Agenda item

To consider the quarterly budget position. 

That the financial performance information for the second quarter of 2019/20 be NOTED. 

55.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 13-32, highlighted a quarter two deficit of £18,530 on the revenue budget and detailed the expenditure to date against both the capital programme and the approved reserves. Members were asked to consider the financial information provided.

55.2           The Head of Finance and Asset Management advised that, overall, the deficit had fallen at the end of quarter two which was good news; however, it was still early in the year. Employee costs showed a surplus of £111,439 which had been generated mainly through staff vacancies across most services. Services had managed vacancies during the period by utilising current staff to cover work in the short term and limiting the use of agency staff where possible. Supplies and services were showing a deficit of £79,197, this was mostly due to expenditure incurred on delivering the European elections. The Council received grant income to cover the cost of the elections therefore an income surplus within Democratic Services matched that expenditure. The Borough election expenditure was also contained within Democratic Services and this was matched through one-off funding from reserves and New Homes Bonus meaning, overall, Democratic Services was in a cost neutral position. In terms of payments to third parties, a deficit of £168,280 was shown - this related to the delivery of the waste and recycling services due to additional resources on grounds maintenance rounds to ensure issues with grass cutting were minimised during the growing season and the additional cost of the depot which had been agreed after the budget was set. Both overspends were being covered through one-off reserve use for the current year. The remaining significant element of the Ubico budget position was the hire of additional vehicles: there was the specific hire cost of an additional vehicle whilst the procurement for a new narrow access vehicle continued. There had also been a couple of accidents which had meant additional hire and repair costs whilst those vehicles were out of operation. In terms of transfer payments, there was a deficit of £130,000 which related to housing benefit claimant payments and recovery of expenditure from the government. The Council was entitled to 100% of the debt if it could be reclaimed from the claimant and therefore it was possible, in the long-term, to eradicate the housing benefit claim; however, recovering significant overpayments could take a long time and was extremely difficult. The situation would continue to be monitored through the rest of the year with the housing benefit team targeting key individuals to recover debt as quickly as possible. In terms of income, there was a surplus currently of £200,970 which was due to £148,000 of grant funding for the European elections; £55,000 of grant funding for the revenues and benefits service; £37,000 gain from the garden waste service; and £12,000 gain on car parking. The positive position was offset by a deficit on planning income at the half year point, the expectation was that by the year-end several large individual planning applications would be received to ensure the income target was met. In addition, there was a deficit on the amount of recycling credits received due to the actual level of recyclate collected being less than was included in the budget - the budget had not included an allowance for non-recyclable material in the system therefore there had been an overestimation of the recycling credits due.

55.3           In terms of the corporate codes which included other sources of financing that were needed to balance the budget, there was a significant budget deficit being shown on investment properties due to the Council not having secured another commercial opportunity as expected at the end of the previous year; this had meant the income expected to have been received in rent had not been achieved. That loss had been mitigated by treasury management costs having been reduced through lower borrowing and no minimum revenue provision being made meaning a cost neutral position on the budget. Business rates was showing a surplus at the half year stage which was helping to reduce the overall deficit position for the Council. The Gloucestershire-wide business rates pool was going well and there was a potential windfall to Tewkesbury Borough Council of £250,000 although it had to be borne in mind that there was a risk to that position as it was only half way through the year. There had been a slight overspend on the capital budget due to incurring a higher than predicted expenditure on Disabled Facilities Grants; however, as the Council had a large grant allocation from central government to pay for those it was not depleting the Council’s capital allocation. In addition, the capital programme still included a budget of £6.6million to secure a commercial investment acquisition which was now profiled to happen in the next quarter of the financial year. The Council had reviewed a number of opportunities in the current year but none had come to fruition to date. Appendix C to the report provided a summary of the current usage of available reserves. Whilst the quarter two position showed a significant balance, it was the expectation that this would be spent in the future. The finance team had asked all departments for updates on their plans to ensure earmarked reserves would be used for their intended purpose or released back to the general fund. 

55.4           Referring to the mid-year treasury management report, the Head of Finance and Asset Management explained that, at this point, treasury investment activities had resulted in an average return of 1.38% on investments which resulted in a surplus of £7,847 - this was considered to be an excellent return given the impact of sustained low rates during the investment period and was commensurate with the risk taken on investments. It was the intention to increase investment in similar amounts in the second half of the year therefore boosting the interest received by the Council.

55.5           During the discussion which ensued, a Member questioned whether it was correct that Public Works Loan Board (PWLB) interest rates were due to increase by 1%. In response, the Head of Finance and Asset Management confirmed that the increase had already happened. The announcement had been a complete surprise to local authorities and had affected all types of borrowing for all durations. He understood the intention was to reign in the commercial activity being undertaken by Councils as well as controlling the level of borrowing. The change had had a slight impact on that but would be more detrimental to housing and redevelopment schemes which was unlikely to have been the intention. Unfortunately, that approach meant the PWLB was becoming uncompetitive and borrowers were being encouraged to borrow from the market instead; the Head of Finance and Asset Management was of the view that this may slow down borrowing but was unlikely to deter local authorities. In terms of recycling credits and contamination, a Member questioned whether the problem had been anticipated. In response, the Head of Finance and Asset Management explained that some contamination was anticipated but the levels found were far in excess of what was expected. The waste team was working with the contractor to identify the contaminates and the issue had been flagged up for next year’s budget. Unfortunately, many authorities were suffering from the same issues so there was work to be done. Members welcomed a briefing note on the problem identifying the level and type of contamination and what was being done to address it and the Chief Executive undertook to enable a discussion at an informal meeting. 

55.6           Accordingly, it was