FOR GENERAL RELEASE
1.
PURPOSE OF REPORT AND POLICY CONTEXT:
1.1
This report provides a budget planning and resource update in
preparation for the start of the 2022/23 annual budget setting process and in
the context of the ongoing pandemic. This inevitably makes cost, income and
funding projections very challenging given the unknown extent of pandemic
financial impacts locally, and in the absence of any multi-year government
funding announcements for local government which may also be affected by the
impact on national finances. The lack of clarity regarding the long term
funding of Adult Social Care is also of significance to financial planning.
1.2
In this situation, as last year, the council will need to consider a
range of potential planning scenarios by considering best, midpoint and worst
case scenarios for costs, funding and incomes, including taxation revenues.
However, even this is unlikely to cover all potential outcomes which then
brings into consideration the appropriate level of reserves and balances required
to maintain financial resilience and sustainability over the medium term.
1.3
Even though government funding information is not yet available and
there is great uncertainty in the planning assumptions for the 2022/23 budget,
good practice suggests that the council should attempt to look further ahead
and draw up a Medium Term Financial Strategy (MTFS) covering at least a 3-year
period to 2024/25. Although uncertain, this can at least provide a high level
indication of how costs and resources may change and enables consideration of whether
or not this provides opportunities to strategically manage finances across the
whole period.
2.
RECOMMENDATIONS:
The Policy &
Resources Committee is recommended to:
2.1
Note the funding and net expenditure projections for 2022/23, based on the
three planning scenarios.
2.2
Note the Medium Term Financial Strategy (MTFS) projections for 2022/23
to 2024/25 and the predicted budget gaps based on a ‘midpoint’ planning
scenario.
2.3
Note the proposed approach to planning for and managing specified
demand-led budgets.
2.4
Agree that officers should draw up 3-year budget strategies, including
associated cost management measures for demand-led services, together with budget
proposals to manage any remaining budget gap across all other services, and
report back with draft budget proposals to the December Policy & Resources
Committee.
3.
MEDIUM TERM BUDGET PLANNING
Financial Impact of the Covid-19
Pandemic
3.1
The pandemic not only increased social care, homelessness, public
health, PPE, coroner and other related emergency response costs but has also
severely impacted the local economy, which has many sectors that are heavily
reliant on visitors to the city. This has in turn resulted in an impact on the
council’s finances due to significant impacts on incomes such as the Brighton
Centre and substantial losses across other fees & charges, particularly
parking charges, penalty notices and commercial property rents.
3.2
Similarly, taxation revenues were affected due to the impact on
businesses and employment, and more people needing financial support such as
Council Tax Reduction. There has also been a slow-down in housing developments
and Council Tax collection rates have been impacted severely. There are similar
impacts in relation to Business Rate growth and collection rates.
3.3
Government emergency funding has largely covered the financial impacts
of Covid-19 in 2020/21 including some cover for taxation losses (Collection
Fund deficits). Further one-off government Covid funding of £11m has been received
for 2021/22 alongside continued compensation for 75% of income losses in
quarter 1, however, it remains to be seen if this will match the extent of the
financial impacts of the pandemic which, for some aspects of council costs and
incomes, could be long-lasting depending on economic recovery. Certain sectors,
for example retail, were already vulnerable prior to the pandemic and this
sector may be further impacted with a correlated impact on business rate
revenues and commercial rent income from the council’s commercial property
portfolio.
Local Financial Planning Context
3.4
Prior to the pandemic, the government issued a one-year financial
settlement for local authorities which was a different approach for 2020/21. Due
to the pandemic, this was followed up with a further one-year Spending Review
settlement for 2021/22 and therefore Local Government still awaits a longer
term, multi-year Spending Review which it will hope to receive in Autumn 2021.
·
Council Tax: £154.5m
·
Fees & Charges for services: £137.1m
·
Business Rates (locally retained share): £66.8m
·
Government Revenue Grant Support: £6.7m
·
Adult Social Care and Better Care Fund Grants £17.2m
The only other significant
funding relates to Section 31 grants. However, these are purely to compensate
local authorities for business rate losses related to government-determined
rate reliefs.
3.6
The continuation of social care grants, including the Better Care Fund,
are clearly critical to the local authority and these are a key element of
funding that local government would prefer to see built into the permanent
funding base alongside recognition of nationally and locally growing social
care demands.
3.7
The detailed Local Government Finance Settlement (LGFS) is not normally
made available until late November or December each year, following autumn
Spending Review announcements, which provides little time to alter financial
planning assumptions before setting the budget and Council Tax level. As a
result, the budget setting process each year should allow flexibility to manage
any adverse fluctuation in the level of announced resources, particularly in
the current situation where there are many unknowns regarding potential
government support for the ongoing impact of the pandemic and Adult Social Care.
This necessarily requires a prudent approach in order to:
(i) keep
risks at an acceptable level and maintain financial resilience and
sustainability;
(ii) minimise
arbitrary, last minute cuts to services to balance the budget; and/or
(iii) avoid
exhausting the authority’s reserves and balances (one-off resources) without
any plan to replenish them.
3.8
This report includes an early assessment of the pressures facing
priority services in terms of increases in costs and demographic growth in
demands, particularly in relation to ‘demand-led’ services for vulnerable adults,
families and children such as social care and homelessness. Alongside
government grant reductions, limitations on the allowable level of council tax
increases, and normal inflationary pressures, these demand-led cost pressures have
been the cause of substantial ‘budget gaps’ that the council has been
experiencing over the last 12 years. The impact of the pandemic may add another
layer of pressures that could exacerbate pressures in 2022/23 and beyond.
·
Public Interest Reports and Statutory Section 114 reports being
issued by External Auditors and Chief Finance Officers (CFOs) respectively. The
latter restricts all spending, bringing with it associated media and
reputational impact as noted recently in the case of Croydon LBC;
·
Related objections to the accounts which must be investigated by
the external auditor;
·
Legal challenges from residents in respect of council decisions,
particularly where urgent cuts have had to be approved to balance the books;
·
Intervention by government in respect of failing services where
they can appoint commissioners to take over whole services, Liverpool being a
recent example;
·
In the severest case, Northamptonshire, direct intervention by
government has resulted in the dissolution of the authority and creation of two
new unitary authorities from April 2021.
In their annual reviews, external auditors are
therefore increasingly concerned with local authorities’ arrangements for securing
value for money which includes demonstrating financial resilience and
sustainability, and providing evidence of effective medium term planning. In
the current context, External Auditors will be looking closely at authorities’
plans and approaches for managing the impacts of the pandemic and their remit
for assessing Value for Money has accordingly been strengthened for the 2020/21
audit onward.
Reserves & Balances
3.10
In this context, the council’s available reserves and balances are an
important indicator of the council’s financial resilience and ability to manage
unexpected financial impacts. Available reserves and balances are those that
are cash-backed and are not due to be drawn down for at least one year. This
excludes balances held by the Housing Revenue Account and Schools which are not
available to the General Fund. Levels are currently as follows:
·
Working Balance £9m – this is a permanent risk reserve and
therefore any use must be accompanied by a plan for replenishment;
·
Earmarked reserves £33m – Earmarked reserves are committed against
an approved scheme or expense. Many are held against contractual commitments
(e.g. PFI contracts) or are risk provisions (e.g. Self-Insurance Fund) and must
be replenished if used. Some are held against regeneration projects (e.g. New
England House, Brighton Centre/Waterfront development, etc) and are linked to match
funding from the LEP or other government funds. Many are held against future
risks or commitments and would therefore need to be replenished.
The Chartered Institute of Public Finance & Accountancy
(CIPFA) has generated a ‘Resilience Index’ covering a wide range of financial
indicators that can provide an insight into the financial health of an
authority. The level of reserves as a proportion of the net budget is one such
measure. BHCC ranks 12th lowest out of 15 ‘nearest neighbour’
authorities which are selected for their similar demographic and financial
characteristics (they are not geographical neighbours). BHCC’s reserves, in
2019/20, were shown to be 19% of net budget. The range of the comparator group
is 67% to 15% and the average is 43%.
A more detailed analysis of the council’s reserves
and balances as at 31 March 2021 is provided in the Targeted Budget Management
(TBM) Provisional Outturn report also on this committee agenda.
2022/23 Budget Planning Scenarios
Table: Planning
Scenarios 2022/23
Cost, Income & Taxation Scenario
|
Scenario
Description/Assumption
|
Worst Case
|
Slow economic
recovery. Council Tax Reduction caseload remains above long-term trend.
Council Tax base and collection rates remain suppressed well into 2022/23.
Higher rate of business failures continue while visitor numbers only recover
slowly. Cost pressures across demand-led services such as Adult Social Care
and Homelessness remain at higher levels. Fees & Charges such as property
rent incomes remain suppressed.
|
Midpoint Case
|
Economic
recovery starts slow but steadily gathers pace. Council Tax Reduction
caseload steadily reduces. Moderate impact on Council Tax base and collection
rate. Business failures are apparent, but business start-ups and recovery also
begin. Steady recovery of visitor numbers. In-roads begin to be made into
cost pressures across demand-led services but they remain at elevated levels
of demand. Fees & Charges and property rents begin to recover to normal
levels after the first quarter.
|
Best Case
|
Economy
‘bounces’ back relatively quickly once fully out of lockdown. Council Tax
Reduction caseload falls quickly as employment increases. Limited, short term
impact on the Council Tax base and collection rates. Business failures are
significantly offset by start-ups or recovery. Visitor numbers also recover
quickly and may even improve due to ‘staycationing’. Significant
stabilisation and mitigation of demand-led cost pressures is achievable. Fees
& Charges and property rents recover to normal levels after first quarter.
|
Grant Funding Scenarios
|
Assumptions
|
Worst
|
A low level of
funding due to the impact of the pandemic on national finances and debt could
look as follows:
-
Ongoing COVID-19 impact funding of £2.0m
-
Adult Social Care grant of £1.0m
- Troubled Families
funding withdrawn
-
Additional
Homelessness funding of £0.5m
|
Midpoint
|
A level of
funding broadly similar to a ‘rolled-forward Spending Review’ might look as
follows:
-
Ongoing COVID-19 impact funding of £3.0m
-
Adult Social Care grant of £2.0m
-
Troubled Families funding continues (worth £0.9m)
-
Additional Homelessness funding of £1.0m
|
Best
|
An improved
level of funding, particularly for Adult Social Care, and greater recognition
of ongoing pandemic impacts could look as follows:
-
Ongoing COVID-19 impact funding of £5.0m
-
Adult Social Care grant of £2.5m
-
Troubled Families funding continues (worth £0.9m)
-
Additional Homelessness funding of £1.5m
|
3.12
There will be variants of these scenarios in between but these serve to illustrate
the expected range of possible outcomes from worst to best case for all
elements of the council’s budget and funding.
3.13
In terms of additional funding support, the level of support and the
form it may take are unknown. However, the government has not made clear its
intentions regarding the long term funding of Adult Social Care which presents
a significant risk. In 2021/22, this was partially mitigated by increasing
local taxation through a 3% Adult Social Care precept. However, this precept
was over a 2-year period and therefore, unless government revisits this mechanism,
this council will not be able to levy a further Adult Social Care precept in
2022/23. The council will therefore be reliant on increased government grant
support for Adult Social Care.
3.15
For planning purposes, it is recommended to use the ‘Midpoint’ case to
develop budget proposals but with consideration of options to meet a worst case
scenario also given, as far as practicably possible. Using the Midpoint
scenario strikes a reasonable balance for planning purposes, with a less
favourable outcome potentially being managed through increased reserve use in
the short term (‘financial smoothing’).
Addressing Budget Shortfalls (Gaps)
3.16
The difference (shortfall) between the estimated costs, demands and
funding pressures that the council identifies compared to estimated increases
in taxation incomes is termed the Budget Gap. The budget gap can be closed by
identifying savings, generating increased income or funding, or developing cost
avoidance measures.
3.17
In summary, the broad options or possibilities for closing any projected
budget gaps are as follows:
(i) Government
may provide increased funding (compared to the level assumed) through the Local
Government Financial Settlement. Potential grant funding for Adult Social Care
and Covid-19 are examples discussed above;
(ii) The
council could elect to increase Council Tax above the current ‘excessive
council tax increase threshold’ (i.e. above 1.99%). However, under current
regulations this would require a local referendum to be held with a successful
outcome, and in itself creates a cost of approximately £0.375m to hold a
referendum and requires identification of one-off resources to mitigate the
delay in implementing proposals while the outcome is awaited;
(iii) Partners
could provide increased funding for joint operations e.g. CCG funding toward
social care costs. However, the CCG has reduced funding support in previous
years because it is also under increasing financial pressure. Other partners
are small by comparison;
(iv) There may be
improvements in the projected level of cost, income and/or demand pressures to
be prioritised in the current estimates;
(v) The
council develops budget strategies across its major service directorates
including identification of potential savings and cost management measures to
either reduce costs in non-priority areas, manage down pressures in demand-led
areas (e.g. through prevention, commissioning and intervention strategies), generate
greater incomes from fees, charges or property rents; or develop strategies to attract
alternative funding.
3.18
Options (i) to (iv) above carry a high level of uncertainty and therefore
the authority will normally need to develop budget strategies and proposals as
described in (v) above. In the case of a Council Tax Referendum, it is a legal
requirement to have a substitute budget should a referendum not be successful.
Budget Strategies to support the Corporate Plan
3.19
The 2021/22 General Fund budget was set in the context of the council’s
Corporate Plan ‘A fairer city, a sustainable future’. The budget, approved in
February 2021, included approximately £22m in support of Corporate Plan priority
areas, including provision for key demand-led services.
3.20
Budget planning also needs to continually keep under review current
budget strategies to ensure they remain fully aligned with the implications and
priorities set out in the Corporate Plan. Some current income sources may, for
example, be impacted in future by carbon reduction initiatives, while
traditional procurement economies may be impacted by Community Wealth Building or
Social Value initiatives. Conversely, Corporate Plan objectives could bring new
revenues, for example, through investment in infrastructure for electric
vehicles. The impact of the pandemic makes it more important to test out these
strategies given the higher level of financial risks that the pandemic has
exposed.
3.21
In 2021/22 the budget also provided significant investment for Corporate
Plan priorities including carbon reduction investment to support the Carbon
Neutral Programme. Almost £1.5m recurrent funding was identified to support various
Corporate Plan priorities together with £1m one-off funding and over £14m
capital investment, including significant investment in the Sustainable Carbon
Reduction (SCRIF) and Warmer Homes initiatives. The Medium Term Financial
Strategy assumes a continued need to invest in Corporate Plan priorities,
particularly in support of the Carbon Neutral Programme for which £0.5m has
been set aside which can either be used to support revenue costs or provide
capital financing support. The level of investment in future years will need to
take into account the level of funding and support from central government
through green finance, natural capital and other programmes. Similarly,
provision of £0.5m has been included to support a range of other priorities set
out in the Corporate Plan.
