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Elmbridge Council Budget 2020/2021 – £1m Shortfall

Elmbridge Council Budget 2020/2021 – £1m Shortfall

Last week following the Elmbridge Borough Council Cabinet Meeting in which the 2020/2021 Annual Budget was to be agreed a tweet from Cllr Ruth Mitchell caught our attention…

We got in touch with Cllr Mitchell who informed us that the 2020/2021 Budget presented by the Elmbridge Council Administration (formed of a coalition between the various Residents Association groups and the Elmbridge Liberal Democrats) had a shortfall of around one million pounds with the shortfall being made up from Council reserves.

With a longer term funding shortfall of around £5m over the next 4 years.

The proposal put forward by Cllr Ruth Mitchell was:

“A full review of the Council’s fees, charges and services shall be undertaken in the 20 21 Municipal Year with the objective of eliminating so far as possible the funding gaps on page 17 of the Medium Term Financial Strategy ( as reported to Cabinet on 12 February 2020).”

It’s worth mentioning that this has come to the attention of Elmbridge Borough council’s independent external auditor, they have produced a report which will be discussed at tonights (4th March) Audit and Standards Committee which says:

“However if no savings or additional income were identified as required in the MTFS, these would be used to balance the budget and would be fully utilised within 4 years, in this scenario the Authority would cease to be financially viable within the medium term.”

You can view the full Audit & Standards Committee Public Pack here – External Audit Report can be found from Page 15.

The section of last weeks cabinet meeting which discusses the budget is below – starting with a detailed explanation of the budget from Cllr Chris Sadler – I would recommend you watch to the end (its around 40 minutes) as there are some interesting representations from all 3 groups towards the end.

 

We contacted Cllr Chris Sadler for comment who (in addition to sending us the transcript of his budget presentation which you can see further down) said the following:

“With regard to the budgettted drawdown of £972,000 from reserves, one thing that I feel should be bourne in mind is that these budgets rest on a large number of assumptions across a whole spectrum of activities that the Borough is involved in. These estimates can have a material impact on costs or income, and this tends to show up in the level of revenue reserves.

As an example of how things can change, the estimate for revenue reserves done in January 2018 for the 18/19 Budgets showed reserves at £15.01 million as at end March 2019.  12 months later in January 2019, the estimate for revenue reserves at end March 2019 was £17.959 million. When the Annual Accounts were produced later in 2019, they showed revenue reserves at end March 2019 stood at £21.209 million, over £6 million highs than the original estimate undertaken around 14 months earlier. It seems to me quite possible therefore that by the time financial year 2019/20 is finished the drawdown on reserves will have been eliminated or substantially reduced in size. We need to act prudently given how many uncertainties there are around at the current time.”

Cllr Chris Sadler Budget Presentation:

Comments to Council on Revenue and Capital Budget and Council Tax for 2020/21
26/02/2020

“Before I start, I would like to express my thanks to the Deputy Chief Executive, and the Head of Finance, and all the Finance team who have put these documents together, answered many questions on them, and accomplished this despite all the delays and changes from central government. It is even more of an achievement than usual.

As an indication of the delays experienced, the final House of Commons debate on the Council Referendum rules and the final Annual Financial Settlement only took place on Monday evening – and yes, all the Provisional figures that we had been using were confirmed.

It is my pleasure to present the Revenue and Capital Budgets for the coming year and our recommendations on Council Tax, the Pay Award to Staff, and other related items, including the Medium Term Financial Strategy which takes a longer term look at the Council’s finances. The background to this presentation is that despite the uncertainties and difficulties which we encounter as a shire district Council, we have kept to the promises we made to the electorate in the run-up to the 2019 Elections, as the Leader has just described in his remarks.

Our aim now is to continue these policies and practices into the coming year and accordingly we are proposing a Net Budget of £18.7 million for next year. This figure is up by just over £1 million compared to that presented last year, largely as a result of increased spending pressures of over £2 million, the most significant part of which relates to staff costs including pension costs following on from the Triennial Actuarial Review.

