Babergh and Mid Suffolk District Councils
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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 4February 2019, Cabinet considered Paper MCa/18/60, together with amendments to the General Fund Budget.  Paper MC/18/38 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:

95.1 Councillor Whitehead introduced his report and informed Council that the  General Fund Budget for 19/20 along with the 4-year outlook had been reviewed by the Overview and Scrutiny Committee on the 17 January 2019 and all Members had been given the opportunity to attend the  detailed briefing on the budget in January as well as opposition briefings.

 

95.2 The Budget had also been debated at Cabinet in January and February.  Councillor Whitehead believed that this was an important part of the budget setting process that the annual budget went through these various forums before coming to full Council for approval.

 

95.3 Councillor Whitehead stated that by law, the Council must produce a balanced general fund budget for the coming year, but he also firmly believed that there was also a further duty, to ensure that there was a sustainable medium term four- year financial outlook for the Council.

 

95.4 Councillor Whitehead continued by saying that taken in isolation the 2019/20 position was remarkably healthy.  However, two matters created the need for caution.  Firstly, 2019/20 was the last year of the 4-year comprehensive spending review where Councils had some certainty about their funding levels. Therefore, the position from 20/21 onwards, remained more difficult to forecast and secondly, the government had tinkered with New Homes Bonus over the past few years, to such an extent that the Council could not rely on it as core funding for the future. These reasons were why the Council was proposing to increase its share of the Council tax by 2% or approximately 6 pence a week for a Band D equivalent. This was to build up a robust Council tax base for the more uncertain future and to help the Council’s ambitious plans for the district, which involved significant capital expenditure to develop several strategic areas of land that the Council owned in the district for residential use as well as some significant acreage of land for business and economic development situated to the east of Stowmarket.

 

95.5 Despite having in place robust management and governing processes and the engagement of experienced external advisors, these brownfield and greenfield developments were not risk-free and Councillor Whitehead therefore strongly believed it was prudent to set aside a £1m reserve whilst these developments progressed towards fruition.  He wanted Members to be quite clear as to the prime mover behind the creation of this new reserve which was supported by the Council’s Section 151 Officer.

 

95.6 Councillor Whitehead then turned his attention to CIFCO and informed Council that there was a recommendation for a further £25m investment into CIFCO matched by Babergh Council. Councillor Whitehead stated that he was mindful that some genuine concerns have been expressed regarding this policy. This was a long-term investment to provide a robust and diverse stream of rental income to help fund the Council’s core services for many years ahead. The CIFCO Board had a life time of experience in the commercial property field and the Council had recruited a professionally qualified assistant director with an excellent track record in her field.  Also, when needed they were supported by external specialist advisers and together they were assembling a strong and diverse portfolio of quality real estate assets, which Members would have seen in the CIFCO stress test paper, which provided further reassurance towards this strategy.

 

95.7 Councillor Whitehead stated that he firmly believed that in CIFCO the Council was creating a partnership with colleagues in Babergh, something that would come to be seen by future Councillors as a truly valuable long-term legacy of this current administration.

 

95.8 Finally, Councillor Whitehead was pleased to highlight the proposal to award a Council tax, care leaver’s discount.  This would help the vulnerable to whom it was targeted at a very modest cost to the Council. He also drew attention to the revised papers detailing some missing parish precepts in a revised appendix and went on to pay tribute to the financial staff and acknowledged the hard work they had put into producing the budget report and for their hard work, diligence and professionalism.

 

95.9 In summary Councillor Whitehead stated that the budget enabled the Council to continue and enhance the services to its residents. It was a budget with a four-year outlook that was robust and financially viable.  It was also a budget which built on the Council’s long- term strategy to be less reliant on the vagrancy of central government funding and to become an increasingly self-reliant strong local Council.

 

95.10 Councillor Whitehead MOVED the recommendations in the report.

 

95.11 Councillor Gowrley seconded the recommendations in the report and reserved the right to speak.

 

95.12 Councillor Stringer MOVED an amendment to the recommendations in the report as follows:-

 

Bring back the Council closer to the people by:

 

          Relocating public facing officers to the Creeting Road site

(Cost between £10,000 and £800,000 depending on numbers needed to accommodate and required building works)

           Providing more Pop-up Council offices in rural locations

           Making officers accessible to the public

 

Invest in Mid Suffolk by:

 

          Selling all CIFCO holdings within four years and reinvesting the money in projects that deliver on a greater number of our strategic priorities.

