Agenda item

Presentation

The Director of Finance and the Head of Financial Planning and Support were in attendance at the meeting to brief the Board on the latest Medium Term Financial Plan (MTFP) position, including the effects of the Provisional Local Government Finance Settlement, and other changes since the last reported position, which would form the basis for the Budget Report. 

 

The Director of Finance delivered a presentation, which covered the following topics:

 

·         Setting the scene of the Council’s finances;

·         Key points – 2022/2023 Budget;

·         Last reported MTFP position as at November 2021;

·         Changes since November position built into latest version of MTFP – From provisional LGFS / other;

·         LGFS inflation contingencies;

·         Increased reserves – rationale;

·         Local Government Finance Reform;

·         Capital Projects;

·         Members’ general responsibilities in setting the budget;

·         The timeline for budget setting;

It was indicated that the share allocated to Children’s Social Care had increased from 13 % of the total net budget in 2010/2011, to 32 % in 2020/2021; Adult Social Care had also increased from 27 % to 35% in that same period. In turn Central Services’ percentage share of the net budget had decreased from 31% to 14% since 2010/2011. The proportion of budget allocated to all of the other Council services, which included Environment and Regeneration, had seen a reduction from 29 % to 19 % of the Council’s net budget. In 2010/11 the Council’s net budget had been £133.6m and in 2021/2022 it was £116.4m. Over the last 11 years the Council had received £16m less, not accounting for inflation and a higher proportion of funding had to be spent on statutory Children’s and Adult Social Care Services.

 

A number of key points were made in respect of the 2022/2023 Budget as follows:-

 

·         Proposals for spending and income for 2022/23 had been developed to support continued delivery of the Mayor’s strategic priorities

·         To deliver these priorities, we needed to protect frontline services and 

preserve our capacity to deliver major improvement programmes and projects

·         Investment provided, including for increased employers NI costs, ongoing 

Covid19 effects, Children’s Care, Adult Social Care Living Wage, car parking & crematorium income shortfalls, energy inflation, Street Wardens, and 

borrowing costs for capital investment

·         No service cuts or budget savings had been assumed

·         The previous year’s saving target re: reducing staff mileage paid had been fully removed

·         A total Council Tax rise of 2.99% (within Government referendum 

limits) was proposed (comprising a 1.99% general increase, and a 1.00% Adult Social Care 

precept - precept applied to Council Tax as per Government 

recommendation to help to pay for the increased costs of Adult Social Care 

services). The proposal was currently out to public consultation.

·         A lower Council Tax increase would require service cuts and/or reduced 

investment, a higher increase would mean potentially more funding available 

for additional investment.

It was explained that following submission of the proposed budget report to Full Council in November, the Provisional Settlement for 2022/2023 was received from Central Government, which changed the assumptions slightly.  The Settlement was welcomed and improved upon when compared with the previous Medium Term Financial Plan (MTFP) assumptions, with the key changes being as follows:-

 

·         A new one off Services grant had been awarded (£3.172m for Middlesbrough)

·         There had been a continuation of Adult & Children’s Social Care grant funding, and also an additional grant for 2022/23 of £2.204m for Middlesbrough

·         Market Sustainability & Fair Cost of Care grant (£512k for Middlesbrough)

·         New Homes Bonus Grant for 2022/23 only (£773k for Middlesbrough)

·         Lower Tier Services Grant for 2022/23 only (£300k for Middlesbrough)

·         Improved Better Care Fund grant increased by inflation

·         Revenue Support Grant increased by inflation

·         Increased NNDR Section 31 grant income

·         Troubled Families grant assumed now to continue rather than ‘fall off’ (not part of provisional LGFS, but based on Government indications)

·         Creation of additional inflation contingencies

·         Amendment to MTFP amounts for Kerbside Recycling Contract re-tender

·         The net position resulting from the additional money received via the LGFS, setting aside the provisions for inflation has been the creation of £495k budget for Service Investment on a recurring basis.

