Agenda item

To recommend to Council the adoption of the Medium Term Financial Strategy 2016/17 – 2020/21

That it be RECOMMENDED TO COUNCIL that the Medium Term Financial Strategy 2016/17-2020/21 be ADOPTED.  

52.1           The report of the Finance and Asset Management Group Manager, circulated at Pages No. 12-36, set out the Medium Term Financial Strategy 2016/17-2020/21. Members were asked to consider the Strategy and make a recommendation to Council thereon.

52.2           The Committee was advised that the Medium Term Financial Strategy provided the financial plan for the Council for the period 2016/17-2020/21. It set out the Council’s estimates of its commitment expenditure and identified the spending pressures it faced and the budget savings needed to achieve the recommended Council Tax levels for each of the five years of the plan. The agreement of a five year financial plan was crucial to the Council in ensuring sufficient resources were allocated to priority areas and that the Council remained financially sustainable. In drawing attention to the Strategy, the Finance and Asset Management Group Manager referred to Paragraph 5.0, New Homes Bonus, and advised that the current assumption was that this would continue. Table 3 showed the forecast for the remaining years up to and including 2020/21 and Table 4 showed the forecast split usage of the New Homes Bonus funding for the same period of time. To date, Tewkesbury Borough had been in a fortunate position in that it had been able to benefit from relatively large amounts of New Homes Bonus funding in the first five years of operation of the Scheme. The next financial year, 2016/17, was the final additional year of the rolling six year support offered and was therefore the last substantial increase; future years would either see growth or contraction dependent upon the level of New Homes Bonus generated against that which was lost as the first years started to drop out. In 2016/17, for the first time Tewkesbury’s expected level of receipt would eclipse the level of core Government support and this meant there would be an ongoing dependence on it to support both the base budget and also to provide monies towards transformational projects. The Council had previously agreed a cap on the level of general support to the base budget of 65% of New Homes Bonus in order to avoid over-reliance.

52.3           Paragraph 6.0, Retained Business Rates, set out information about the Virgin Media Appeals which had had a significant effect on the Council and had resulted in the Council’s temporary withdrawal from the Gloucestershire business rates pool from April 2016 onwards. Outstanding appeals, and in particular Virgin Media, meant that forecasting future business rates income was very difficult and the levels retained could be very volatile. Future uncertainty remained within the scheme with a national revaluation expected to impact in 2017 and a full reset of the system planned for 2020. Despite this, and the appeals issue, income from business rates offered significant potential for growth over the medium to long-term as aspirations for the development of motorway junctions 9 and 10, and also the redevelopment of Tewkesbury Town Centre, became a reality. This meant that retained business rates was an area where the Council could look to maximise income; with this in mind, growing and retaining the business rate base in Tewkesbury should be a key priority for the Council and particularly since the Chancellor’s announcement in respect of retaining 100% of business rates in the future.

52.4           Paragraph 8.0, Growth Pressures, set out the pressures on the Council including rising costs such as the cost of employees and the forecast for pay awards; the creation of a single tier state pension and the triennial valuation of the Gloucestershire Local Government Pension Scheme; the cost of providing the waste and recycling service; and the requirements of maintaining both the land and property portfolio and the Council’s IT infrastructure. Paragraph 9.0, Capital Programme, set out the Council’s capital expenditure and Table 5 summarised the planned capital expenditure up to 2020/21, together with information on the funding of that expenditure. The current capital programme would deplete capital reserves to around £1.6million by March 2017. The Council would also need to consider the purchase of a vehicle fleet for 2017 which would require an investment of around £1.5million and, although partial funding could be found through the use of New Homes Bonus, the majority of the investment, if approved, would utilise the final balances of the capital reserve. This meant that any future ambitions for asset improvement, town centre redevelopment and the continuation of the Disabled Facilities Grants programme would require the utilisation of other sources of funding. Consideration would need to be given for the disposal of some under-utilised assets in order to replenish the capital reserves.

52.5           All of that information was brought together into the Medium Term Financial Projection which was set out at Paragraph 10.0 and illustrated a funding gap of £2.9million over the five year life of the Medium Term Financial Strategy. In order for the Council to remain financially sustainable over the medium term, a number of financial strategies would need to be followed to bridge the gap as well as allowing for the use of alternative funding streams such as New Homes Bonus and retained business rates.

52.6           Paragraph 11.0, Council Tax, included a rise of 2% each year during the life of the Strategy. For the last five years, the Council had decided to freeze its Band D Council Tax charge at £99.36 per annum. In return for freezing the Council Tax, the Council had received a grant from the Government of varying value for different periods of time. The most recent grants had been equivalent to a 1% increase in Council Tax and had been rolled into the Revenue Support Grant element of core Government funding to allow for ongoing support. It was not clear whether this offer would continue into the future; it was also not clear what the Government’s position would be with regards to excessive Council Tax increases which required a local referendum for their approval. The Government may amend the referendum limit which could necessitate the Council considering other levels of Council Tax; an indication of potential changes to referendum limits was shown in Table 8. The current Council Tax charge of £99.36 was the fifth lowest of English District Councils and was over £40 below the bottom quartile threshold and £60 below the national average. Projections of future increases to Council Tax would ensure the Council remained within the bottom quartile for Council Tax charges and therefore met its priority to maintain a low Council Tax.

52.7           Paragraph 12.0, Business Transformation Strategy, set out that a strategic and planned approach was needed to meet the significant challenges posed by continuing public sector funding reductions and this was the reason that the Business Transformation Strategy had been developed. Within the ‘Waste/Operational Service’ Paragraph, a Member noted a typographical error which should read ‘It is likely that the Council will be asked to purchase a new fleet rather than purchase lease it as it is more cost effective’. The Finance and Asset Management Group Manager advised that this would be amended prior to the Council’s consideration of the Strategy. Members were advised that in recent times the Medium Term Financial Strategy had been prepared against a background of uncertainty and this year that was even more the case.

52.8           A Member questioned whether, given the uncertainty, this was the wrong time to agree the Medium Term Financial Strategy. In response, the Finance and Asset Management Group Manager indicated that the Strategy was a ‘living’ document which would be reviewed and changed on a regular basis; it was likely that changes would be discussed in the next few days, as well as the New Year following the Chancellor’s announcement on the Comprehensive Spending Review, but the Strategy was relevant as at the current time and this was the best way to look at it. Another Member questioned whether Officers were aware of any other Authorities that were in a comparable position, in response, the Finance and Asset Management Group Manager explained that many were in a similar position; however, in some ways Tewkesbury Borough was better placed with the amount of New Homes Bonus monies that it received. There were certainly other Authorities in Gloucestershire that were, relatively speaking, looking for similar savings, facing similar challenges and looking for similar solutions.  A Member advised that the Council was not one of those Authorities that was using all of its New Homes Bonus funding to ‘prop up’ the budget which was encouraging. He also expressed the view that the only certainty was that the Medium Term Financial Strategy would change but the current document was the best that could be drafted in the circumstances.

52.9           Accordingly, it was