(Cost in initial year between £25,000 and £1,000,000 depending upon current valuations of the properties)  

           Investing in stalled housing sites, to increase housing delivery (see

           above)

          Planning to upgrade Stowmarket Station forecourt and undertaking a strategic review of town centre car parking

 Be an open and transparent Council by:

 

           Holding a majority of meetings out in the district to encourage

           attendance

           Broadcasting web-cast meetings for greater accessibility

           Undertaking an annual community budgeting process

·          Reporting in an open and honest manner

 

All of the proposals above to be funded from the 2018/19 underspend, the 2019/20 surplus or the uncommitted balance in the Growth and Efficiency Fund.

 

95.13 In his speech, Councillor Stringer stated that it would be incorrect to say that the Administration were doing everything wrong, but there were a few things that caused concern. He could focus on why the Council was raising domestic taxes when one pound in every three from that tax was not spent last year. He was concerned that almost £2m was unspent last year. However, he felt that the Council had two very pressing issues. The first pressing issue was the need to raise some income other than from taxation and government grant and the other pressing issue was the issue of a 5-year land supply and actually building enough houses within the district to maintain that sustainably. This was causing great concern within a number of parishes. It was also slightly worrying regarding the CIFCO issue, that the Council was proposing that the debt per elector would go up to £625. He felt that it was an awful lot of debt especially where the buck stopped with the electorate.

 

95.14 Councillor Stringer felt that the Council had been lucky that it had not been caught up in the recent contractions in that market. But asked what would happen if the luck ran out. He also asked Council to recognise that the amendment didn’t seek to generate new income from any taxation, it just sought to reinvest the underspend from this year, in moving away from what was perceived by many as a risk that was out of the district and out of touch to many in Mid Suffolk. Councillor Stringer believed that the money could be better invested in securing housing delivery with whatever model that was chosen. A report has been published in the last 24 hours about how Suffolk could be a major player in housing delivery.  Councillor Stringer felt that Mid Suffolk should be an equal partner in that, and it would be investing in what would touch on one or more of the Council’s strategic priorities. He felt that CIFCO was prevented from investing in its own district due to the way it was set up equally with Babergh. The amendment provided the opportunity to do something about that and would bring together those two elements which residents have the most concern about, and certainly the opposition in the Council shared those concerns.  Councillor Stringer felt that investments, like charity should begin at home.

95.15 Councillor Welham seconded the amendment and reserved the right to speak.

 

95.16 The Chairman asked Councillor Whitehead if accepted the amendment?

 

95.17 In response Councillor Whitehead refused to accept the amendment.

 

95.18 Councillor Passmore asked a question relating to the risk factor around CIFCO.

 

