Babergh and Mid Suffolk District Councils
Democratic Services

Mobile menu icon

Agenda item

Cabinet Member for Finance

 

In accordance with Council Procedure Rule 18.3, immediately after any vote is taken at a budget decision meeting of the Council the names of Councillors who cast a vote for the decision or against the decision or who abstained from voting shall be recorded in the Minutes of that meeting.

 

At its meeting on 6 February 2019, Cabinet considered Paper BCa/18/62, together with amendments to the General Fund Budget.  Paper BC/18/39 now includes all the relevant updated information, together with the necessary recommendations, with the exception of one Parish precept notification which remains outstanding.  Further details will be reported at the meeting.

 

Minutes:

102.1 Councillor Ward presented the 2019/20 General Fund Budget and four- year outlook report to Council.

 

102.2 In his opening speech, he informed Council that the first draft of the report was considered at Cabinet last month and the finalised position was approved at Cabinet earlier this month. Unlike in previous years, the report did not combine both the General Fund and the HRA Budgets.  Councillor Ward thought that it was proper that the Housing Revenue Account was examined and debated separately, therefore this year the HRA had its own separate budget report.

 

102.3 Councillor Ward told Council that the General Fund budget setting should never be seen as just a short-term exercise.  Rather, it must be part of producing a medium-term outlook for the Council’s finances which were both sensible and sustainable.  That was why, during the lengthy budgeting process, the Council had spent a considerable amount of time working on projecting the four-year outlook. The projections for this were detailed in Section 8 of the report. The cumulative deficit at the end of this period was £954k if all the NHB receipts were used and £2.976M excluding these.

 

102.4 Councillor Ward informed Council that the General Fund budget in front of them, required all of the anticipated 2019/20 New Homes Bonus (NHB) receipts of £683k and reliance on reserves amounting to £615k to achieve a balanced budget.  However, given the uncertainties regarding future NHB cashflows, the Council must continue with its efforts to become self-sufficient through maximising income streams, continuing to make efficiencies and productivity savings and continuing to find new ways of working.  It also behoves the Council to have a strong core council tax base and so, from the perspective of the four-year outlook through to 2023, the numbers produced a compelling case for the need for council tax increases each year.  The Council would continue to do this at the maximum level allowed without requiring a referendum, i.e. £5 per year for a Band D property for the next two years and 3% for the following two years. This should be seen in the context of an average CPI inflation rate of 2.5% for 2018. Along with a 1.64% growth in the Band D equivalent number of properties for 2019-20 and 1.5% p.a. thereafter, this will ensure that the Council can grow its council tax revenues to help offset the ongoing cost pressures that it faces.

 

102.5 Commenting further, Councillor Ward said as already mentioned, the Council was reliant on reserves to balance the budget and that it would need to take action during 2019/20 to replace this funding with more sustainable options because the reserves were declining. The reserve levels were detailed in paragraph 7.5 table 3 of the report. The figures had improved from the initial assessment in the Autumn, due to a number of factors, including the provisional finance settlement of £273k outlined in paragraphs 4.9 to 4.11 of the report so that the Council had now been able to leave the commuted maintenance reserve largely untouched, but Councillor Ward did not want to rely on this for 2020/21. He also pointed out that that the transformation fund now had very little in it.

 

102.6 Councillor Ward said that he had mentioned earlier the need for greater self-sufficiency and to that end the Council was including within the budget recommendations, a further £25millon investment in CIFCO. This was budgeted to produce net income after interest charges of £218k in 19/20, £604k in 20/21, £526k in 21/22 and £541k in 22/23 – an additional £1.9M over the four years, on top of the four-year income of £2.7M from the current CIFCO investment.  The Council’s capital programme showed that investment, phased equally over the two years 19/20 and 20/21 as set out in Appendix B of the report.

 

102.7 Councillor Ward also pointed out appendix F in the report which described the successful stress test that was undertaken for CIFCO as requested by the Overview and Scrutiny committee. This had looked at all aspects of the CIFCO investments to ensure that risks have been adequately mitigated. It had covered worst case scenarios for a tenant default, CIFCO loan repayment default and failure of CIFCO. This stress test was a formal position on the matter from the Section 151 Officer. At this point Councillor Ward reminded Members that, if the Council did not make this further investment, there would be significant cumulative effects in the finances – the investment was an integral part of the Council’s medium-term financial planning.

 

102.8 Councillor Ward also highlighted the proposed changes the Council were proposing for the discretionary Care Leavers Council Tax discount of up to 100%.  The details were set out in section 11 of the report.  This was a Suffolk-wide initiative and, although the cost to the Council was very modest, it would be most welcome to its recipients.

 

102.9 Finally, Councillor Ward informed Council that there were proposals to increase the second empty property premium in accordance with the legislation that followed the announcement in the government’s 2017 budget. The Council would be using the maximum premium of 100% for 2019/20 and introducing further changes in subsequent years in line with the maximums given in paragraph 12.9 of the report.

 

102.10 Councillor Ward then MOVED the recommendations in the report which Councillor Ridley SECONDED.

 

102.11 Councillor Beer sought clarification on the proposals for increasing council tax, and asked if the proposals were just for this year?

 

102.12 In response Councillor Ward confirmed that the proposal was an increase of £5 for the forthcoming year, however as part of the medium- term financial planning the Council was proposing further increases over a four- year period, but obviously any new Council could change this in the future.

 

102.13 The Monitoring Officer clarified that the Council was setting the council tax for the next financial year but also agreeing a future financial strategy that included year on year increases to council tax.

