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Agenda item

Financial Outturn Report 2020/21

To consider the General Fund outturn for 2020/21, the reserves position as at 31 March 2021, the financing of the capital programme and the annual treasury management report and performance.

Minutes:

27.1          Attention was drawn to the report of the Head of Finance and Asset Management, circulated at Pages No. 69-93, and the updated report and Appendix A circulated separately, which provided financial information for quarter four and the full year 2020/21 which would usually be included in the performance report that had been considered by the Overview and Scrutiny Committee at its last meeting.  Members were asked to consider the general fund outturn for 2020/21, the reserves position as at 31 March 2021, the financing of the capital programme and the annual treasury management report and performance.

27.2          The Head of Community Services advised that he had been unable to include the finance report with the performance management information due to the timing of the completion of the accounts so a separate report had been provided following approval by the Executive Committee.  An updated report had been circulated separately following an error by the government.  Members were advised that a general fund surplus of over £13m had been generated during the year which was a great overall position and a boost to the Council’s reserves; however, it did not resolve the ongoing challenges with the base budget and the concerns over funding reduction and reform remained.  In terms of the reserves allocated, a number had been earmarked for specific purposes so there was limited choice over how they could be spent and it was still necessary to act cautiously ahead of an announcement on what the financial future would look like for the Council.  The table at Page No. 3, Paragraph 2.3 of the separate papers, gave a breakdown of how the surplus had been generated with the main factors being employee vacancies and turnover and savings in respect of premises and transport as staff had been working mainly from home.  There had been an overspend on payments to third parties because several provisions had been raised at year end for planning appeals lodged in the financial year.  It should be noted that there had been an underspend on the Ubico contract.  During the year, the Council had responded to COVID-19 and a number of costs were directly attributable to that with the main one being support to Tewkesbury Leisure Centre to help with unavoidable costs of closing during the pandemic as well as additional Ubico costs due to extra staff, vehicles, personal and protective equipment (PPE) and cleaning products in order to be COVID-19 secure.  With regard to projects funded externally, the vast majority of the £1m saving was due to additional government funding received, particularly relating to the Garden Town; that money was moved to reserves at year end.  Council income was showing additional income levels of £1.29m over the budgeted position; the majority of fees and charges budgets were under target due to the pandemic, with the exception of planning fees, so the large variance was due to substantial external grant income received during the year for a range of activities including homelessness prevention, carbon reduction and supporting the leisure centre which had boosted the surplus.  With regard to commercial activity, the Council had acquired two new commercial investment properties in the year which had generated extra rental income.  The overall position on the retained business rates scheme showed a surplus for the full year which included that generated by being in the Gloucestershire Business Rates Pool.  £4.9m of business rates relief funding had been provided by the government to cover the loss of income from businesses; the impact of this was not realised until the following financial year so £5.1m must be held in a reserve to fund the future deficit that would form part of the outturn next year.  In relation to that, the Head of Finance and Asset Management advised that the surplus of £3.5m generated on the business rates collection fund in 2019/20 had been realised in the 2020/21 outturn.  He went on to explain that the Council had received a general grant from central government to relieve expenditure pressures relating to COVID-19 which had totalled £1.25m; this was not ringfenced for specific services. The balance of the £2.178m received related mainly to new burdens funding for administering the numerous grant schemes introduced by the government throughout the pandemic.  Tewkesbury Borough Council had also claimed £450,000 compensation for losses incurred in its sales, fees and charges income streams as a result of the pandemic.  Overall, this totalled approximately £13m which, together with the planned contribution to the reserves, resulted in £14.4m being transferred to the reserves; that was a significant amount and would be used for things such as the vehicle replacement programme and other Council projects.  Appendix A, circulated separately, gave a full explanation of all variances exceeding £40,000 at a group level.

27.3           The Head of Finance and Asset Management went on to advise that a breakdown of the reserves of the Council as at 31 March 2021 was shown at Appendix B to the report.  When added to the £17m existing reserves, there was over £31m total revenue reserves at year end.  A note had been added to explain the reason for the significant movement.  Notwithstanding this, the majority of reserves were planned contributions or external funding received for specific purposes – i.e. normal activities, such as Section 106, one-offs, such as vehicle replacement, and COVID-19 recovery.  Some of the factors contributing to the increase had been known about, for instance, the business rates surplus, and that had been used to reinstate the Medium Term Financial Strategy reserve which had been used last year to pay a levy to the government for business rates.  The resulting reserves balance was £2.7m which put the Council in an excellent position to tackle the financial challenges ahead.  The surpluses generated within the general fund had allowed the Corporate Leadership Team to make allocations to fund priority areas which included carbon reduction and further sums for COVID-19 recovery.

