Agenda item

Purpose of Report

 

To present the second quarter performance, up to 30 September 2020, specifically including the financial impact of the Covid-19 pandemic on the Council’s General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programmes.

 

Decision

 

That the Executive:

 

(1)          Notes the financial performance for the period 1 July 2020 to 30 September 2020, the projected outturns for 2020/21 and the impact of Covid-19 on the Council’s financial position;

 

(2)          Notes the underlying impact of the pressures and underspends identified in paragraphs 3.2, 4.3 and 5.2 of the report, together with Appendices B, D and F.

 

(3)          Approves the proposed contribution to earmarked reserves as set out in paragraph 3.11 of the report.

 

(4)          Approves the proposed contributions from earmarked reserves as set out in paragraph 3.13 of the report.

 

(5)          Notes the changes to the General Fund Investment Programme and Housing Investment Programme as approved by the Chief Finance Officer as set out in paragraphs 7.3 and 7.10 of the report respectively.

 

(6)          Approves the changes to the Housing Investment Programme, as set out in paragraph 7.11 of the report.

 

Alternative Options Considered and Rejected

 

None.

 

Reason for Decision

 

The report provided updates on the Council’s General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programmes for the current financial year and set out the estimated impact on the budget of the Covid-19 pandemic following application of the budget revisions approved at quarter one in order to maintain a balanced budget for 2020/21.

 

Covid-19 had taken its toll on the financial resilience of the Council as income streams had plummeted and there had been a requirement to incur costs to ensure services were being provided throughout this difficult period and to respond to consequences of the pandemic. The impacts of this were not restricted to the current financial year but would have a significant impact over the period of the current Medium Term Financial Strategy and possibly beyond. The cumulative impact of these challenges had resulted in significant shortfalls on the General Fund and on the Housing Revenue Account prior to the offset of any Government funding. 

 

In response to calls from the sector, the Government had allocated a total of £4.6 billion of general purpose grant funding to support local authorities to cover expenditure related pressures and announced an income compensation scheme to recompense councils for approximately 75p in every £1 of lost sales, fees and charges income. To date, the Council had received funding support of £1.877 million for Covid-19 related pressures and was forecasting to receive approximately £2.980 million through the income compensation scheme. There had, however, been no additional financial support provided to the Housing Revenue Account.

 

Despite the Government’s financial support package, the General Fund and Housing Revenue Account could not absorb the level of budget shortfalls without having to take some measures to reduce some areas of expenditure. The decisive action taken by the Council, as approved at quarter one, had allowed the Council to be able to continue to deliver its critical services in 2020/21 and to ensure its balances remained at an adequate level to provide resilience for future years.

 

Based on a significant number of planning variables and after offsetting the government funding support package and measures taken to address the budget pressures, as at the end of 30 September 2020, the forecast financial position of the Council for 2020/21 was set out in paragraph 2.5 of the report.

 

General Fund Revenue Account

 

The General Fund was currently projecting a forecast budget shortfall of £183,968, resulting in a general balance at the year-end of £2,338,220 subject to any final contributions to earmarked reserves. There were a significant number of forecast year-end variations in income and expenditure against the approved budget, primarily as a result of Covid-19 along with variances arising from measures taken to address the budget pressures. These were set out in paragraph 3.2 of the report and in further detail at Appendix B.

 

In response to the emergency situation arising in March 2020, the Council had to adjust its service provision to meet the needs of its users and residents, as well as establish new services and response cells and meet increased costs through contractual arrangements. Increased costs on a range of services had therefore been incurred as follows:

 

·         setting up the Civic Society, including the befriending service and business support cells;

·         moving rough sleepers into temporary accommodation;

·         provision of PPE and ‘Covid Secure’ status for Council services and buildings;

·         requirements under existing contracts for services;

·         increased demand on the Revenues and Benefits Shared Service;

·         increased demand on the Licensing and Health and Safety Teams.

 

In addition, the following key income losses were noted:

 

·         car parking;

·         development management, land charges and building control;

·         leisure, recreation and tourism;

·         the Christmas Market;

·         commercial rents;

·         treasury management;

·         Court cost charges.

 

Measures taken to address the budget shortfall included:

 

·         a budget review of all of the Council’s revenue budgets undertaken to identify one-off budget reductions;

·         a coronavirus job retention scheme;

·         the Towards Financial Sustainability Programme;

·         a review of capital financial through Direct Revenue Finance;

·         the establishment of a Covid-19 reserve.

 

It was proposed that the latest tranche of un-ringfenced Covid-19 grant support was allocated to the Covid Recovery Reserve to support the financial pressures in future years that would arise from the legacy of Covid.

 

Housing Revenue Account

 

The Housing Revenue Account was currently projecting an in-year variance of a £479,378 underspend, which would increase the general balances to £1,400,449 at the end of 2020/21.

 

Although the forecast position was an underspend, there were a number of forecast year-end variations in income and expenditure as a result of Covid-19 along with variances arising from measures taken to address the budget pressures. Full details of the main variances were set out in paragraph 4.3 of the report and Appendix D.

 

In response to the emergency situation arising in March 2020, the Council had to adjust its service provision in order to meet the needs of its tenants and had increased costs in respect of the establishment of a housing rent hardship fund, together with the required provision of PPE and ‘Covid Secure’ status for Housing Revenue Account services and buildings. The more significant pressure facing the Housing Revenue Account was in relation to its income streams, primarily its housing rent income, as follows:

 

·         housing voids;

·         treasury management;

·         Court cost charges.

 

As with the General Fund, the Housing Revenue Account could not absorb this level of budget shortfall without a range of measures aimed at reducing expenditure in the current year. The measures taken to ensure that the Housing Revenue Account maintained a balanced budget for 2020/21 were similar to those in respect of the General Fund.

 

Housing Repairs Service

A quarter two the Housing Repairs Service was forecasting a surplus of £169,909 in 2020/21. Full details were set out in Appendix F of the report.

 

Details relating to the General Investment Programme and Housing Investment Programme were outlined in section 7 of the report.

 

Councillor Ric Metcalfe put on record his thanks, on behalf of the Executive, to the Chief Finance Officer and her team for their excellent financial management and the work they had done to achieve a balanced budget for the 2020/21 financial year in circumstances which had seen an unprecedented reduction of £6.4 million in income.

 

Councillor Donald Nannestad referred to the table at paragraph 3.8 of the report which set out in more detail the losses incurred during quarter one and two of 2020/21, together with estimates based on the most likely scenario for the remainder of the financial year. He said that quarters three and four, on that basis, would need to be monitored closely moving forward, particularly as the extent of behavioural change was yet to be known in terms of the impact of Covid 19.