To consider and scrutinise the Council’s financial performance information for the second quarter of 2017/18. 

That the financial performance information for the second quarter of 2017/18, along with the half year treasury management report, be NOTED.

61.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 15-35, highlighted the quarter two financial performance and half year treasury management report which Members were asked to consider.

61.2           The Committee was advised that the summary showed an increase of £90,000 surplus in quarter two against quarter one with all expenditure headings looking good. Particular attention was drawn to income which was below target with planning income showing a deficit against the planned budget. Currently there was also a deficit against the garden waste budget but this had been expected due to the annual renewals being changed so they were all aligned to April. In terms of the corporate codes, the impact of treasury management activity during the year had now been included in the mid-year figures rather than just at the year-end; so far the Council was £88,815 ahead of budget – this was largely due to cheap borrowing rates as well as the use of more lucrative funds for cash investments. The Council also had a target for the acquisition of additional investment property and, whilst the quarter two figures showed the Council being behind target due to bids on properties being unsuccessful, it had recently acquired three new properties which would generate nearly £820,000 of income per year; this would mean the Council would exceed its budget target for the current year and that position would be reflected in the quarter three report. Appendix 2 showed the capital position which was currently underspent against the profiled budget as a result of certain projects, such as the refurbishment of the Council Offices, not starting within the expected timescales. The reserves position was shown at Appendix 3 and, whilst the quarter two position showed that there remained a significant balance on the reserves, the expectation was that those balances would be spent in the near future. The Finance Team had requested updates from all departments about their plans to ensure earmarked reserves were either used for their intended purpose or released back to the general fund.

61.3           In terms of the mid-year treasury investment activities, an average return of 1.08% had been gained which, at the end of September, totalled £17,575,000 generating interest of £77,000 in the first half of the year against the budget estimate of £13,800. The investment performance had been boosted by an investment of £2million into the CCLA property investment fund which was producing monthly income returns of approximately 4.6%; Officers were confident that the capital value would return to the investment level in the near future and growth would be maintained thereafter. The Council’s drive to invest in commercial property had resulted in a requirement to borrow funds to cover direct investments and day-to-day cashflow. The budget had anticipated a borrowing cost of £42,000 at the mid-year point but, as a result of the delay in property purchase, the efficient management of borrowing requirements and the extremely low borrowing rates available to the Council, actual borrowing costs had only totalled £17,000 which was a saving of £25,000. In addition, brokerage fees totalling £4,700 had been incurred in the period which was substantially less than budgeted for.

61.4           During the discussion which ensued, a Member questioned whether the recent rise in bank fees had affected the Council. In response, the Head of Finance and Asset Management explained that a small impact had been noticed since the increase but the long term yield curve remained fairly flat so the market was not projecting any big changes at this stage. There had been a slight increase in borrowing rates but nothing significant to date; this would be kept under review. A Member referred to the fact that the Disabled Facilities Grants budget was consistently underspent and questioned why that was. In response, the Head of Community Services advised that the Council was not receiving the number of applications it had originally anticipated. Tewkesbury Borough was not alone in this as it was a similar picture across the country - the Council did advertise the grants scheme but there was little more it could do to encourage take-up.

61.5           Referring to the retained income from the business rates scheme, the Head of Finance and Asset Management explained that this was currently showing a surplus of £187,500 which was a prudent prediction of the year-end position. It was noted that, so far, there had been very little activity with regard to processing appeals, either from past appeal listings or those against the new 2017 list. The Council had set aside a significant provision to cover additional appeals, which was hoped to be sufficient, and this would allow the Council to benefit from wider increases in business rates income. Bearing in mind the losses that had been seen in previous years, the growth target for the current year had been reduced to zero; however, so far there was an improving position with more appeals getting dismissed than had been seen previously. Officers felt confident to include a growth target for next year; this would be discussed as part of the Medium Term Financial Strategy.

61.6           A Member questioned why there had been a mismatch between the projected planning income and the actual income received. In response, the Head of Development Services explained that some expected planning applications were yet to be submitted which had impacted the figures. The trajectory of growth was such that she hoped to see an upturn soon and she would be looking to maximise income through other means such as planning performance agreements. One of the strands of the planning review was about the commercialisation of the service but the Council would need to ensure its own house was in order in terms of targets before it would be able to sell the service to other authorities. Historically the Council received a significant return from planning income but overall it was in deficit. The increases in fees, efficiency savings and changes to working practices should all help the situation. In terms of the increase in planning fees, the Head of Development Services advised that the Council would be able to increase its fees by 20% once the law had been changed by the government; initially it had been planned to introduce this in July 2017 but it now looked likely to be in place for April 2018.

61.7           Accordingly, it was