Agenda item

To consider an update on update on the policy and resources strategy and related recommendations.

The report had not been circulated five clear days in advance of the meeting. The chair agreed to accept the report as urgent because each year, the council updates a detailed policy and resources strategy covering, as a minimum, the following financial year.  The report initiates the 2020-21 to 2022-23 budget planning process and the detailed work on budget proposals.  Members and officers will undertake this work over the coming months in order to meet the timetable to prepare a budget proposal for submission to council assembly in February 2020. 

RESOLVED:

That the following be noted:

1.  That Government has stated its intention to announce and then publish a Spending Review to take place in 2019 to determine resources available for the period from 2020-21 and that there is now lack of clarity as to whether that review will extend beyond one year.

2.  That the progress on government’s fair funding review and its potential impact on London Councils remains unclear and in any event cannot be exemplified until the outcome of the spending review is complete.

3.  That the Government has also stated its intention to implement a redesign of the Business Rates Retention System based on 75% retention with effect from April 2020, set alongside a reset of business rate baselines.

4.  That there remains no confirmation of key components of government’s funding of councils and especially the future of the Better Care Fund, Improved Better Care Fund and New Homes Bonus.

5.  That the long awaited government green paper on funding adult social care is still not published.

6.  That there remains no confirmation of changes to the funding of new burdens and other demand pressures including children’s social care, dedicated schools grant (DSG) high needs costs and impacts of welfare reform.

7.  That economic and financial impacts to the council of Brexit remain unclear and that any local budget pressure may need to be contained within the limited budget and reserve created as part of the 2019-20 policy and resourcing strategy and budget for 2019-20.

8.  That Government decision taking and policy decisions insofar as they impact on local government remain unclear, specifically in the context of the election of a new leader of the Conservative Party, to take over as Prime Minister in late July.

9.  That funding uncertainties make any meaningful financial planning extremely challenging, with a range of potential scenarios suggesting a funding gap in 2020-21 of anywhere between £4m and £32m, with the range of potential outcomes increasing widely beyond 2020-21 (paragraph 53 of the report) and that, subject to the inherent uncertainties, the central forecast indicates a potential budget gap of £18.9m in 2020-21.

10.  That the central budget forecast is based on the following assumptions:

·  the impact of Spending Review and the Fair Funding Review will be neutral

·  the major grant funding sources, i.e. Public Health Grant, Better Care Fund, Improved Better Care Fund, Social Care Grants and New Homes Bonus will continue at 2019-20 levels

·  resetting the Business Rate Baseline will significantly impact those authorities that have experienced the greatest growth since inception of the existing BRR system in 2013-14; Southwark is forecast to lose up to £12.5m

·  subject to further analysis, net inflation and pay award pressures of £8.6m have been assumed

·  increased debt financing costs arising from the capital programme of £3m per annum

·  growth generated from increased homes and business rate yield of £4.7m

·  retaining the contingency of £4m within the overall budget to support in year cost pressures

·  full utilisation of the business rate risk reserve over three years to mitigate the impact of business rate reset.

11.  That the strategic director of finance and governance with the support of other strategic directors and their terms will prepare a one year budget for 2020-21 based on cash-limiting departmental budgets at 2019-20, setting out the risks of this approach and how these risks will be managed.

12.  That the strategic director of finance and governance will seek to prepare with other officers indicative savings options and commitments for 2021-22 and 2022-23 as part of the risk mitigation required to support this approach.

13.  That further reports be received by cabinet in the autumn as further funding information becomes available and as budget plans for 2020-21 become available.

14.  That, cabinet review the Fairer Future Budget Principles and, if required refresh these as part of the development of budget plans for 2020-21.

15.  That in the event of clarity of government funding looking forward, the council will need to establish medium term budget plans, reviewing any decisions previously taken.