Agenda item

To recommend the Medium Term Financial Strategy to Council for adoption.  

That it be RECOMMENDED TO COUNCIL that the Medium Term Financial Strategy 2018/19-2022/23 be ADOPTED, subject to the following amendments:

·           Paragraph 10.3 of the Strategy be amended to read: ‘The previous Medium Term Financial Strategy recognises the likely need for further increases in future years in order to provide the flexibility to deal with the anticipated deficit faced. Although Council finances have improved, and additional revenue streams are now being developed, there may continue to be a need to resort to some measure of further Council Tax increase each year over the Strategy period. The Council will maintain this previous financial strategy, accepting the likely need for future increases, but seeking to maintain the Council Tax to the lowest possible levels’.

·           Table 7 of the Strategy be amended so the heading reads ‘Potential Council Tax Strategy’ and the table includes percentage, as well as monetary, amounts.

62.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 36-60, set out the Medium Term Financial Strategy for 2018/19-2022/23. Members were asked to consider the Strategy and recommend it to the Council for adoption. 

62.2           The Head of Finance and Asset Management explained that the Medium Term Financial Strategy was a key element within the Council’s overall strategic planning framework. It took a five year perspective and was reviewed, updated and rolled forward annually to set a framework for how budget pressures and priorities would be managed within the best estimates of available capital and revenue resources. The Strategy represented a snapshot in time so it was updated regularly to ensure it reflected policy both internally and nationally. Some of the issues which contributed to the uncertainty included the government’s approach to public spending and reducing the fiscal deficit; economic impacts resulting from the country’s decision to leave the European Union; local government finance post-2020; further consultation over the future of the New Homes Bonus Scheme; the government’s approach to 100% retained business rates; and the government’s commitment to devolution. The Council’s forward projections of its financial position were impacted by further reductions in core government grant of £385,000 in the next two years; salary growth pressure in excess of the 1% cap; further significant financial contributions required for the local government pension scheme; the new General Data Protection Requirements; and increasing demand for additional resources to meet a range of service requirements and pressures.

62.3           The Strategy also contained important strategic planning in a number of areas including the increase of Council Tax and the use of New Homes Bonus. The headline recommendations of the Strategy included: Council Tax to be increased by £5 for 2018/19 and with £5 increases thereafter; New Homes Bonus support to the base budget to increase by £200,000 per year, subject to available funding through the Scheme; the Council would operate outside of the Gloucestershire Business Rates Pool in 2018/19 and until such time as the risk from Virgin Media was mitigated; a target for retained business rates income would be reintroduced to the base budget; and the Local Council Tax Scheme would remain unchanged as the default scheme for 2018/19 but a review of the scheme would take place in the first half of the new financial year.

62.4           Referring to the proposed Council Tax rises, a Member indicated that, whilst he understood the Medium Term Financial Strategy changed on an almost daily basis, it was still the Council’s strategy which set out its intentions in how it approached its finances over the next five years. With that in mind, in the previous year the Council had stepped back from declaring that the Council Tax would increase in line with the referendum limit year on year and had changed it more in line with the Council Plan which indicated that the Council recognised a possible need to increase Council Tax but did not set down any firm increases. He would like the Medium Term Financial Strategy to be reworded in line with that strategic statement and therefore proposed that Section 10.3 be amended to read: “The Council Plan 2016-2020 makes a commitment to ‘maintain a low Council Tax’. The Council Plan also sets out objectives to develop alternative revenue streams, and rebase the revenue structure, to become less dependent on government core grants, and collections from taxpayers. Increasing Council Tax to fund any deficit outcome should be a last resort. The previous Medium Term Financial Strategy 2017/18 to 2021/22, ‘recognises the likely need for further increases in future years’, in order to provide the flexibility to deal with the anticipated deficit faced. Although Council finances have improved, and additional revenue streams are now being developed, there may continue to be a need to resort to some measure of further Council Tax increase each year, over the strategy period. The Council will maintain this previous financial strategy and, in accepting the likely need for future increases, provides a projection of anticipated inflation rate increases for the five year strategy period. Table 7 highlights potential alternatives of inflation rate increases and referendum limit increases to the charge and the additional income generated.” During the discussion which ensued, some Members expressed the view that there was no need to change the wording as the Medium Term Financial Strategy set out a projection only and the actual Council Tax level was set by the Council at a separate meeting in February. In addition, it was felt that the amendment was unnecessarily wordy. In response, the Member indicated that the Medium Term Financial Strategy set the Council’s intentions and therefore the direction for both the budget and the Council Tax; once the direction was set it would be easier to reach an agreement so it was helpful if the intent was clear. The Head of Finance and Asset Management advised that he could add a paragraph to the Strategy to clarify that Council Tax was one of the elements that could be subject to change – if the tables etc. were amended, more changes would be needed as they would flow through the rest of the Strategy. Currently the Council remained the fifth lowest Council Tax in England with a Band D property being £60 below the national average and it was expected that it would retain that position even with the recommendations contained in the Medium Term Financial Strategy.

62.5           The Chief Executive indicated that the Medium Term Financial Strategy would change; however, it was the starting point for the Council’s financial planning and one of the most important documents for the future of the Council. The External Auditors would look at the figures in the Strategy to judge how the Council was performing and they did not expect to see a whole range of figures. Officers could work with the Transform Working Group to show how reducing income would impact other areas but it was felt that, whilst the explanatory wording could be amended, it would be difficult to change the figures in Table 7 as there would be no clarification in terms of what the Council’s finances were likely to be going forward. It was agreed that the amendment as proposed should be amended so that it offered clarification but was also less prescriptive. Accordingly, it was