95.19 In response Councillor Brewster stated that CIFCO was created to provide a new revenue income stream that could be used to pay for Council services.  As a result of austerity driven reductions in government grant to local government, the two Councils decided it was necessary to generate alternative sources of income rather than make reductions to Council services.  He had read an article in the press that had said this was speculative investment. Councillor Brewster felt this was far from the truth as the due diligence that occurred when purchasing an asset was immense. All such decisions must be in accordance with the CIFCO business plan which was reviewed and approved by each Council on an annual basis.  In particular the business plan included a detailed approach to risk.  CIFCO invested to create a diverse portfolio ensuring no single market sector or tenant contained a disproportionate level of the overall funds invested.  That is why not all the investment is in Suffolk, it did need to spread further than that and that actually is the risk mitigation.  Therefore, mitigating any risk of tenant or market failure for example this approach has successfully ensured that over the last 12 months CIFCO has been reducing retail risk and exposure.  In making investment decisions the CIFCO board which included 3 industrial experienced professionals, 2 Councillor directors, and was advised by professional property agents, lawyers, fund managers and managing agents.  This was not a group of inexperienced Councillors making major investment decisions.  To date the Board had invested circa £45m through the purchase of 10 properties.  In deciding to make these purchases the Board had considered, applied due diligence and dismissed more than 60 potential property purchases as they didn’t fit the bill and they didn’t fit the plan.  CIFCO focused on properties with secure, longer term leases to strong covenants in order to lower the likelihood of tenant failure and fluctuations in income and they continuously monitored performance of the fund. The Councils loan the money to CIFCO, where they do, it must be at commercial rates and loans are secured by the properties that are purchased.  Members often decry the policy of commercial investment for whatever reason including financial risk.  Everyone faces risk every day in their lives, whether that be crossing the road, getting into cars, or just simply breathing and in today’s world there will be peaks and troughs including within the world of investment.  Opposition members wish to use CIFCO funds to build affordable homes for sale or rent. Mid Suffolk Growth has been set up to carry out house building in the district initially on Council owned sites.  Under this housing, the company could aim to build 200 houses over the next 3 years.  The amendment that is being put forward may be a desirable aspiration.  It is also not without risk, in fact it would not bring the immediate return which commercial investment does to make this Council sustainable in the future of supporting services for our communities.  Rentals within the HRA are ultimately at risk of right to buy and the rent remains with the HRA and is not available for general fund usage.

 

95.20 Councillor Stringer raised a point of order and informed Council that his

amendment did not propose to dissolve CIFCO.

95.21 Councillor Morley speaking on the amendment, informed Council that early discussions were in place about relocating the teams at the Creeting Road depot to a more appropriate and cost-effective location preferably with the Council’s partners. The Council was continuously making improvements through its Customer Strategy refreshed last year to the customer offer whether face to face, on the phone, or online.  She questioned the proposal suggesting that the depot site would not be the right place for an office or customer service facility and that such a redevelopment would only cost £1m. She was also disappointed that there was still a reluctance to accept what a success the decision had been to move to Endeavour House. Frontline officers remained extremely accessible to all communities and residents every day, with less than half of staff routinely working from Endeavour House.  The Council also prided itself in not just being transparent in all of its work, but also enabling others to access and engage in local democracy and in reporting all what was done in an open and honest manner.  As part of the imminent upgrades to the audio visual in this Council Chamber, there were already plans to introduce web casting of Council meetings. The Council was always open to holding more meetings in different locations but would continue to enable this to be the decision of the Chairman of each relevant meeting and dependent upon the items on the agenda.  As Councillors were aware, there were longstanding local budget arrangements with each Councillor investing over £6,000 in their wards each year and able to pool these budgets between themselves.  With any further decisions on community budgeting being informed by the current community strategy consultation which closes shortly. 

 

95.22 Councillor Horn in response to the amendment, agreed with one of the points listed in the amendment to unlock stalled housing sites rather than actually just investing in stalled housing sites and informed the meeting that the Council actually committed the funds to do this two years ago.  At the time the Council was unable to recruit to the position, so the Council had been working quite closely with an agency to help provide that resource into unlocking the sites.  This was a national issue and although there was quite a lot of sites that have been granted planning permission and not come forward, officers had been working extremely hard with developers to understand the 5-year housing land supply position. The way they had gone about this was to enter into a memorandum of understanding with developers about what their development plans were, which meant that the Council would have a much better sight of all of those sites than it ever did.  This in itself had allowed the Council to tackle some of those issues. In terms of delivery, Councillor Horn had been to a briefing that had indicated under the new housing delivery test that Mid Suffolk’s housing delivery was a little over 80% which indicated that something must have been done over the last 3 years, so the Council was heading in the right direction.  To Councillor Horn, one of the greatest risks that the Council was facing in terms of delivery, was sites not coming forward properly, neighbourhood plans were coming forward with too few allocations and communities not actually being persuaded or shown or demonstrated the benefits of some of the growth that they could be taking. Therefore, Councillor Horn welcomed the aspiration to unlock stalled housing sites.

 

95.23 Councillor Stringer raised a point of clarification and stated that one of the key points of his amendment was that it offered a lower degree of risk than what the Council was currently doing at the moment.

