It was not possible to circulate this report five clear days in advance of the meeting. The chair agreed to accept this item as urgent because the council each year updates a detailed policy and resources strategy covering, as a minimum, the following financial year. This report initiates the 2021-22 to 2023-24 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 2021.
1. That the unprecedented financial uncertainties be noted:
· The impact of the Covid-19 pandemic on spending, income and savings plans and the pace of recovery
· The extent of government support to offset the financial cost to the council of the pandemic
· The expected world-wide recession as we emerge from lock-down and the end of the Brexit transition period
· The likely delay in the spending review intended to take place in 2020, with no indications of core funding and level of grants in 2021-22 and beyond
· The postponement of the planned reforms of local government finance (fair funding review, business rate retention arrangements) intended to be implemented from April 2021
· The likely deferment of business rates reset, planned for April 2021
· Governments proposals for sustainable long-term funding for adult social care
· No confirmation of additional funding for new burdens and other demand pressures including social care, high needs costs, homelessness and impacts of welfare reform.
2. That it be noted that the 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.
3. That it be noted that the accumulated deficit on the dedicated schools grant was £18.5m at 31 March 2020 with the prospect of achieving any meaningful reduction without additional funding from the Department for Education being remote.
4. That it be noted that financial planning is extremely challenging, with a range of potential scenarios suggesting a funding gap in 2021-22 of anywhere between £12.8m and £46.8m, with the range of potential outcomes increasing widely beyond 2021-22 (paragraph 41 of the report) and that, subject to the inherent uncertainties, the central forecast indicates a potential budget gap of £26.2m in 2021-22.
5. That the central budget forecast is based on the assumptions set out at paragraph 23 of the report:
· Additional government funding will be announced to mitigate collection fund deficits as a consequence of the pandemic (50% most likely; 75% best case and 0% worst case)
· That council revenues will continue to suffer losses in 2021-22 as a consequence of the pandemic and recession
· The use of reserves to mitigate resource losses throughout the period 2021-22 to 2023-24 (£5.0m per annum in the most likely scenario, £2.5m best and £10m worst)
· Council tax will need to increase throughout the period (2.99% per annum assumed)
· No additional precept for adult social care
· Additional costs arising from pay and prices, contractual losses, undeliverable savings proposals and debt financing costs (£20.1m/£14.4m/£24.8m respectively)
· Debt financing costs arising from additional investment projects (£1.5m in 2021-22 in the most likely scenario)
· That the Public Health deficit will be written down to support the service as we enter the period of recovery and renewal (£0.9m in the most likely/best case and £1.8m in worst).
6. That it be noted that the funding forecasts contained within the report draw on reserves to mitigate immediate budget pressures; these reserves will need to replenished in the longer-term.
7. That the strategic director of finance and governance with the support of other strategic directors will look to establish medium term budget plans, reviewing any decisions previously taken.
8. That further reports be received by cabinet in the autumn, as further funding information becomes available and as budget plans for 2021-22 to 2023-24 develop.