3.22
The major service directorates developed Budget Strategies for 2021/22
which remain current but will be updated for 2022/23 and the medium term. The
budget strategies identify the longer term direction of travel of services, the
approach to the commissioning and delivery of services, the alignment of budget
strategies with the council’s Corporate Plan priorities, proposals and
strategies for managing demand-led budgets, and proposals for achieving cost
savings or increased income to help address budget gaps.
3.23
Based on the experience of recent years’ budget setting processes, a
different approach to financial planning for priority demand-led services is
proposed for 2022/23. In the past, these services have traditionally identified
very substantial demographic and cost driven budget pressures, for example, in
2021/22 the budget pressure identified was £19.1m across demand-led services.
In common with previous years, this was a key driver of the overall budget gap
in 2021/22 requiring savings of £10.644m to close the gap and achieve a
balanced budget. However, in the event, over £5m of these ‘savings’ were
related to managing costs in demand-led budget areas. A review of the process
indicates that it is not technically correct to regard these as ‘savings’ proposals
because they are effectively ever-ongoing measures to manage limited resources by
continually evolving and developing commissioning, prevention and intervention
strategies that are designed to improve cost management over the medium term.
3.24
For 2022/23, specified demand-led budgets will therefore present a forecast
cost pressure scenario together with a forecast of the potential cost management
achievable through Budget Strategies aimed at continually improving commissioning,
contracting, prevention, intervention, care plans and pathways, joint working
with partners (e.g. Health) and so on. The services to be presented in this way
will be:
·
Adult Social Care
·
Adult Learning Disability Services
·
Children’s Social Care including Disability Services
·
Homelessness and Rough Sleeping
·
Home to School Transport
This will not include the
associated administrative, assessment, commissioning or contract management
functions within these areas. It will only relate to the demand-led budgets
managed by these services.
2022/23 Scenario Projections
3.25
The table below sets out the costs, losses and investment requirements
under the three scenarios outlined in paragraph 3.11
above.
Table: Investments, Cost Pressures & Tax Base
Scenarios 2022/23
|
Budget Area
|
Worst Case
|
Midpoint
Case
|
Best
Case
|
|
£m
|
£m
|
£m
|
|
Net Demand-Led & Other
Cost Pressures:
|
|
|
|
|
Increase in Budget Requirement
2022/23 (see Appendix 1)
|
15.030
|
15.030
|
15.030
|
|
2021/22 excess pay award cost
|
2.350
|
1.680
|
1.680
|
|
Demand
lead Service pressures
|
|
|
|
|
·
Adult
Social Care
|
4.800
|
4.000
|
3.000
|
|
·
Adult
Learning Disabilities
|
2.500
|
2.000
|
1.800
|
|
·
Looked
After Children/Care Leavers
|
3.000
|
2.400
|
1.500
|
|
·
Loss
of Troubled families funding
|
0.950
|
0.000
|
0000
|
|
·
Temporary
accommodation/rough sleeping
|
4.200
|
2.500
|
2.000
|
|
·
Home
to School Transport
|
0.500
|
0.200
|
0.200
|
|
Illustrative cost management through application of budget
strategies (Appendix 3)
|
-4.950
|
-5.100
|
-5.700
|
|
All other services – recurrent pressures
|
1.500
|
1.000
|
0.800
|
|
Orbis net disaggregation pressure
|
0.700
|
0.500
|
0.400
|
|
Carbon Neutral Investment
|
0.500
|
0.500
|
0.500
|
|
Corporate Plan priorities
|
0.500
|
0.500
|
0.500
|
|
Potential one off pressures
|
|
|
|
|
Covid impact on commercial
income
|
0.600
|
0.400
|
0.150
|
|
Covid impact on other income
|
1.500
|
1.000
|
0.500
|
|
Covid impact on Supported Bus
routes
|
0.400
|
0.300
|
0.200
|
|
Ash dieback/Elm Disease
|
0.600
|
0.500
|
0.500
|
|
Net Demand-Led & Other Cost Pressures
|
34.680
|
27.410
|
23.060
|
3.26
The scenarios above indicate net Demand-Led and other cost pressures in
the range of £34.680m to £23.060m. Similarly, potential funding scenarios are
given below based on assumptions described in paragraph 3.11
above.
Table:
Funding Scenarios 2022/23
|
Funding Scenarios
|
Worst
Case
|
Midpoint
Case
|
Best
Case
|
|
£m
|
£m
|
£m
|
|
Council Tax – change in tax base
|
1.000
|
1.950
|
2.500
|
|
Council Tax - increase at 1.99%
|
3.090
|
3.110
|
3.120
|
|
Council Tax – Adult Social Care
precept
|
0.000
|
0.000
|
0.000
|
|
Business Rates – change in tax
base
|
0.000
|
0.610
|
0.900
|
|
Business Rates – inflation
increase(CPI)
|
0.610
|
0.610
|
1.100
|
|
ASC funding
|
1.000
|
2.000
|
2.500
|
|
Covid-19 ongoing impact funding
|
2.000
|
3.000
|
5.000
|
|
Additional homelessness/Rough
sleeping funding
|
0.500
|
1.000
|
1.500
|
|
Use of reserves/financial smoothing for one off pressures
identified above
|
3.100
|
2.200
|
1.350
|
|
Total Funding Assumptions
|
11.300
|
14.480
|
17.970
|
3.27
Combining the projected net cost pressure and funding/taxation scenarios
illustrates the range of potential budget gaps as set out in the table below
which can be considered for financial planning purposes. This provides the
committee with a sense of the range of risks that the council may need to
consider, particularly in the case where costs continue to escalate, recovery
is slow, and any funding settlement from government is at the lower end.
Table:
Range of Potential Budget Gaps 2022/23
|
Cost & Income Pressures Scenario:
|
Worst
|
Midpoint
|
Best
|
|
Aligned with:
|
£m
|
£m
|
£m
|
|
Worst Funding/Taxation Levels
|
23.380
|
16.110
|
11.760
|
|
Midpoint Funding/Taxation
Levels
|
20.200
|
12.930
|
8.580
|
|
Best Funding/Taxation Levels
|
16.710
|
9.440
|
5.090
|
3.28
The table above shows the complexity of planning in the current
environment where there is uncertainty over almost every aspect of the
council’s budget from inflation, demographic changes and Covid-19 impacts to
tax base recovery and grant funding levels. The table indicates a range of
potential budget gaps in 2022/23 from £23.380m at worst down to £5.090m at best.
However, this assumes that one-off pressures relating to Covid-19/Tree Dieback and
the spreading of the Collection Fund deficits over a 3-year period can be
resourced from reserves (i.e. further Financial Smoothing) or other one-off
resources for 2022/23.
3.29
Planning on the basis of all elements being at the Best or most
optimistic level would be a high risk strategy, while planning for the Worst or
least optimistic scenario would mean undertaking substantial additional work to
identify and plan for savings or cuts that may never be required. The Midpoint
therefore represents the most sensible balance for planning purposes at this
stage of the process. However, it must be remembered that all estimates are
very early in the process and are subject to change as they are reviewed and
updated throughout the budget process. In particular, cost management
assumptions for demand-led budgets are inextricably linked to the concomitant
service pressure estimates. At this stage broad, illustrative assumptions have
been made based on previous cost management achieved in these areas, tempered
for the lower scale of pressures and the impact of the pandemic.
3.30
Using the Midpoint cost and funding level indicates a potential budget
gap of £12.930m which is after allowing for cost management improvements of £5.100m
for the key demand-led service areas as set out above and in Appendix 3. The
budget gap would therefore need to be addressed by identifying savings across
all other service areas excluding demand-led budgets, informed by Corporate
Plan and member priorities.
Medium
Term Financial Strategy Update 2022/23 to 2024/25
·
1.99% Council Tax increases;
·
Midpoint scenario for net reductions in tax bases;
·
Midpoint scenario for government funding assumptions;
·
1.5% pay awards;
·
1.5% income budget uplifts;
·
2.00% Social care third part payments
·
0.75% to 1.00% non-pay budget cash limits;
·
1.00% assumed inflation rate for Business Rate uplifts;
·
Continued investment in priority demand-led services and Corporate
Plan priorities;
·
Repayment of reserves & balances used for COVID-19 over a 10
year period.
Table:
Indicative Medium Term Financial Strategy
|
Summary MTFS and Budget Gaps
|
2022/23
|
2023/24
|
2024/25
|
|
£m
|
£m
|
£m
|
|
Commitments (from previous decisions)
|
1.704
|
1.078
|
3.637
|
|
Provision for grant reduction/ending
|
8.023
|
4.000
|
0.000
|
|
Net Inflation (on Pay, Prices, Income, Pensions)
|
5.303
|
4.876
|
5.535
|
|
Subtotal
|
15.030
|
9.954
|
9.172
|
|
Net Investment in priority services and Corporate Plan
priorities
|
10.180
|
5.150
|
5.000
|
|
New grant funding assumed
|
-6.000
|
-1.000
|
-1.000
|
|
Projected Net Tax Base changes
|
-6.280
|
-5.679
|
-8.560
|
|
Predicted Budget Gaps
|
12.930
|
8.425
|
4.612
|
3.32
The MTFS projections could be affected by a wide range of factors,
including pandemic impacts, as follows:
·
Higher or lower demands and cost pressures than projected;
·
Higher or lower cost management improvements in demand-led areas;
·
Higher or lower tax base movements;
·
Movements in pay or general inflation;
·
More or less favourable government grant settlements;
·
Potential impact of changes to the ‘excessive council tax’
capping rules and/or precepting;
·
Changes in interest rates (impacts on financing budget); and
·
Actuarial changes to employers’ LG pension contributions.