 

95.24 Councillor Welham as the seconder of the amendment, stated that the first issue was to address the rise in Council tax as the Council was predicting a £1.9m underspend at the end of this Council year.  That was one third of the total of £6m raised from residents’ Council tax in the last year. Secondly why was the Administration suggesting that the Council borrow another £25m to invest in retail and commercial properties when the Council should be investing in housing. Councillor Welham felt that the Council needed to address the shortage of homes for Mid Suffolk residents instead of investing in far flung places. He said that the Council could put itself into a win/win situation and meet more of its strategic priorities, by building homes in the right places for its residents.  The income from sales and rents of these homes not just social housing, could help meet the 5 -year housing land supply and the Council could put itself back in control of planning rather than leaving it to speculative builders.  Part of the proposals in the amendment referred to Stowmarket.  Councillor Welham stated that the Council needed to make Stowmarket a destination place rather than a place to shop.  Councillor Welham welcomed the Council’s investment in the cinema and supporting the museum but he felt that the Council needed to do more. An upgrade to Stowmarket station forecourt with free shuttle buses around the town to take people into the town centre and station would encourage residents to use the facilities more and might encourage a higher quality shopping experience and food outlets. Councillor Welham felt that when the outcome of this meeting was reported residents and parishes would be dismayed that this money was unspent and the Council was borrowing another £25m which may well be invested outside of the district.  Councillor Welham said that every house with four electors would have a £2,500 debt with the money invested in places they’ve had no choice about rather than in houses in our district. Councillor Welham was also not convinced about the financial success of a move to Endeavour House and said that this was raised regularly at parish meetings that he attended.

 

95.25 Councillor Whitehead in response, said that one of his first thoughts was it would have been nice if say 10 years ago someone had done all this CIFCO investment before all the controversy and the Council were getting the full income stream from £50m already. It would have made the budgeting job a lot easier but the problem was of course 10 years ago nobody had a crystal ball and nobody ever envisaged that the revenue support grant would go from over £2m down to 0, they never envisaged the start of a new homes bonus and then all the tinkering that followed. However, Councillor Whitehead re- emphasised his view that the Council was building a long-term legacy for the future and the idea of selling all the CIFCO Holdings within four years would be economic vandalism.

 

95.26 Councillor Stringer in his summing up said that following Councillor Whitehead’s statement the Council was where it was today and that it had a very stark choice. Everything came with a risk and if the whole economy was to go skywards at least with the Budget amendment that was tabled today the Council could say that it had invested and was committed to delivering housing for the residents.

 

95.27 The amendment was PUT to the meeting and Lost.

 

95.28 In accordance with Council Procedure Rule 18.3 the vote was recorded

as follows:-.

 

For

Against

Abstention

Cllr Field

Cllr Barker

 

Cllr Killett

Cllr Brewster

 

Cllr Marchant

Cllr Burn

 

Cllr Matthissen

Cllr Caston

 

Cllr Norris

Cllr Ekpenyong

 

Cllr Otton

Cllr Flatman

 

Cllr Stringer

Cllr Fleming

 

Cllr Welham

Cllr Gibson Harries

 

Cllr Gowrley

 

 

Cllr Guthrie

 

 

Cllr Hadingham

 

 

Cllr Haley

 

 

Cllr Horn

 

 

Cllr Humphreys

 

 

Cllr Kearsley

 

 

Cllr Mayes

 

 

Cllr Morley

 

 

Cllr Muller

 

 

Cllr Osborne

 

 

Cllr Passmore

 

 

Cllr Storey

 

 

Cllr Whitehead

 

 

Cllr Wilshaw

 

 

 

 

Total       8

Total    23

0

 

95.29 The Chairman announced that the Motion was lost and returned the debate to the substantive motion.

 