Savings and extra income at just under £600,000 have been difficult to nail down on a sustainable basis given all the uncertainties at the national and international level. The net impact of all this is that our gross drawdown of reserves is budgeted at £972,000, compared to £436,000 last year. Fortunately, as a Council we have built up our reserves over the years, with the result that we estimate that at the end of the coming financial year, i.e. end March 2021, we will still have £18.1 million of revenue reserves, without including either the £4 million General Fund balance or the £18 million of CIL funds.

This gives us the comfort of time over the next 12 months to see how best we can reduce and ultimately eliminate our reliance on drawing on reserves. I should say at this point that we are not alone in using reserves to balance the budget next year, – I noticed that among our Surrey neighbours, Reigate and Banstead will be using about £1.25 million of revenue reserves to help balance their 20/21 Budget.

Turning to the recommendations on the Agenda paper, Recommendation (d) is that we agree a staff pay award of 2.5% or £750, whichever is the greater, to be implemented with effect from 1st April 2020. As ever, this is a compromise between what we can realistically afford, and what we feel our staff deserve. The figure of 2.5% is marginally above the current CPI index figure of 1.8%, but also marginally below the 3.2% recent average for Wages Growth in England.

We also believe that putting in a minimum of £750 p.a. should make the overall package more attractive to up and coming, often younger, members of staff, and hopefully have a beneficial effect on staff turnover rates. This £750 minimum will benefit all staff with an annual salary of less than £30,000, and staff earning less than £25,000 will have the equivalent of at least a 3% increase on their salary. And, as the Leader mentioned just now, there will be an extra day’s leave for staff on their Birthday or as near to it as possible.

Recommendations (b) and (c) are that we approve the additional spending pressures of £1,373,000 as set out in Section 4.6 of the Cabinet report and that we approve the additional income and savings totalling £594,000 as set out in Paragraph 7 of the report.

Logically this leads on to Recommendation (a), which is that the Council Tax precept for Band D properties be agreed at £226.30, an increase of £5 or 2.26%. This is the maximum that the government will allow Boroughs and Districts such as ourselves to raise their precepts without having to go to a referendum.

Given the spending pressures we are facing, we feel that we have no realistic alternative, and indeed, the Government’s Core Spending Power figures are all based on the assumption that all Boroughs and Districts will go for the maximum £5. Over the last few days, I have had a look at what increases our neighbouring Surrey Boroughs and Districts will be proposing.

Eight of the 10 other Surrey Borough and District authorities, Epsom and Ewell, Guildford, Mole Valley, Reigate and Banstead, Runnymede, Surrey Heath, Tandridge and Woking are all going for either £5 or £4.95, and only Spelthorne and Waverley are proposing less than 2% at 1.29% and 1.9% respectively.

The recommendations (n) to (t) deal with the technical aspects of approvals of the precepts set by Surrey County Council, Surrey Police, Elmbridge Borough Council and Claygate Parish Council. Surrey County Council will be increasing their overall precept, i.e. including that element for the social care budget, by the maximum allowable without referendum of 3.99%.

This will amount to a £57.96p increase for a Band D property, Surrey Police will be increasing their precept by the maximum permissible without referendum of £10 a year, an increase of 3.84%. If we agree the £5 increase put forward as the Cabinet recommendation, then the overall Council Tax payable for a Band D property will increase to £2008.33p. an increase of 3.8%. Claygate residents will pay the usual £14.15 extra for a Band D property.

Elmbridge’s share of the overall bill will reduce to only 11.3% of the total. I think you will agree that our proposed Council Tax increase is a moderate proposal, less than the 2.9% that was pushed through last year, and justified by the unprecedented circumstances we find ourselves in.

Recommendation (e) is that we approve the new Capital bids for 2020/21, 2021/22, and 2022/23 as set out in Appendix G on pages 165 and 166 of tonight’s Agenda. Detailed commentary on the bids has been in the Members Room for the past two weeks. Overall there are 17 bids, which come to just under £1 million for next year, excluding the £1 million Provisional Allocation of funding for possible Asset Investments.

They cover a wide spectrum of activities and include up to £470,000 over the next three years for spending on works to improve the energy performance of a number of our buildings and then getting Energy Performance Certificates for these buildings so that we know by how much we are reducing energy use and thus getting closer to our target of net zero carbon emissions by 2030.

Recommendation (f) is to approve the revenue estimates for 2020/21 as summarised at Appendix I on page 167, which brings all the summary budgets together in the usual format.

