Issue - meetings

Councillor Mark Elliott, Cabinet Member for Resources (supported by Andy Rothery, Chief Finance Officer (151)) introduced the report. The Cabinet Member explained that local government funding is pretty broken and that a number of Council’s have declared bankruptcy. He explained that Council Tax covers a third of the operating costs of the authority and other income comes from things we charge for. He stated that the pressure on budgets in social care is enormous. He explained that the budget would be finalised and agreed at Council in February 2024.

Panel members made the following points and asked the following questions:

Councillor MacFie referred to the expenditure in adult and childcare and asked for assurances that this would be addressed. He asked that an item on the budget regarding childcare be brought to the Panel. The Cabinet Member agreed that an item on this aspect of the budget could be brought to the Panel in terms of what can be done regarding rises in this budget area.

Councillor Halsall stated that students who study in the city cannot then afford to live here. He asked if HMOs (Houses of Multiple Occupation) disadvantage the authority as they do not pay Council Tax. The Cabinet Member stated that Universities do add to the city but can be economically detrimental.

In response to a question from Councillor Simon regarding SEND funding, the officer explained that this funding came from the dedicated schools grant which is managed by the Council. The pressure is very high on this – the Council is part of a safety valve programme which is a funding package to help Council’s out of deficit.

Councillor Simon asked if there is a regional programme regarding accommodation for looked after children. The officer stated that a regional programme has not been adopted and that Councils are talking about how provision/properties can be brought into use.

Councillor Blackburn asked about the Revenue Support Grant and about what representations were being made in terms of a possible new Government. The Cabinet Member stated that Government funding had reduced from £31m down to £800k. He stated that conversations with potential future government could be more productive than any such conversations with the current Government. The officer explained that the F20 group (a group of authorities) had written to the government and are doing what they can to lobby.

Councillor Blackburn queried the fact that there was no mention of the Commercial Estate. The Cabinet Member agreed that a report on this could come to the Panel. He explained that the Commercial Estate was performing fairly well but not up to pre Covid levels. He added that rental values had fallen in Commercial properties. He is satisfied that officers are doing a good job.

Councillor Hodge asked what the social care contingency is. The officer explained that the social care reserve was put into last years budget so is no longer a reserve.

Councillor Hodge asked about budget re basing. The officer agreed across all services. Regarding  ...  view the full minutes text for item 34

The Medium Term Financial Strategy (MTFS) sets out the strategic direction and priorities for the Council as well as outlining the financial context and challenges the Council faces over the next five years and the strategy that will be used to inform its annual budget process.

Cllr Mark Elliott introduced the report and made the following statement:

“As you will be aware I have three financial reports to present to Cabinet this evening, all of which need to be set in the wider financial context, and all of which slightly overlap, so I’m going to spend a little time on this first report setting out that wider context, and then I take that as read for the following two reports.

Cabinet will be aware that systemically Local Government Finance is a mess.  Colleagues will be aware that a number of councils have recently issued Section 114 notices – essentially declaring themselves bankrupt. Thankfully we’re not amongst them, and I am confident we won’t be, but I had a quick look at the figures, and before 2018 only three Section 114 notices had ever been issued, going back to 1988 when the Local Government Act legislation was introduced.  Since 2018, 12 have been issued, and these have been by Councils across the political spectrum.

The system is fundamentally broken.  Central government knows this but is totally devoid of any ideas about how to sort it out. Across the country, going back over the last decade, local councils are having to deal with an increasingly dire situation, with first austerity measures meaning a vast reduction in central government funding to local authorities, then Brexit meaning workforce shortages and consequent wage inflation, then Covid meaning the world shutting down for a couple of years, and now the war in Ukraine, a cost of living crisis with spiralling inflation, and the recent conflict in Israel-Palestine.

In order to understand why these pressures are so exceptionally damaging to local councils, and why it’s so difficult for us to deal with, we need to remind ourselves how councils are funded.

The council’s budget is split between “Revenue” – our operating costs, staff, materials, services, etc. – and “Capital” – land, buildings, equipment, roads, vehicles, etc.  The two are kept very separate, and we are forbidden, for very good reasons, from spending capital money on revenue.

I think there is an understandable perception amongst the public that council tax pays for council spending.  In reality council tax covers about one third of our operating costs, and virtually none of our capital costs. 

Our operating costs are roughly £300m, and our council tax income this year is set to be around £113m.  The rest of our operating income comes from grants from central government, and things we charge for separately: services, car parking, the Roman Baths, property rental, etc.

Our capital spending, which this year is budgeted to be just shy of £90m, is financed 60% by borrowing, 20% from grants, 15% from capital receipts (i.e. selling assets we don’t want in order to buy or build assets we do want) and revenue, and 5% from Community Infrastructure Levy (the charged levied on developers for developments as part of the planning process).

So, to pick out some elements from that in order to  ...  view the full minutes text for item 42