95.30 Councillor Gowrley reminded Council that it had recently purchased the old National Westminster bank and the Aldi store in Stowmarket to make sure there was a further investment in Stowmarket. He also stated that the Council was being asked to recommend the approval of a budget that would commit another £25m to CIFCO to enable the Council to gain a further return on investment to provide a profit for the purpose of protecting investing and developing services within the district.  The investment would also enable the Council to gain a further revenue stream to assist the Council in the development of all types of housing within the district. He went on to say that the Council had already made substantial commitments to the development of housing in the last 12 months to assist the housing market.  It had invested £1.77m and set up a Joint venture company Mid Suffolk Growth, to deliver and market affordable housing with the initial development being the former HQ site at Needham Market with a proposed 93 homes that include affordable homes.  Those homes subject to getting planning permission would be delivered over the next 2 to 3 years.  The Council was also developing its own housing sites within the district at Needham Market, Stowmarket, Eye, and Elmswell with over 150 homes planned over the next 3 years.  Those sites were part of a pipeline to enable the Council to increase its own housing stock to provide much needed affordable homes for the residents. Councillor Gowrley also stated that the Council had a pipeline supply of over 40 homes on other Council owned sites in Mellis, Laxfield, Norton and a potential site in Stowmarket. The Council was also working with registered providers and developers to assist in expediting their developments in partnership to secure more homes across the district at pace. Councillor Gowrley told Members that to put the Council’s commitment into delivering housing into a national context inside a housing magazine reported in 2018, of the 58 Councils that had established a housing delivery vehicle, more than half of them had yet to deliver a single house and since 2012 only 500 houses have been delivered nationally in total so he felt that what the Council were  establishing was the foundations and structures to deliver approximately 250 additional new homes in the next three years.  This represented 50% of what had been achieved nationally over the last 7 years.  The Council would also have to go further with the development of more housing through the identification of other opportunities and if these opportunities required further finance, Councillor Gowrley stated that he was committed to review the funding requirements to make this happen.  As future business cases stacked up if there was an additional requirement for more homes outside of the Council’s current commitment of over 250 homes then the Council would invest where necessary and appropriate.

 

95.31 Councillor Otton stated that she was delighted with the investment in Stowmarket and the various projects stated including the proposals for Needham Lakes. However, residents were still unhappy with the Council’s move to Endeavour House and she felt that it deterred them from taking part particularly in Council meetings and the involvement with issues that they were faced with. Councillor Otton informed Council that her Group could not support the Budget due to the Council’s investment in property outside of the district and stated that they did not agree with borrowing public money to invest in highly risky retail properties. Commenting further Councillor Otton felt that the impact on the long-term financial position especially with the uncertainties over Brexit, it made little sense to borrow another £25m, Councillor Otton did not think it was right to increase Council tax which would penalise the lowest housing bracket. Finally, she mentioned the lack of a five-year land supply that had resulted in numerous planning applications being submitted that would not have been given permission if this had been in place.

 

95.32 Councillor Matthissen suggested that the savings that the Council were making following the move to Endeavour House was because they were unable to recruit staff.

 

95.33 In response the Chief Executive stated that the Council was not struggling to recruit staff since moving to Endeavour House and had actually found it easier to recruit staff of a higher calibre.

 

95.34 The recommendations were PUT to the meeting and CARRIED

 

95.35 In accordance with Council Procedure Rule 18.3 the vote was recorded

as follows:-.

 

For

Against

Abstention

Cllr Barker

Cllr Field

 

Cllr Brewster

Cllr Killett

 

Cllr Burn

Cllr Marchant

 

Cllr Caston

Cllr Matthissen

 

Cllr Ekpenyong

Cllr Norris

 

Cllr Flatman

Cllr Otton

 

Cllr Fleming

Cllr Stringer

 

Cllr Gibson Harries

Cllr Welham

 

Cllr Gowrley

 

 

Cllr Guthrie

 

 

Cllr Hadingham

 

 

Cllr Haley

 

 

Cllr Horn

 

 

Cllr Humphreys

 

 

Cllr Kearsley

 

 

Cllr Mayes

 

 

Cllr Morley

 

 

Cllr Muller

 

 

Cllr Osborne

 

 

Cllr Passmore

 

 

Cllr Storey

 

 

Cllr Whitehead

 

 

Cllr Wilshaw

 

 

 

 

 

Total    23

Total       8

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 2%, which equates to £3.26 per annum (6p per week) for a Band D property, to support the Council’s overall financial position, be approved.

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

(iv)        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 be approved.

Supporting documents: