Purpose of Report
To present the first quarter’s performance (up to 30 June 2021) on the Council’s General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programmes, and to seek approval for changes to both the revenue and capital programmes.
Decision
(1) That the progress on the financial performance for the period 1 April 2021 to 30 June 2021 and the projected outturns for 2021/22 be noted.
(2) That the underlying impact of the pressures and underspends, as identified in paragraphs 3.2 (and Appendix B), 4.3 (and Appendix D) and 5.2 (and Appendix F) of the report, be noted.
(3) That the proposed contributions to earmarked reserves, as set out in paragraph 3.5 of the report, be approved.
(4) That the changes to the General Investment Programme and the Housing Investment Programme as approved by the Chief Finance Officer, as detailed in paragraphs 7.4, 7.10 and 7.11 of the report, be accepted and noted.
(5) That the changes to the General Investment Programme, as detailed in paragraph 7.4 of the report, be approved.
Alternative Options Considered and Rejected
None.
Reason for Decision
Following the unprecedented impact of Covid-19 on the Council’s finances in 2020/21, budgets for 2021/22 were revised as part of the Medium Term Financial Strategy for 2021-26 based on a number of assumptions around the speed and extent of national and local recoveries. Whilst in many cases these assumptions reflected the actual position to date, there were still some areas where the rate of recovery was impacting adversely on the Council’s finances. Close monitoring of the position and implementation of mitigating actions over quarters two-four would be key to ensuring the Council maintained a balanced budget position for 2021/22.
Updates were reported as follows:
General Fund Revenue Account
For 2020/21 the Council’s net General Fund revenue budget was set at £978,410, including a planned contribution from balances of £477,240 which resulted in an estimated level of general balances at the year-end of £2,193,359 after allowing for the 2020/21 outturn position.
The most significant of these forecast variations related to car parking income, which was currently forecasting a reduction in income of £219,305. This shortfall had mainly arisen during the first quarter due to the extended national restrictions. This budget along with all key income budgets was monitored closely and reported to Corporate Management Team on a monthly basis.
Included in the forecast outturn underspend of £199,432 was a proposed additional contribution to/from earmarked reserves, as detailed at paragraphs 3.6, and 6, and Appendix G, of the report.
Towards Financial Sustainability Programme
The savings target included in the Medium Term Financial Strategy for 2021/22 was £850,000. Progress against this target, based on quarter one performance, had shown that secured savings totalled £427,040, as summarised at Appendix N of the report.
Housing Revenue Account
For 2021/22 the Council’s Housing Revenue Account (HRA) net revenue budget was set at a £14,910 use of balances, resulting in an estimated level of general balances at the year-end of £1,059,743, after allowing for the 2020/21 outturn position.
The Housing Revenue Account was currently projecting an in-year variance of £209,737 underspend which would increase the General Balances to £1,284,390 at the end of 2021/22.
There were a number of forecast year-end variations in income and expenditure against the approved budget, as outlined at paragraph 4.3, with full details of the main variances provided at Appendix D of the report.
The HRA was currently forecasting an underspend at the end of the financial year. The largest variance for HRA was the current forecast underspend on Repairs and Maintenance. This was mainly due to the ongoing impact of Covid-19 affecting the ability to carry out repairs, the current reduction in charge from HRS and the lack of tradespeople to carry out the repairs required. HRA and HRS were working hard to address these issues and so this underspend may be reduced over the remainder of the financial year.
For this financial year it was proposed that a one off additional DRF contribution to capital would be made to reduce the use of capital receipts and borrowing within the Housing Investment Programme. This was currently estimated to be £500,000, however the actual amount would be dependent on the final outturn position.
Housing Repairs Service
For 2021/22 the Council’s Housing Repairs Service net revenue budget was set at zero, reflecting its full cost recovery nature. At quarter one the Housing Repairs Service was forecasting a deficit of £718,835 in 2021/22, with a summary and details of main variances set out in Appendices E and F of the report. The main contributory factor for this deficit was the ongoing impact of Covid-19. The loss of one of the main sub-contractors locally and the inability to recruit was causing problems with repairs scheduling and void turnarounds. Repair numbers were down, at a time of high demand, as a result and therefore lower recharges were being made to the HRA. The use of more expensive subcontractors to keep on top of work had increased costs which at this stage had not been reflected in the service hourly rate and therefore also contributed to the forecast overspend.
The forecast overspend reflected the national position in relation to the construction industry. A significant number of companies had gone into liquidation, which was putting significant pressure on the those remaining in the sector. Contract prices continued to increase, reflecting increases for materials and labour. Qualified and skilled labour was becoming increasingly difficult to recruit. The service was looking at all manner of potential short-term solutions, which had included bringing in local contractors for support but these companies were experiencing similar issues with recruitment.
Surpluses from HRS had been repatriated to the HRA over the last few years and as such healthy reserves remained in the HRA. These reserves were increased at the end of last financial year to allow for HRS to catch up with any back log of repairs that had built up due to Covid-19 restrictions.
Details of earmarked reserves and their forecast balance as at 31st March 2022 were outlined at paragraphs 6.1and Appendix G of the report.
General Fund Investment Programme
The original General Investment Programme for 2021/22 in the Medium Term Financial Strategy for 2021-26 amounted to £14.393m, which was increased to £16.941m following quarter four approvals and year end re-profiles from 2020/21. At quarter one, the programme was increased by £0.510m to £17.451m, as shown at paragraph 7.2 of the report.
There were no changes over the approved limit that required Executive approval for the first quarter. Details of new projects subject to Executive approval during the first quarter were detailed at paragraph 7.4 of the report.
The overall spending on the General Investment Programme for the first quarter of 2021/22 amounted to £1.415m, which was 8% of the 2021/22 programme and 8.25% of the active programme, as detailed further at Appendix J.
Although this represented a low percentage of expenditure at this stage of the financial year, further expenditure was expected in quarter 2 on Disabled Facilities Grants, Boultham Park Lake, the Crematorium, HAZ Scheme and various capitalised maintenance schemes.
Housing Investment Programme
The original Housing Investment Programme for 2021/22 in the Medium Term Financial Strategy for 2021-26 amounted to £22.491m. This was increased to £25.839m following approvals and year end re-profiles as part of the 2020/21 outturn. This had been further adjusted to £29.047m during the first quarter of 2021/22. A summary of the were shown at paragraph 7.8 of the report. The changes that required approval from Executive were detailed at paragraphs 7.10-7.11 of the report.
Although this was a lower percentage than would be expected at this stage of the financial year, works had been constrained by the ongoing issues arising during the Covid-19 pandemic. Further work during quarter two and three would be undertaken to consider appropriate reprofiles required.