Minutes

The Minutes of the Meeting of the Financial Policy Panel held on 7 July 2015 were agreed as a true record and signed by the Chairman.

No declarations of interest were made by Councillors regarding items on the agenda.

The Panel received and considered a report which updated the financial forecast, recommended financial targets for preparing the draft budget for 2016/17 and the approach to financial planning for 2017-20.

The Panel was reminded of the wider context in which the Council was planning its finances.  The Council had seen a significant cut in government funding, (its core grant had been reduced by £1.9m over the last five years), whilst the impact of benefit reforms had seen the Council’s homelessness costs increase from £143K in 2010/11 to a budgeted £816K for 2015/16.  Interest rates were at historic lows: in 2007/08 (before the banking crisis), base rates were at 5% and the Council generated £1.25m from its investments to pay for services.  At the date of this meeting, interest rates were at 0.5% and the Council had budgeted to receive £200k to fund services.  It was therefore becoming an increasingly tough fiscal environment. 

The level of general reserve at the start of 2015/16 stood at £3.3m.  With the budgeted use of £230k of general fund reserves to fund services, this would bring the balance down to £3.1m.  The Council’s policy was to maintain a minimum working balance of £2.5m (which was comparable with that held by other local authorities and considered a prudent level). However, 2015/16 was already proving to be challenging and it was likely that the Council would need to draw down more of its reserves to fund its homelessness obligations which had increased sharply in the first quarter and this remained a significant financial risk.

Strategic Reserves had increased slightly in 2015/16 to £7.2m but this increase took into account New Homes Bonus grant and the Council had committed to spend £1.3m of these reserves this year.

The latest forecast budget deficit for 2016/17 (before savings) was £850k, based on the following assumptions:

·         A Council Tax increase of 2% (1% = £55K);

·         An increase in annual yield from fees and charges of 3%;

·         An increase in the Council’s pay bill of 2.1% (1.5% inflation and 0.6% progression);

·         Inflation of 2% on expenditure;

·         Use of £500k of New Homes Bonus to finance services.

The Council had forecast receipt of a total New Homes Bonus grant of £2m in 2016/17.  Indications were that this stream of funding would continue but it remained uncertain as to how and at what level it may be awarded for 2016/17 onwards.  Therefore, at odds with a number of authorities, this Council had taken the decision not to heavily rely on this funding stream to finance service delivery.

The Head of Financial Services also highlighted that additional employer pension contributions of £133k were included in the forecast deficit figure as well as £150k for works to council property and £100k for additional homelessness costs.

Thus, although there remained uncertainties in the forecast, not in the least the level of government funding, the current position suggested that if the Council wanted to deliver a balanced budget for 2016/17 it would still need to identify savings of  ...  view the full minutes text for item 13.