Agenda item

To consider the quarterly budget position. 

That the financial performance information for the third quarter of 2021/22 be NOTED.  

90.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 8-21, set out the financial performance information for the third quarter of 2021/22 which Members were asked to consider. 

90.2           The Head of Finance and Asset Management was pleased to report a healthy projected outturn surplus of £3,609,348 on the revenue budget. A large percentage of the surplus was funded from grant income which was to be used for specific purposes in the coming financial year; however, overall, the Council was on track to enjoy a healthy surplus at year-end and careful consideration would need to be made on the best use of the one-off money to support its ambitions as well as deal with risk.

90.3           Attention was drawn to the table at Paragraph 2.1 of the report which highlighted the forecast outturn position for service provision, the net position on corporate income and expenditure and the resulting surplus. The quarter three full year projection showed a full year cost of service provision totalling £10,349million which resulted in a surplus against the approved budget of £2.068million of which over £1.5million would be carried over at year end for specific purposes either as a result of grant determination or previous decisions of the Council. The reasons for the projected surplus were set out within the report and included savings on employees across a majority of the service areas including One-Legal, Development, Democratic and Corporate Services but also within senior management following the decision in June 2021 to delete the post of Deputy Chief Executive. That saving was offset to some degree by the cost of recruitment to the new Director of One Legal. The Head of Finance and Asset Management also indicated that the report did not include the pay award as it had not been agreed at the time of writing the report; however, it was now likely a settlement of 1.75% would be made which was within the funding boundary of 2% that had been included within the budget. There had also been savings in transport costs, mainly attributable to the reduction in business travel across the Council; savings in supplies and services; and payments to third parties. In terms of payments to third parties, the large majority of the surplus was due to some growth items being postponed until next year – in-cab technology, digital growth within the Business Transformation Team and additional Joint Core Strategy (JCS) support - those sums would be carried over at year-end to fund future expenditure within those areas. In addition, £112,000 had been budgeted for an additional food waste crew which had been postponed until next year due to delays in acquiring a new food waste vehicle and there had also been a significant saving in the Materials Recycling Facility (MRF) gate contract since changing the provider which it was expected would continue for the foreseeable future. The savings had been reduced slightly by additional expenditure on the domestic abuse review – which was fully funded by the domestic abuse grant; an increase in demand for emergency accommodation – any outturn overspends would be funded from the homeless prevention grant; and a projected overspend on the Ubico contract sum in relation to an increased market supplement to attract and retain drivers – the rest of the contract sum was on target.

90.4           Tewkesbury Borough Council had been awarded £410,000 of funding for Contain Outbreak Management (COMF) due to the impact of COVID-19 – it was expected that £300,000 of that would be spent by the end of the financial year with the remaining £110,000 being carried over at year-end to fund continued activities in the first part of the new financial year. Generally, services continued to see a financial impact from the pandemic with a full-year cost estimated at £442,917 – those costs included the continued work of the business cell, additional costs for the provision of waste and recycling services and the continued support to Tewkesbury Leisure Centre; those costs would be met from the additional COVID-19 grant funding provided by the government and new burdens funding for the business cell work. Income in many areas of activity had recovered well from the pandemic with a number of income streams either back on budget or delivering a small surplus; in particular, Development Management was generating 19% more income in planning fees than expected due to the greater number of planning applications being received. Bulky waste, trade waste and licensing were also projected to deliver income in excess of budget. However, some areas continued to be affected by the pandemic with reductions in income levels in car parks, the Tewkesbury Leisure Centre contract fee would not be provided during the year and two of the three units on the top floor of the Council Offices building had been vacant all year. In addition, One Legal income remained below target although this was offset by savings on employee costs. The income position was significantly boosted by the receipt of a number of external grants with the main contributor being a £1million grant from the Gloucestershire Economic Growth Joint Committee for transport modelling required for the JCS – in addition, grants had been received for homeless prevention, delivery of elections and new areas of activity within the Revenues and Benefits service.

90.5           Treasury activities were expected to deliver small savings in borrowing costs and an increase in interest received from investments, in particular as a result of pooled fund investments but also recent increases to the base rate. The Council’s commercial property portfolio was currently predicting a deficit on the year as a result of the expected temporary void at one office unit and a tenant exercising a mid-year break clause at an industrial unit – should the commercial property account remain in deficit for the full-year, the Council would utilise the commercial property reserve to cover the void and lease costs resulting in no impact on the base budget position. Core government funding was showing a significant surplus as a result of the additional COVID general grant fund of £424,927 and the Council had received new burdens funding of £91,600 for its continuing administration of business grants as well as being able to claim compensation for losses on its sales, fees and charges as a result of COVID-19 for the first quarter of the year. Referring to business rates, the Head of Finance and Asset Management advised that the overall projected position on retained business rates had changed significantly from that reported at quarter two as a result of a multitude of changes and movements within the calculation which highlighted the volatility of the funding stream, particularly during the pandemic. Some of the points to note included the award of further business rate reliefs, additional S31 government grants, clarification of the accounting treatment for reliefs and grants, review of empty property provisions, bad debts and appeals and the impact of significant reductions to Virgin Media assessments. As a result, the anticipated retention of business rates income now showed a net surplus of approximately £0.8million from the original budget; however, the underlying position of business rates in the current year showed a small amount of growth and an improving position against the prudent estimates made in the budget. The Council’s membership of the Gloucestershire Business Rates Pool meant there was an amount attributable to Tewkesbury Borough depending on the performance of all parties within the pool but the latest estimate suggested a windfall of approximately £500,000 for Tewkesbury Borough Council.

90.6           Referring to the capital budget position, the Head of Finance and Asset Management advised that this was currently showing an underspend of £2.2million against the profiled budget of £2.9million. The capital programme estimated total expenditure for the year to be approximately £3.9million which was much reduced on previous years as a result of the end of the acquisition phase of the commercial property investment strategy – the main elements of this year’s forecast included Ashchurch bridge; vehicle replacement; replacement of the heating system at the Council Offices; and Disabled Facilities Grants. The expected replacement of the Council Offices heating system would no longer take place in this financial year as the quotation was far greater than the grant funding; however, the grant funding would now be used to support the delivery of a solar canopy above a number of the car parking spaces in the rear car park of the Council Offices building – the work was expected to begin in the final quarter of the year. In terms of the reserves position, this had been boosted by both grant funding related to COVID-19 and also the release of provisions from the retained business rates scheme. Whilst the quarter three position showed that there remained a significant balance on the reserves, the expectation was that they would be spent in future. The Finance team had asked for 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.

90.7           During the discussion which ensued, a Member referred to the Ashchurch bridge project and questioned whether it was being paid for from Homes England funding, as that was what she thought was happening. In response, the Head of Finance and Asset Management confirmed there were no cost overruns projected so it should be covered by the grant available. There was expected expenditure which would not be incurred in the current year due to delays but that would be covered by the grant funding – he apologised if this was not clear within the report. In addition, the Member noted that the wording on Page No. 18, Paragraph 22, seemed to infer a link between the Tourist Information Centres and the JCS. The Head of Finance and Asset Management confirmed there was no correlation between the two but both elements made up the overall position. The additional £60,000 for the JCS would not be needed in the current year but it would be matched by the two other JCS authorities as and when it was required.

90.8           Accordingly, it was