Recommendation (g) is to consider and approve the Medium Term Finance Strategy (MTFS) and the Statement of Reserves as set out in Appendices J and K ( pages 169 to 195). These analyse the pressures we face in the medium term and the resources we have built up to manage such outturns. There is great uncertainty around Local Government finances currently, with government consulting on a Fair Funding Review, a Review of Business Rates, and a Review of the New Homes Bonus Scheme, and looking at the possibility of an entirely new Housing Incentive scheme.

The 26 pages of the MTFS and the Schedule of Revenue Reserves create as good a picture of our current financial state as can be arrived at given all the uncertainties that surround us. Importantly, the MTFS also sets out our commitment that there will be a root and branch review of all the service areas in 2020.

Recommendation (h) is simply a request that should our interest income earned during the year exceed what we have budgeted for, then any surplus should go the Interest Equalisation Account, and if we undershoot out target, then the shortfall should be made up by drawing down on the same Interest Equalisation account. This is a continuation of existing practice.

Recommendation (i) is that we agree to additional staff at the Housing Companies, with costs up to £125,000 funded from the 2020/21 New Homes Bonus allocation.

Recommendation (j) is to delegate authority to respond to any consultation relating to the Fair Funding Review to the Strategic Director Resources in consultation with the Portfolio Holder for Resources.

Recommendation (k) is to delegate authority to the Strategic Director Resources in consultation with the Portfolio Holder Resources on whether to prepay secondary Pension Fund contributions as detailed in Section 4.6 of the report. This is being closely looked into to see whether it would be advantageous. I understand that Reigate and Banstead have decided to enter into a similar arrangement.

Recommendation (l) is to approve the Pay Policy Statement for 2020/21 as attached at Appendix L to these minutes as required under the Localism Act 2013. This is very similar to the one approved last year and is needed for transparency as to our pay policies and practices. The statement goes on our website.

And finally, recommendation (m) is that Claygate Parish grant of £2730 in respect of the localisation of Council Tax benefits continue to be included in the Elmbridge Budget.

I appreciate that this has been a fairly rapid canter through the Revenue and Capital Budget proposals, but I am happy to take questions, if necessary pass them on to the Head of Finance, – otherwise I recommend we add our support to all the recommendations (a) to (t) as set out on Pages 95 to 100 of tonight’s Agenda. ”

Cllr Ruth Mitchell Response:

“It only takes a glance at the budget papers to realise that this councils expenditure exceeds its income by around a £1m. In order to balance our budget as required by law the difference has been taken from reserves. The funding gap in the budget in 3years time is forecast to be £5m.

This year both our Chief Financial Officer and our External Auditors have reported something most of us surely realise that funding revenue expenditure from reserves, whilst a quick and simple option, is clearly not sustainable. Our auditors have stated that they will be closely monitoring our use of reserves.

Misuse of reserves is a recipe for disaster.

I will not go into details of our Capital Expenditure position which is equally depressing.

Clearly this is why we have seen nothing in the budget relating to one of this councils key priorities notably our declaration to become carbon neutral by 2030.

I recall last year when we were the administration the opposition voted against our budget because they preferred a lower increase than we proposed in council tax. If that financially imprudent action had succeeded we would have an even greater deficit. I am not playing party politics by doing the same with their budget because I am aware that by law a balanced budget has to be produced by 10 th. March.

This administration should have taken firm and decisive action last year to undertake a root and branch review of our finances. Sadly this was not done and now it is too late for this budget.

Last September, the politically proportionate Performance and Final Panel unanimously proposed that a working group be formed to undertake a full review of fees, charges and services with the aim of being able to balance our budget in future years without resorting to reserves as a matter of course. Regrettably this proposal was not accepted by Cabinet.

And that is the problem with this budget. We are in a hole , still digging and we have no plans to get out of it!

We simply must get to grips with our Finances so that we can continue to provide the services that our residents expect.

That is why I am proposing the additional recommendation that you see before you.”

Further Reading:

https://www.esherwalton.com/news/elmbridge-administration-hole-over-budget-and-still-digging

https://elmbridgeresidentsgroup.com/elmbridge-annual-budget

Public Agenda Pack – Cabinet Meeting

 

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