·         Removal of remainder of Covid Scarring budget from 2023/24 as funding now provided elsewhere

·         £300k of Children’s Services additional MTFP support b/fwd from 2024/25 to 2022/23

·         Contingency for future Council Tax/Business Rates losses from 2022/23

·         Changes to planned use of Reserves

In terms of inflation contingencies it was advised that the additional funding provided within the LGFS over and above that anticipated had been used to create contingencies to address potential inflation rises in the following areas of expenditure:-

 

·         Pay award - £450k contingency to provide for pay award up to a maximum of overall of 2.5% (MTFP already includes provision for 2% assumed pay award). Every 1% of pay award costs approximately £900k

·         Energy  - contingency of further £215k (this is in addition to £371k already provided for in MTFP)

·         General supplies and services – contingency of £459k (this is on top of £1.4m already provided for in MTFP for contractual inflation)

·         Vehicle fuel – contingency of £51k

·         Food – contingency of £53k

·         Agency staff – contingency of £123k

·         Increased Adult Social Care Costs – contingency of £1,604k

·         Increased Children’s Care costs – contingency of £545k

In terms of creating increased reserves it was explained that the rationale was that there was a need for the Council to ensure prudent financial planning, to create sufficient contingency to cover increased inflation; uncertainty around the level of the pay award; the anticipated Local Government Finance Reforms; the lack of clarity around the level of Government Grant provision going forward; the unknown impact of Health and Social Care reform; the ongoing effects of Covid-19, both on the Council and the wider economy and the need to smooth the available budget across the MFTP period. In light of the above it was advised that there was a need to ensure a reasonable increase in the Council’s levels of financial reserves to protect us against the issues highlighted.

 

With regard to Local Government Finance Reform it was explained that a new Government Department had been created – DLUHC and they had renamed the Fair 72Funding Reform the Local Government Finance Reform. It was likely that these reforms would come into effect from 2023/24 onwards. It had been indicated that the Funding Reforms would be linked to ‘levelling up’ but as of yet that had not been clearly defined. Indications had, however been given that there would be transitional arrangements in place to protect authorities that would lose out on funding. In the worst case scenario Middlesbrough could lose the £3.172m service grant awarded in 2022/23 and therefore there was a need to ensure the appropriate level of reserves were made available.  There continued to be a need for business rates to be reset but it was unclear at this stage what that would look like. The Health and Adult Social Care Bill reforms would have an impact, although this was yet to be clarified. More clarity was needed around the ongoing grant support that would be available in the future to the Council and as always the preference was for multi-year settlements / earlier settlements to be awarded.

 

Information was provided in respect of the Capital Projects that would be coming up over the next few years. It was noted that the Capital Programme for the period 2020/21 to 2023/24 totalled £240m, of which £118m was Council investment and £122m of external funding. 

 

In terms of responsibilities for setting the budget, it was explained that the Section 151 Officer’s responsibility was to propose and certify that a budget was balanced.  In terms of Elected Members, responsibility was focused on working positively towards setting a balanced budget, which was a legal responsibility and not optional for the Council.  It was commented that Members had contributed positively to the process this year.

 

Regarding the budget setting timeline, the legal cut-off point for setting the budget was 11 March 2022.  Following consideration, the budget report would be submitted to Executive on 14 February 2022 for endorsement, and then subsequently to Council on the 23 February 2022 for approval.

 

Following the presentation, the Chair thanked the Finance Director for the presentation and Members of the Board were afforded the opportunity to ask questions.

 

A Member made reference to the provisional and assumed financial figures referenced during the presentation and it was queried whether the Council had yet received the Council had received the actual settlement from the Government. In response the Director of Finance advised that the Council had received the provisional settlement from the Government. It was anticipated that these figures would be confirmed later this month but it was unlikely the figures would change.

 

A Member made reference to the money initially set aside for the re-tendering of the Kerbside Recycling Contract, which was no longer needed and it was queried whether this meant there was additional funding available. In response it was advised that the monies had been taken from that service budget and used for general reserves / inflationary pressures.

 

A Member referred to the creation of £495k budget for Service Investment and queried whether given that many people were currently struggling with inflationary pressures / high energy costs would it not be better to use this funding to reduce the Council Tax increase by 0.5% or 1 %. In response the Director of Finance advised that a 1 % reduction in Council Tax equated to approximately £600k. It was a legitimate option that the Council could consider. From a financial perspective it was not be the better option, however, it was a political decision for Full Council to consider.

 

A Member made reference to the Council’s finances more generally and queried whether from a financial perspective the Council was in a healthy position. In response the Director of Finance advised that the Council was in a secure position. The Council was not in a healthy position as the based on the level of demand in the town it was the Director of Finance’s view that the Council was underfunded particularly in respect of the pressures in Children’s Social Care. There was no danger of the Council issuing a section 114 notice.

 

The Chair thanked the officers for their attendance and contributions to the meeting.

 

AGREED that the information provided be noted, and the agreed action be undertaken.