Many of these can have significant impacts on MTFS projections
in either direction.
3.33
Based on the analysis above, which includes many unknowns and broad
estimates, it is recommended to instruct the Executive Leadership Team (ELT) to
develop options to address budget gaps over the MTFS period 2022/23 to 2024/25
based on a Midpoint cost and funding scenario for all years. Consideration
should also be given to strategies for managing higher potential budget gaps to
avoid emergency or arbitrary decisions being required late in the budget
process.
3.34
The Committee will note that the projected budget gap in 2022/23 is very
substantial and this presents severe challenges following large savings targets
over many years. The council will therefore need to clearly prioritise services
and investment, balancing its duties in relation to statutory service provision
with discretionary and/or universal service provision and priority areas for
investment and support.
General Fund
5 Year
Capital Investment Programme
4.1
The Capital Strategy was approved at Budget Council in February 2021
along with scheme-by-scheme capital programme estimates that were incorporated
into the council’s Budget Book. The aim of the Capital Strategy is to ensure
that all members on the full Council can understand and determine the overall
long-term policy objectives and resulting capital strategy requirements,
governance procedures and risk appetite of the council. The capital expenditure
estimates incorporate planned rolling investment programmes alongside major
infrastructure, housing and sustainability schemes.
Rolling
programmes
4.2
The majority of the council’s capital investment is within rolling
programmes. The key programmes are as follows:
·
Investment in maintaining and improving the Council Housing Stock
through the Housing Revenue Account;
·
The Education Capital programme provides investment from central
government which includes New Pupil Places, Education Capital Maintenance and Devolved
Formula Capital for schools;
·
Disabled Facilities Grants;
·
The Local Transport Plan (LTP) covering a wide range of
transport-related schemes;
·
The Information, Technology & Digital Investment Fund to
maintain and upgrade the council’s infrastructure and IT architecture;
·
The Asset Management Fund (AMF) to maintain operational buildings,
improve sustainability and reduce long term maintenance costs;
·
Corporate Planned Maintenance (PMB) to undertake planned works
and upgrades;
·
The Strategic Investment Fund (SIF) to provide project support
for major regeneration programmes;
·
Vehicle and plant replacement annual programme.
4.3
The current strategy identifies longer term capital investment plans as
well as a funding strategy and the potential outcomes for each investment plan.
This strategy includes major investment requirements such as investment in the
seafront infrastructure and partnership investment through major projects such
as Valley Gardens, Preston Barracks, Brighton Waterfront, New Homes for
Neighbourhoods, the Home Purchase scheme, the Housing Joint Venture, Heritage
Lottery Fund bids such as the Stanmer Park Master Plan and the Royal Pavilion
Estates Regeneration, and plans for investment into the seafront infrastructure
at Madeira Terrace.
4.4
Government funding through the City Deal has been received to support
the development of Longley Industrial Estate including the refurbishment and
expansion of New England House. Local Growth Fund (LGF) grants have been
approved from the Coast to Capital Local Enterprise Partnership (C2C LEP) to
support the Brighton Waterfront and Valley Gardens Phase 3 projects. Other
schemes which are substantially complete include Preston Barracks Central
Research Laboratory, and the Circus Street Redevelopment. Longer term
investment for coast protection is also incorporated into the 5 year strategy
which includes potential government match-funding.
4.5
Capital receipts from the sale of surplus land and buildings support the
capital programme and the projections are regularly reviewed. The council will
continue with its strategy of re-balancing the property portfolio by disposing
of low or non-performing commercial properties and reinvesting in more viable
property investments. This ensures costs can be minimised and rental growth optimised
to ensure best value is achieved. However, this is now considerably more
challenging as borrowing from the PWLB is now prohibited for commercial
property investment. Capital receipts are generally under severe pressure due
to competing demands and there are significant calls on receipts to support the
following objectives:
·
Funding of annual investment funds such as the SIF and AMF
referred to above;
·
Rebalancing of the commercial property portfolio;
·
Additional capital investment towards achievement of carbon
neutral 2030;
·
Support for accelerating housing supply schemes; and
·
Funding of the Modernisation Fund which supports implementation
of savings and improvement programmes (see below).
Modernisation
& Enabling Investment
4.7
The Modernisation Fund will be kept under review as budget plans develop
and spend-to-save opportunities and investment requirements emerge in more
detail.
|
Table 6: Modernisation Fund
(Indicative Profile)
|
|
Programme Area
|
2020/21
|
2021/22
|
2022/23
|
2023/24
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Invest to Save (4-Year Plans)
|
0.650
|
0.550
|
0.450
|
0.350
|
2.000
|
|
Customer Digital
|
1.750
|
1.750
|
1.550
|
1.050
|
6.100
|
|
Modernisation enablers
|
1.510
|
0.920
|
0.930
|
0.940
|
4.300
|
|
Managing staffing changes
|
0.700
|
0.500
|
0.400
|
0.400
|
2.000
|
|
IT Modernisation Investment
|
0.800
|
0.300
|
0.000
|
0.000
|
1.100
|
|
Total
|
5.410
|
4.020
|
3.330
|
2.740
|
15.500
|
The current elements of the Modernisation Fund are
as follows:
4.8
Customer Digital: The council’s Digital programme initially concentrated
on developing the digital infrastructure and providing the web design and
content management applications and tools necessary to develop digital
services. In the last two years there has been development of a significant
number of digital services and ‘apps’, particularly driven by the pandemic
where digital access became critical to ensure accessibility and continuity of
service. Digital forms, apps and services can enable enhanced data management
and a better customer experience. Digital developments enabled thousands of
businesses to apply on-line and access Covid-19 business grants during the
pandemic.
