Agenda item

Purpose of Report

 

To present the third quarter’s performance on the Council’s General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programme, specifically including the financial impact of the Covid19 pandemic.

 

Decision

 

Executive:

 

1)    Noted the progress on the financial performance for the period October to 31st December 2020 and the projected outturns for 2020/21 and the impact of Covid19 on the Council’s financial position.

 

2)    Noted the underlying impact of the pressures and underspends identified in paragraphs 3.2 (and Appendix B), 4.3 (and Appendix D) and 5.2 of the report,

 

3)    Approved the proposed contributions to earmarked reserves as set out in paragraph 3.13 and 3.14 of the report.

 

4)    Approved the proposed transfer between earmarked reserves as set out in paragraph 6.2.of the report.

 

5)    Approved the changes to the General Investment Programme and Housing Investment Programme as approved by the Chief Finance Officer and detailed in paragraphs 7.3 and 7.10 respectively of the report.

 

6)    Approved the changes to the Housing Investment Programme as detailed in paragraph 7.11 of the report.

 

Alternative Options Considered and Rejected

 

None.

 

Reason for Decision

 

Covid19 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 simply restricted to the current financial year but would have a significant impact over the period of the MTFS and possibly beyond

 

Despite a financial support package announced by the Government the General Fund and HRA could not absorb the level of budget shortfalls without having to take some measures to reduce some areas of expenditure. These measures, approved at Q1, would allow the Council to be able to continue to deliver its critical services and to ensure its balances remained at an adequate level to provide resilience for future years.  

 

Updates were reported as follows:

 

General Fund Revenue Account

 

For 2020/21 the Council’s net General Fund revenue budget was set at £12,963,220, including a planned contribution from balances of £286,310  which resulting in an estimated level of general balances at the year-end of £2,522,188, after allowing for the 2019/20 outturn position.

 

The General Fund summary was currently projecting a forecast underspend of £122,723, (as set out in Appendix A of the report), resulting in general balance at the year-end of £2,645,911, (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 Covid19 along with variances arising from measures taken to address the budget pressures and the financial support provided by Government. Full details of the main variances were provided in Appendix B while the table below sets out the key variances:

 

	Forecast £’000
Increased expenditure arising as a result of Covid19	610
Income losses as a result of Covid19	6,305
Income Compensation Scheme	(3,048)
Government Grants (Covid19, Rough Sleeping, New Burdens, Test & Trace support and Compliance & Enforcement).	(2,283)
Measures approved at Q1 (budget review, furlough, review of capital, increased TFS)	(1,898)
Coronavirus Job Retention Scheme (in addition to Q1)	(84)
2020/21 national pay award implications	110
Covid19 Grant - Contribution to reserves for use in future years (approved at Q2)	622
Net other variances	(458)
Overall forecast budget shortfall/(surplus)	(123)

 

The key financial challenges the Council was facing in 2020/21 arising as result of Covid19 were detailed at paragraphs, 3.4 – 3.8 of the report.

 

Financial support received from the Government had been provided and measures had been adopted to address the budget shortfall as detailed at paragraphs 3.9 -3.12 of the report

 

Included in the forecast outturn underspend of £157,723 was a proposed additional contribution to earmarked reserves in respect of Active Nation Bond Reserve – contribution to a new reserve fund in the sum of £ 83,000 and carry forwards, requested to be transferred into an earmarked reserve to offset expenditure in the next financial year as detailed at paragraphs 3.13-3.14 of the report

 

Towards Financial Sustainability Programme

 

The savings target included in the MTFS for 2020/21 was originally £500,000, this was increased by £50,000 as part of the budget measures approved at quarter one. Progress against this target, based on quarter 3 performance showed that secured savings totalled £559,070. This resulted in an over achievement of the increased target in 2019/20 by £9,070 as summarised at Appendix N of the report.

 

Housing Revenue Account

 

For 2020/21 the Council’s Housing Revenue Account (HRA) net revenue budget was set at a £75,000 use of balances, resulting in an estimated level of general balances at the year-end of £921,071, after allowing for the 2019/20 outturn position.

 

The Housing Revenue Account was currently projecting an in-year variance of £772,391 which would increase the General Balances to £1,693,462 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 Covid19 along with variances arising from measures taken to address the budget pressures as are provided in Appendix D of the report.

 

The key financial challenges that the Council was facing in 2020/21 arising as result of Covid19 were detailed at paragraphs, 4.5 – 4.6 of the report.