27.4          Moving to the capital programme, expenditure was dominated by the purchase of the final two investment properties, infrastructure projects such as Ashchurch Bridge, replacement vehicles and equipment which largely related to IT equipment for remote working, and Disabled Facilities Grants.  A summarised capital programme was set out at Appendix C to the report together with sources of finance used.  A treasury report was set out at Appendix D to the report and that provided a lot of the detail the Council was required to produce.  The Council had needed to borrow money to ensure liquidity during the early months of the pandemic but there had been an in-year gain from the capital growth of pooled funds which had recovered much of the loss experienced at the outset.  The Head of Finance and Asset Management reiterated that this was a great position to be in and money had been set aside to deal with a number of priorities; however, it did not deal with the challenges on its own.

27.5          A Member noted that the report and Appendix A had been updated following publication of the Agenda, as set out on the separate papers, and asked for clarification on the adjustments that had been made to the figures in terms of business rates reliefs and reserves.  The Head of Finance and Asset Management advised that an extra £82,000 had gone into the Medium Term Financial Strategy useable reserves; this was due to a very simple, yet complicated, mistake in the calculator the government used to calculate losses due to  local government from the business rates impact – this had meant that the spreadsheet had produced the wrong figure to start with.  Another Member drew attention to Page No. 73, Paragraph 2.12 of the report, which stated that £14.6m had been transferred to reserves  and he asked what percentage of the Council’s total income that represented.  The Head of Finance and Asset Management indicated that was a very good question and he advised that, removing housing benefit income from the government, the Council’s income for the year was approximately £23m which was around 40%.  The Member went on to ask why there was a discrepancy between the amount being transferred and the amount being spent and was advised that the unusual amount of reserves was due to the impact of COVID-19 and the amount of grant funding, as well as the situation with business rates; in the 20 years he had worked at the authority, the Head of Finance and Asset Management had never seen a surplus of this level and was unlikely to see it again.  It was very difficult to reconcile the ongoing base budget with the amount of Council Tax charged; the fear was that the government would see the reserves and think there was no need to give any grant funding but, hopefully, the reason why the reserves were in place would be recognised.  Another Member pointed out that some were earmarked reserves and the Head of Finance and Asset Management confirmed there was only £2.8m uncommitted funds within the Medium Term Financial Strategy with the remainder allocated to specific projects. 

27.6          A Member noted that the Corporate Leadership Team had allocated £1.8m of reserves and he questioned how this had been decided and whether this had been taken to Executive Committee or Council.  The Head of Finance and Asset Management confirmed it had been agreed by the Executive Committee which had a remit to approve reserves.  In terms of the items identified, there was an immediate risk around development management for a number of reasons, but particularly due to the amount of applications being received for large developments, so a decision had been made to allocate funding to ensure there was capacity within the team to deal with those.  With regard to Ubico vehicle replacement, it had been identified there was likely to be a shortfall during 2024/25 when the fleet was due to be replaced so it was intended to look to extend the useful life of the current vehicles as far as possible.  Transform Working Group had received an excellent presentation on the general work being done to transform services, for instance, in areas such as housing benefits and customer services, so money had been allocated to the digital team to continue to make efficiencies.  Climate change was a priority area within the Council Plan but there was very little funding associated with it and Officers were keen to support early wins.  Looking at the Council as a whole, the money could probably be allocated several times over; however, the Head of Finance and Asset Management believed it had been allocated where it was needed at this time.  In terms of the pay award reserve, Members would recall that the base budget had included 0% uplift; however, employers had made an offer of 1.5% which had been rejected by the union so there was now a real danger it would be above that amount, as such, reserves had been allocated to make provision for a 2.3% increase.

27.7          Having considered the information provided, it was

RESOLVED          That the general fund outturn for 2020/21, the reserves position as at 31 March 2021, the financing of the capital programme and the annual treasury management report and performance be NOTED.

Supporting documents: