring to the performance of business rates, the Finance and Asset Management Group Manager advised that this had not been going particularly well and, given the ongoing threat of appeals and revaluations from Virgin Media especially, it had been agreed that Tewkesbury Borough Council would withdraw from the Gloucestershire business rates pool for 2016/17. Tewkesbury would then continue to operate independently within the retained business rates scheme and, should there be future safety net requirements, those would be met by the government rather than the Gloucestershire authorities. If the ongoing risk was reduced then Tewkesbury would look to re-join the pool at the earliest opportunity.

79.6           In terms of Council tax setting, Members were advised that the recommendation was for an increase of £5 on a Band D property which was the most that it was allowed to increase within referendum limits and, if this was agreed, it would retain its position of one of the lowest charging authorities. The position from the government was that a national threshold of 2% for lower tier authorities was set with the exception of those authorities whose Council Tax was in the lowest quartile and who were therefore deemed to have low Council Tax. A threshold of £5 or 2%, whichever was higher, had been set for those authorities. If the increase of £5 was approved it would be the first time in five years that the Council would have increased its Council Tax and that would generate much needed additional income of around £96,000 over an increase of 2%. That increase would limit the need to use reserves to cover ongoing service costs in 2016/17 and would also put the Council in a better position to tackle the future deficits it would face as well as the uncertainty over the future of the New Homes Bonus scheme. Referring to the proposed budget, the Finance and Asset Management Group Manager advised that the estimates for 2016/17 included an £80,000 increase in direct staffing costs as a result of the assumption of a 1% pay award which was still to be agreed for the period from April 2016; a £196,000 increase in pension deficit contributions which was the third and final step of the agreed three year settlement; a £150,000 increase in national insurance contributions as a result of removing the rebate from contracted out schemes; a £63,000 reduction in Housing Benefit Administration Subsidy grant from the government; a £68,000 reduction in investment income as a result of reduced investment balances; a £140,000 increase in the cost of resources in the planning department to meet increased demand; a £303,000 increase in planning income; a £70,000 increase in garden waste income; and £10,000 of new procurement targets. Also included were savings generated by a number of business transformation activities over the last 12-18 months as well as the previous Council decisions that would have a new impact on the base budget for 2016/17 i.e. the opening of the new leisure centre, the cashable savings generated by the service review of Customer Services, the potential savings from the ongoing review of environmental health and development management and the estimated return on the photovoltaics.

79.7           The risks to the budget were set out at Paragraph 7.0 and the Finance and Asset Management Group Manager drew particular attention to the top three which were the largest risks; those included government support, New Homes Bonus and business rates. Appendix A set out the current capital programme and Members were asked to bear in mind that this may need to be amended to fund future ambitions. In addition, Paragraph 9.4 of the report set out the Council’s early plans for future investment which included a range of activities such as the purchase of a new vehicle fleet for its waste and recycling, grounds maintenance and cleansing services. All of those initiatives would require significant investment at a level well in excess of capital balances and, whilst the Council would seek to dispose of less valuable assets to supplement its current capital receipts, it was inevitable that it would need to consider borrowing, either internally or externally, in the next financial year.

79.8           During the discussion which ensued, a Member questioned whether the suggestion of a four year settlement from the government would restrict the Council’s own Medium Term Financial Strategy on an annual basis. In response, the Finance and Asset Management Group Manager advised that the settlement should offer more certainty to the Council and therefore help form the Strategy, however, there was still a need to see the detail of the offer from government before this could be confirmed. Another Member indicated that he regretted the need to increase Council Tax and he felt the Council needed to look more imaginatively at the ways that income could be increased so that Tax payers were not burdened with more increases in forthcoming years. In response to a query regarding garden waste fees, the Finance and Asset Management Group Manager explained that whether or not the fees would be increased was still to be decided. The matter would be considered by the Transform Working Group again at its next meeting to see if a steer could be gained. In terms of the budget the suggested £70,000 additional income would, in part, be due to the increased number of households taking up the scheme. Some increase in fees would be included so if an increase was not agreed Members would need to discuss where the money would be funded from. In respect of the pay increase, a Member advised that he suspected this may end up being 1.5% rather than 1% and, in response, the Finance and Asset Management Group Manager advised that an extra 0.5% would cost the Council approximately £40,000 which would have to be met from New Homes Bonus. The Member noted that, to date, the work of the Transform Working Group had been focussed on the budget but now its attention would need to turn to how to raise income as it was not sustainable just to keep making savings.

79.9           Referring to Paragraph 3.2, a Member questioned how the Council would be affected by the possibility that New Homes Bonus funding could be cut if its local plan was not up-to-date. In response, the Finance and Asset Management Group Manager indicated that the Council had not yet been provided with a definition of what was meant by up-to-date. However, Tewkesbury Borough’s local plan had been rolled over so its argument would be that it did have a local plan in place even though it was currently going through the Joint Core Strategy examination process.

79.10         Having considered the report and information provided, it was