 

The measures taken to ensure the HRA maintained a balanced budget for 2020/21 were similar to those in the General Fund as detailed at paragraph 4.7 of the report

 

The total of these measures along with other income and expenditure variances in year had resulted in the HRA currently forecasting a budget underspend at the year end. As with the General Fund there were a number of financial assumptions which may change during the course of the next 3 months and could alter the current forecast position. At this point it was therefore  proposed that the use of the earmarked reserve to resource the Rent Hardship was reviewed following the final outturn position and in addition that the underspend on repairs and maintenance was considered for allocation, subject to the  final outturn position.

 

Housing Repairs Service

 

For 2020/21 the Council’s Housing Repairs Service net revenue budget was set at zero, reflecting its full cost recovery nature.

 

At quarter three the Housing Repairs Service was forecasting a surplus of £204,670 in 2020/21, with a summary and details of main variances set out in Appendices E/F of the report. However, as with the General Fund and HRA this forecast was based on a number of assumptions which, due to uncertainties related to Covid19, may change during the next three months. In addition, there had been a delay in undertaking the internal billing process which provided a further level of uncertainty to the forecast position.

 

Details of earmarked reserves and their forecast balance as at 31st March 2021 were outlined at paragraphs, 6.1– 6.2 and Appendix G of the report.

 

General Fund Investment Programme

 

The original General Investment Programme for 2020/21 in the MTFS 2020-25 amounted to £15.6m which was increased to £16.4m following quarter 4 approvals and year end re-profiles from 2019/20. At quarter 2 the programme was reduced to £11.1m and at quarter 3 the programme was reduced by a further £5.987m to £5.117m, as shown at paragraph 7.2 of the report.

 

Budget changes/re-profiles approved by the Chief Finance Officer during the third quarter detailed at 7.3-7.5 of the report, resulted in one change requiring Executive approval for the third quarter resulting from notification of additional grant funding, together with a further scheme added to the GIP, having been previously being considered by the Executive pending confirmation of external grant funding: and changes to the Crematorium Scheme, considered elsewhere on the agenda had also been reflected in the General Investment Project above:

 

The overall spending on the General Investment Programme for the first three quarters of 2020/21 amounted to £0.885m, which was 17.5% of the 2020/21 programme and 17% of the active programme, detailed further at Appendix J.

 

Although this represented a low percentage of expenditure at this stage of the financial year, works had been constrained by the national lockdowns as well as the diversion of internal resources to focus on the Covid19. The majority of schemes had recommenced either on site or in terms of their development stages; a further £384k had been spent since the end of quarter 3.  Further expenditure was expected in quarter 4 on Disabled Facilities Grants, Car Park Ticket Machines, Boultham Park Lake, the Towns Fund, Western Growth Corridor, HAZ Scheme and various capitalised maintenance schemes. 

 

Housing Investment Programme

 

The original Housing Investment Programme for 2020/21 in the MTFS 2020-25 amounted to £25.640m. This was increased to £28.505m following approvals and year end re-profiles as part of the 2019/20 outturn. As at quarter 2 the budget was revised to £22.3m and has been further adjusted by £2.6m to £19.7m at quarter 3. A summary of the were shown at paragraph 7.9 of the report

 

The changes that required approval from Executive were detailed at paragraphs 7.11-7.12 of the report.

 

Expenditure against the HIP budget to the third quarter was £10.206m, representing 52% of the revised programme. A further £1.8m had been spent as at the end of January 2021 as detailed further at Appendix L.

 

Although this represented a lower percentage than would be expected at this stage of the financial year, works had been constrained by the national lockdowns as well as the diversion of internal resources to focus on Covid19.  The majority of schemes had now recommenced either on site or in terms of their development stages, some schemes had been re-profiled into future years at quarter 3.

 

Councillor Ric Metcalfe thanked the Council’s Chief Finance Officer and her team for their excellent stewardship of the Council’s finances, reflecting on what had been a most extremely challenging year under very difficult circumstances. He added that the loss of income to the Council had been significant and, whilst being grateful to the Government for the support it had put in place, highlighted that was on the basis of one-off support and that the Council itself would need to ensure its long term financial sustainability.

 

Councillor Donald Nannestad reflected on reference in the report to housing repairs and the reduction in the number of repairs carried out. He reported that people had been reluctant throughout the pandemic to allow the Council enter their homes and undertake repairs. As restrictions relaxed in relation to Covid-19 it was anticipated that there would be increases in the number of repairs carried out.