4.9
Modernisation Enablers: This investment covers project teams and
staffing necessary to support service directorates in the delivery of large
savings and improvement programmes. This includes Project & Programme
Managers (PMO), Business Improvement analysts and ‘Workstyles’ project staff,
as well as investment in the People Promise, internal communications and change
management. This resource has become more critical during the pandemic where
staff providing day-to-day services have very limited capacity to support
improvement programmes.
4.10
Invest-to-Save (4-Year Plans): These investments cover direct
investment by services to enable them to achieve planned savings and improvements.
This can include commissioning expert advice or professional services,
providing temporary additional capacity, or investing in equipment, training
& development and systems developments to support service changes.
Investments must be supported by Business Cases which are considered and
scrutinised by the Corporate Modernisation Delivery Board (CMDB) chaired by the
Chief Executive. The use of the resources also needs to be reviewed in the
light of the pandemic and where possible used to help services modernise and
achieve cost reductions as a further aid to achieving financial sustainability.
4.11
Managing Staffing Changes: Many savings measures will involve
service redesign or modernisation (e.g. becoming more digital) that may have an
impact on staffing requirements. This is normal within local authorities as
they strive to improve value for money as part of their Best Value duty under
the Local Government Act 1999 and as part of their budget strategies. Managing
change often requires seeking voluntary redundancy or supporting redeployment
as a way of managing the process and this requires funding to meet redundancy
costs and potential pension strain costs.
4.12
The Modernisation Fund is currently managed by the Corporate
Modernisation Delivery Board (CMDB) chaired by the Chief Executive and
including Executive Directors and the CFO. Decisions regarding the detailed use
of the Modernisation Fund are governed according to Financial Regulations, and
Committee and Officer delegations set out in the Constitution. Larger
investment decisions, above £0.500m, are reported to Policy & Resources
Committee as these are outside of officer delegations. Decisions leading to
investment in capital assets are also be reported to Policy & Resources
Committee either as a separate report or through the capital appendices of
Targeted Budget Management (TBM) reports.
HRA Capital Programme
4.13
The capital investment plan for the HRA is mainly funded from direct
revenue funding from tenants’ rents (and associated rent rebates) as well as
the use of retained capital receipts from Right to Buy sales and borrowing for
investment in new affordable homes.
4.14
The capital investment programme for 2021/22-2023/24 is informed by the
stock review and survey and the new HRA Asset Management Strategy 2021-2025. A
key consideration will be the investment needed to fulfil the new health and
safety requirements as a result of new Government safety guidelines in light of
the Grenfell Tower fire.
4.15
The HRA continues to look at the range of initiatives it has to deliver
additional housing and meet the Housing Committee Work Plan priority commitment
to deliver 800 additional council homes by 2023. These initiatives include the
New Homes for Neighbourhoods Programme, Home Purchase Scheme and Converting
Spaces programmes.
4.16
Work will continue through 2021/22 to delivery housing supply pipeline
schemes. The Home Purchase Scheme will continue to explore opportunities to buy
back ex-right to buy properties to increase the supply of affordable housing
within the HRA.
4.17
The budget for new homes 2022/23 will need to consider the resources
required to support this level of delivery both in terms of capital resources
available for building and purchasing of new homes and the revenue resources
required to support this work.
5.
TIMETABLE
5.1
The suggested timetable for developing and approving the 2022/23 budget
is given below. However, the timetable may need to flex depending on the timing
of government announcements or in response to a dramatically changing in-year
situation. The timetable is in outline only and does not include all aspects of
member involvement or wider consultation that may need to be undertaken
including with staff, unions, partners, service users and residents.
Table: Outline General Fund Budget Planning Timetable
|
Date
|
Who
|
What
|
|
1 July 2021
|
P&R Committee
|
2020/21 TBM Provisional Outturn
2021/22 TBM Month 2 (May)
General Fund Budget Planning & Resource Update
|
|
July – Oct
|
ELT
|
Develops Budget Strategies and budget proposals to address
budget gaps for 2022/23 to 2024/25 alongside developing Equality Impact
Assessments
|
|
7 Oct 2021
|
P&R Committee
|
TBM month 5 (August)
Council Tax Reduction Scheme Review 2022/23
|
|
21 Oct 2021
|
Council
|
Approves Council Tax Reduction Scheme 2022/23
|
|
Oct/Nov
|
Government
|
Likely Spending Review 2021 Announcement
|
|
2 Dec 2021
|
P&R
|
General Fund Revenue Budget Update 2022/23 including draft
Budget Strategies, budget proposals and Equality Impact Assessments.