 

102.14 Councillor Busby expressed his disappointment about the amount of Rural Service Delivery Grant that had been awarded and told Council that the amount of new homes needed to increase the council tax base would need to be around 2080 to be able to sustain costs including inflation and employee costs and the deficit in the pension fund, which would mean that the Council would need to double council tax to make it viable. He also felt that the Council need to rethink how it delivered its services.

 

102.15 Councillor Ward told Councillor Busby that he fully shared his concerns, but the Council was limited to how much it could increase its council tax without holding a referendum. That was why the Council had to rely on innovative new things like CIFCO investments. 

 

102.16 The Section 151 Officer also clarified that with regard to the pension fund, this was the last year of a current 3 -year triannual evaluation and over those last three years, Babergh had been fortunate to be able to reduce its employer’s contribution. The end of March 2019 was when the next evaluation happened and that would set the employers rates for the following three years. As the Council did not know at what level that valuation would be it had built in a prudent 1% increase in terms of the employers’ contribution based on evaluation but it may have to switch from being able to reduce its contribution to potentially having to increase it in the future.

 

102.17 Councillor Burgoyne asked if it would be possible to have a briefing note in plain English regarding the proposals for care leavers discount so that he could circulate them as appropriate.

 

102.18 Councillor Arthey asked about the CIFCO stress test and the risk in terms of the capital value of the properties that the Council was purchasing as he felt that the market was skewed at the moment due to all of the investment by local authorities which was inflating prices and this was not included in the stress test?

 

102.19 In response Councillor Simon Barrett agreed that this was a very valid point but said that the Council was only really interested in the income stream that would come from the asset and felt that it was only if the Council sold the capital asset the loss would be realised. He therefore stated that a realistic and cautious approach should be taken but it was likely that the capital asset value would go up and down as the market fluctuated. Councillor Barrett stated that the real problem would come if there were a lack of tenants for the rental income that would need to be generated.

 

102.20 The Section 151 Officer also added that under paragraph 4.7 in the stress test, this had been considered, the assets the Council were investing in were for a longer term because the Council wanted the rental return and the yield from the properties.

 

102.21 Councillor Busby asked the Section 151 Officer when the guidance form CIPFA on Council investing in property would be available?

 

102.22 In response the Section 151 Officer stated that the guidance had still not been published however she would circulate this to all members once it was published.

 

102.23 Councillor Long felt that the recent publication of the end of term magazine should have included a realistic reference to the needs of the Council to raise more income to protect services.

 

102.24 In response Councillor Ward stated that in all of his parish reports he had explained the situation that the Council was in and had even talked about this on local radio so that he felt that he was conveying an accurate message to residents.

 

102.25 Councillor McCraw asked what would happen if the Council faced the worst- case scenario of having a property that needed maintenance costs and what impact this would have?

 

102.26 In response Councillor Ridley confirmed that the properties were all on fully insured tenancies and the costs would only come back to the Council if the property did not have a tenant.

 

102.27 Councillor Melanie Barrett queried the empty home premium mentioned in page 108 of the report and said that she was surprised that the premium only applied to empty and unfurnished property and felt that the Council should include furnished empty property as well.

 

102.28 In response the Section 151 Officer stated that the Council was very much constrained by the regulations that the Government issued around empty properties with the premium only coming into effect after two years, so the Council was not able to extend this to furnished ones.

 

102.29 Councillor Kemp asked if the Council had to pay an empty homes premium as it had an empty property in Long Melford for over two years?

 

102.30 In response Councillor Jan Osborne stated that she was not aware of the property in Steeds Meadow and would investigate this further and come back to Councillor Kemp outside of the meeting.

 

102.31 Councillor Hinton asked what was the net debt Babergh had at the moment

 

102.32 In response the Section 151 Officer confirmed that the current forecast for the end of the year was £113m.

 

The recommendations were PUT to the meeting and CARRIED.

 

102.33 In accordance with Council Procedure Rule 18.3, the vote was recorded as follows:-.

 

For

Against

Abstention

Cllr Arthey

Cllr Beer

 

Cllr M Barrett

Cllr Cresswell

 

Cllr S Barrett

Cllr Hinton

 

Cllr P Burgoyne

Cllr Kemp

 

Cllr Burrows

Cllr Rose

 

Cllr Busby

 

 

Cllr Campbell

 

 

Cllr Carpendale

 

 

Cllr Creffield

 

 

Cllr Davis

 

 

Cllr Gasper

 

 

Cllr Grandon

 

 

Cllr Holt

 

 

Cllr Hurren

 

 

Cllr Lawrenson

 

 

Cllr Long

 

 

Cllr Maybury

 

 

Cllr McCraw

 

 

Cllr Newman

 

 

Cllr Nunn

 

 

Cllr A Osborne

 

 

Cllr J Osborne

 

 

Cllr Plumb

 

 

Cllr Ridley

 

 

Cllr Swan

 

 

Cllr Ward

 

 

Total       26

Total   5

0

 

It was Resolved:-

 

(i)                  That the General Fund Budget proposals for 2019/20 and four year outlook set out in the report be approved.

(ii)                That the General Fund Budget for 2019/20 be based on an increase to Council Tax of £5 per annum (10p per week) for a Band D property, which is equivalent to 3.15%, to support the Council’s overall financial position.

(iii)       That a further £25m be invested in CIFCO as set out in paragraph 8.20 of the report.

(iii)              That a discretionary Care Leavers Council Tax discount of up to 100% be Introduced from the 1 April 2019 as set out in   Section 11 of the report.

(v)        That the second empty property premium be increased as per the regulations set out in paragraph 12.9 of the report.

 

Supporting documents: