Members are asked to refer to the report included in the Cabinet agenda 28^th October, 2020.

The Committee received a presentation from Councillor Candida Ronald (Cabinet Member for Resources and the Voluntary Sector); supported by Neville Murton (Corporate Director, Resources); and Kevin Bartle (Interim Divisional Director of Finance, Procurement and Audit) regarding the Council’s projected outturn position against General Fund, Dedicated Schools Budget, Housing Revenue Account and earmarked reserves for 2020-21, based on forecasts as at 31st August 2020. The main points arising from the discussion are outlined as follows;

The Committee:

A.   Noted that with regard to future Government money that LBTH might receive and in particular regarding the Foregone earnings (i.e. the difference between earnings actually achieved and the earnings that could have been achieved).

B.   Noted that this was forecast as being £7m;

C.   Noted that LBTH had submitted a formal claim at the end of September;

D.   Noted that there were a couple points requiring clarification as to what LBTH could and could not claim for;

E.   Noted that it was considered LBTH would not receive the total amount being claimed and it was anticipated that the Council would have a short fall of potential £1m. However, LBTH will continue to keep this under review;

F.    Noted that the main reason for this is where the Government considers that the Council has made a conscious decision to not collect income. The best example of this being where a decision was made to provide free parking permits for essential workers and NHS staff. The Government considers this to be a local decision that the Council has made so it will not reimburse the income foregone;

G.   Noted that previously it had been assumed that LBTH would get that back as a legitimate loss of income due to Covid;

H.   Noted with regards to the social inequality that has been highlighted by the pandemic e.g. the Dedicated Schools Grant (DSG) where prior to the pandemic savings had been agreed. However, with a budget greatly reduced LBTH is still moving ahead with those savings.

I.     Therefore, asked if there has already been enough adjustment given the inequalities that has been highlighted as a result of the pandemic;

J.    Noted that the overspending in the DSG is something that has been discussed with the Department of Education (DfE) and LBTH is restricted to what it can do within the plan that has been agreed with the DfE; 

K.   Noted that in terms of the social inequalities LBTH is considering about how to rebuild and recover after the pandemic. However, the Council does have a legal responsibility to set a balanced budget and with the risks LBTH currently faces in terms of the overspends and  demographic pressures means that the Council does not have much room for manoeuvre in terms of identifying new areas of spend at the same time as protecting programmes to address inequality such as the Council Tax reduction scheme which we know will be really important to residents as the Borough rebuilds after the pandemic;

L.    Asked about (i) the loss of income due to Covid in this financial year; (ii) the extra expenditure as a result of Covid; and (iii) how those figures contrast with the financial support that has been received from the Government.

M.  In response noted that (a) the loss of income due to Covid in this financial year as referred to above was £7m from fees and charges; and (b) there has been a very significant sum from council tax/business rates that has not been received. 

N.   Noted that this is more difficult to quantify because in the case of a business rates income a lot of businesses receive grants from the Government towards the business rates. Although there has been a significant fall in the amount of income received from business rates/ council taxes.  Those people unable to pay their council tax due to their loss of income have applied for and been supported by the local council tax reduction scheme. Therefore, it was noted that the lost income and the additional cost of the local council tax reduction scheme is approximately £4m;

O.   Noted that officers would provide outside of the meeting details of the actual figure for the total loss of business rate and council tax income. (a) in terms of the increased additional expenditure the report sets out the total increased expenditure and the loss of income being £36m (£7m from lost income from sales fees and charges) and £28m of additional Covid related costs. (b) in terms of the financial support that has been received from the Government they have provided £23.6m in tranches 1 to 3 of general funding and on top of that tranche 4 has now been received which is the £14.4m referred to earlier. Therefore, at the time the report was prepared it was £23.6m but it is now approximately £38m and there are a few other specific earmarked funding for items like the Local Outbreak Fund and elements of the Business Rate Grants referred to above;

P.   Asked in relation to the (i) £12.5m overspend as highlighted in the Cabinet report; (ii) announcement last week from the Ministry of Housing, Communities and Local Government (MHCLG) of an additional £14m to help the Council deal with the costs of Covid; and (iii) that there's a contribution coming in from reserves to reduce the shortfall.

Q.   In response noted that a £13m overspend has been identified of which £5.5m is attributable to what at that time was unfunded Covid costs.  Therefore, the £14.4m that LBTH has now received would eliminate the £5.5m overspend in very broad terms.  However, the Committee was referred back to the amount of sales fees and charges that cannot be recovered which indicated that there would have to be further options to address this although in very broad terms the £14.4m is not only for historical Covid costs but for future expenditures as well. Therefore, whilst it is really welcomed, and it is putting the Council in a better position than before where LBTH has been playing catch up and awaiting income to come retrospectively to fund expenditures. However, the Council now has some money in hand which will enable it to deal with the second wave of the pandemic and that there is the £7.5m which is not related to Covid and is still a component of the Council's base budget overspend and the £14.4m will not assist in that in any way. Accordingly, this will require further action to bring the budget back into line.

R.   Noted that the Secretary of State's statement had indicated that the money is to ensure that the Council has the resources it will need over the winter to address the impact of the pandemics second wave.  However, the pandemic has disrupted the savings programme and the two areas of risk to be considered are (i) not achieving our savings; and (ii) the demographic pressures that the Council are facing in this year.  These pressures are very real and are to do with population growth and the levels of deprivation in LBTH and whilst the Council does not wish to withdraw support from the most vulnerable residents it has to work to bring the budget back into balance.

S.   Commented that this is money over and above what the Council might have been expected from the Government but still leaving a shortfall. Therefore, the deficit for this year is much smaller than was originally projected.

T.    Noted that the impact of the pandemic on Council Tax/Business Rates is not included in the report and is not yet clear.  Also, the way that the Government has given LBTH more money makes it very hard to plan because how the sums of money are received. Then there will be another announcement and there will be another sum of money that does not relate to how much money that has already been received and it is very difficult to work with such uncertainty at the time of a pandemic.

In conclusion, the Chair thanked Councillor Candida Ronald (Cabinet Member for Resources and the Voluntary Sector); Neville Murton (Corporate Director, Resources); and Kevin Bartle (Interim Divisional Director of Finance, Procurement and Audit) for their presentation

The Chair the Moved and it was:

RESOLVED that:

The Committee would require as part of the budget process in the next quarter a detailed breakdown of the:

1. Covid costs;
2. Recovery plans versus population vulnerability; and
3. What costs will not be reimbursed by Central Government.