TBM month 7 (October)
|
|
December
|
Government
|
Provisional Local Government Finance Settlement
|
|
December
|
ELT
|
Consultation process begins on draft 2022/23 budget
proposals including staff, unions, partners and residents
|
|
27 Jan 2022
|
P&R
|
Council Tax Base
Business Rates tax base
|
|
February
|
Government
|
Final Local Government Financial Settlement
|
|
10 Feb 2022
|
P&R
|
2022/23 General Fund and HRA Revenue & Capital Budget
reports including the Capital and Treasury Management strategies
TBM month 9 (December)
|
|
24 Feb 2022
|
Budget Council
|
2022/23 General Fund and HRA Revenue & Capital Budget
reports
|
6.
ANALYSIS & CONSIDERATION OF ANY ALTERNATIVE OPTIONS
6.1
The budget process allows all parties to engage in the examination of
budget proposals and put forward viable alternative budget and council tax
proposals, including through amendments, to Budget Council on 24 February 2022.
Budget Council has the opportunity to debate the proposals put forward by the Policy
& Resources Committee at the same time as any viable alternative proposals.
7.
COMMUNITY ENGAGEMENT AND CONSULTATION
7.1
No specific consultation has been undertaken in relation to this report.
8.
CONCLUSION
8.1
The council is under a statutory duty to set its budget and council tax
before 11 March each year. This report sets out information on projected costs,
investments and resources for 2022/23 to 2024/25. It also provides an outline timetable
for considering options to develop the 2022/23 budget.
9.
FINANCIAL & OTHER IMPLICATIONS:
Financial Implications:
9.1
These are contained in the body and appendices of the report.
Finance
Officer Consulted: James Hengeveld Date: 21/06/21
Legal Implications:
9.2
The process of formulating a plan or strategy for the council’s revenue
and capital budgets is part of the remit of the Policy & Resources
Committee. The recommendations in section 2 above are therefore proper to be
considered and, if appropriate, approved by it.
9.3
This report complies with the council’s process for developing the
budget framework, in accordance with Part 7.2 of the Constitution.
Lawyer
Consulted: Elizabeth Culbert Date:23/06/21
Equalities Implications:
9.4
For any significant budget changes proposed in 2022/23, it is proposed
to use the council’s well-established screening process to develop Equality
Impact Assessments (EIAs). Key stakeholders and groups will be engaged in
developing EIAs but we will also need to consider how Members and Partners can
be kept informed of EIA development and the screening process. In addition,
where possible and proportionate to the decision being taken, there may be a
need to assess the cumulative impact of the council’s decision-making on
individuals and groups affected in the light of funding pressures across the
public and/or third sectors. The process will ensure that consideration is
given to the economic impact of proposals.
Sustainability Implications
9.5
The council’s revenue and capital budgets will be developed with
sustainability as a key consideration to ensure that, wherever possible,
proposals can contribute to reducing environmental impacts and support progress
toward a carbon-neutral city.
Risk and Opportunity Management Implications:
9.6
There are a range of risks relating to the council’s short and medium
term budget strategy including the ongoing impact of the pandemic, ongoing economic
conditions (e.g. the changing shape of high street retail), changes in the
national budget, pressures on existing budgets, further potential reductions in
grants, legislative change or demands for new spending. The budget process will
normally include recognition of these risks and identify potential options for
their mitigation. In the current unprecedented situation, the level of risk
that the council may be prepared to carry is likely to be higher than in normal
circumstances.
9.7
Key factors (risks) for projecting the savings requirements for 2022/23
and future years will be taken into consideration including:
·
An assessment of how robust and deliverable the savings that come
forward are in the context of current demands, economic conditions, changing
needs and the ongoing impact of the pandemic;
·
The accuracy with which tax base estimates and other assumptions,
particularly the level of business rate appeals, can be made;
·
The continuing impact of Welfare Reform changes such as Universal
Credit e.g. on Temporary Accommodation (homelessness), in particular, the
ongoing impact of the application of the Benefit Cap and the pandemic;
·
The impact of economic conditions e.g. property price rises have
been impacting on temporary accommodation costs and care home provision and
availability. Also, the buoyancy of many income streams can be affected by
economic conditions e.g. commercial rents. This is now potentially more
volatile both as a result of the pandemic and as ‘Brexit’ progresses, although
the full impact of these may not be known for some time;
·
The impact of demographic and other changes e.g. immigration,
public health issues (e.g. obesity), drug improvements (e.g. treating
dementia), increasing longevity with health conditions, etc.
SUPPORTING
DOCUMENTATION
Appendices:
1.
Medium
Term Financial Strategy Assumptions and Projections
2.
Resources
Update
3.
Demand-Led
Budget Projections
Documents
in Members’ Rooms
None
Background Documents
None