Minutes:
6.1 The Chair welcomed Ian Williams, Group Director, Finance and Corporate Resources and Councillor Geoff Taylor, Cabinet Member Finance from London Borough of Hackney (LBH) to the meeting.
6.2 Headlines
6.2.1 The Council was in the process of producing its statement of accounts for 2015/16.
6.2.2 The Group Director, Finance and Corporate Resources recapped on the council’s budget pressures; adult social care - the Council is managing down the over spend in this budget area; temporary accommodation – the Commission visited one of the Council’s facilities recently – and looked after children – this area continues to increase moderately.
6.2.3 Hackney has a large number of residents in receipt of housing benefit. The Council is reporting its best level of benefit processing - currently -10 days -against a long standing target of 20 days just as the benefit is being abolished. Government is utilizing data transfer information especially in relation to benefit overpayment. Real time income data is now available from HMRC.
6.2.4 The number of people attending the HSC is reducing in line with the budget saving identified for 2016/17. Comparisons to 2 years prior shows the number of people attending the HSC has reduced by 100,000. The Council has shifted a number of processes online in a bid to migrate people to using online services and reduce the need for people to attend the HSC.
6.2.5 The Council’s capital investment programme continues as they invest significantly in their housing stock. However there is pressure on the HRA budget particularly in relation to the Benefit Cap and Universal Credit. The Group Director, Finance and Corporate Resources suggested providing Councillors with a briefing session on the Housing and Planning Bill to provide information about the impact of the Bill on the Council’s housing budget.
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ACTION
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Group Director Finance and Corporate Resources to provide a briefing session for Councillors on the impact of the Housing and Planning Bill on the Council’s housing budget. |
6.2.6 The Government is offering councils a four year settlement and this has to be accepted by 14th October 2016. LBH is still considering the proposal because some details pertaining to the settlement remain unclear.
6.2.7 The Government has introduction the Social Care Precept and the Council has included this in the budget.
6.2.8 Hackney’s council tax collection rate continues to remain high with income increasing in line with the number of new properties in the borough.
6.2.9 The Council’s income has reduced by £130 million.
6.2.10 The Government is assuming all upper tier councils will increase their council tax by 3.75% each year.
6.3 Hackney Budget
6.3.1 Hackney Council agreed its budget at the Full Council in March 2016. The headlines were:
· 2% Social Care Precept raising £1.3m
· Significant Cost Pressures: Temporary Accommodation / Looked After Children; No recourse to public funds; Impact of Benefit Cap reduction. Based on medium term forecasts the council will need to invest up to £5 million to accommodate the cost pressure from temporary accommodation.
· The Council continues to utilise its asset base and capital investment programme.
· The income stream for council tax / business rates; parking and commercial income are improving.
6.3.2 The Council continues its work on realising the planned savings and ensuring they are embedded and delivered for 2016/17. The Council’s income has a gap of £30 million. The Finance team is working with departments to ensure delivery of the planned savings and assessing any impact of new changes like the Housing and Planning Bill and the changes to schools funding recently announced.
6.3.3 The Council’s funding gap for the next three years was noted as follows:
· 2017/18 the gap is £15.326 million,
· 2018/19 the gap is £8.301 million and
· 2019/20 the gap is £7.377 million.
It was noted the figures above do not assume an increase in council tax.
6.3.4 The organisational income was outlined to be (in millions)
· £75.148 top up;
· £69.140 RSG;
· £67.851 council tax and £28.818 council tax freeze;
· £26.3 business rates;
· £18.042 new homes bonus;
· £10.909 adult social care;
· £7.74 NHS grant;
· £3.567 collection fund surplus estimate; 2.6 million LACSEG;
· £1.3 grant for losses arising from the autumn statement and;
· £.244 new homes bonus adjustment grant.
· A total income of £311.659.
6.3.5 In the past local authorities were funded by a range of grants. In recent years the number of grants received by local authorities has reduced significantly.
6.4 Income Generation
6.4.1 The Council has 19 service areas generating income. Parking is the largest income generating service area.
6.4.2 A large proportion of the income generating service areas have an income stream in the thousands not millions. The income of 13 service areas is under £2 million a year each. The majority of income generation is from fees and charges.
6.4.3 It was noted that those areas of the Council that generate income have been identified and ring-fenced from significant cuts. In fact, areas such as property services and commercial waste have received investment to fully realise their income streams. It was pointed out that Increases in income directly reduce the need to deliver cuts to front-line services and as councils move towards a more self-sustaining model of local government, these income sources will become more important.
6.4.4 Parking is an increasing source of income but expenditure is driven by policy. Parking income has increased by 40% between 2012/13 – 2015/16. The surplus in income from parking contributes towards eligible expenditure such as concessionary fares. A breakdown of parking income was provided and Members noted that the income from Penalty Charge Notices (PCNs) was the largest and increasing significantly.
6.4.5 Commercial waste is an area where the council is aiming to be more active in generating income. Private contractors will only collect the waste agreed, whereas councils have a duty to remove waste and are often the last resort for waste not collected. The Council aims to become commercially viable in this area so that they become the contactor of choice for businesses.
6.4.6 Members commented this could be supported through stronger enforcement.
6.4.7 In reference to income generation for regulatory services – planning, licensing, building control and land charges. The Council would like to see the fees for planning and licensing more in line with the cost of providing the service. It was noted that there are some conditions on income stream and the example cited was Markets. The Commission was informed any charges pertaining to this service can only cover costs.
6.4.8 It was noted council tax income has been increasing year on year and this is attributed to the growth in properties in the borough and collection rate. The Council’s collection rate has remained consistently 95%. Hackney borough has 20,000 more properties than a decade earlier.
6.4.9 Hackney has seen an increase in its business rate collection rate. Increasing business rate income should be an area of opportunity for the Council but the regime announced by Government has introduced a complex process that encourages businesses to submit an appeal for a business rate rebate. The Valuations Office has received a large volume of appeals. This office was not equipped to manage the volume of appeals it has been receiving.
6.4.10 The Council has continued to increase its asset base of properties to grow its capital. The Council has been investing to enhance its existing asset base and disposing of assets which cannot provide optimal returns. This strategy requires the Council to balance risk. This has led to strengthening existing Estate Management resource and reviewing options to support regenerative outcomes, in partnership with Regen Delivery, Libraries, CYPS, HLT and Leisure.
6.4.11 As part of its asset management the council is reducing its physical corporate “footprint” and thus running costs. The progress being made in the areas of digitalisation will release areas like the cash office. The kiosks are currently taking 30% of the cash revenue. The Council is investing to enhance its existing asset base where revenue savings can substantially outstrip cost. Enabling the reallocation of surplus space to productive uses and creating new assets. The Council is pursuing opportunities to re-finance where possible.
6.4.12 In line with its corporate responsibility the Council encourages businesses (using their asset base) to pay the minimum wage to employees.
6.4.13 In relation to income generation the General Fund’s commercial income has increased by more than 400% between 2012/13 and 2018/19. The Housing Revenue Account (HRA) income has increased from £1,633,692 to £2,358,347 between 2012/13 and 2017/18. This is as a result of the strong performance of new acquisitions and maximising rents through strong lettings, rent reviews and lease renewals.
6.5 Questions, Answers and Discussions
i. Members queried if this growth assumption was likely to be able to replace the income needed by councils.
In response to this query Members were informed that the assumptions is the growth will be from new council tax income. It was highlighted that London is likely to see a growth in council tax income from the new homes built.
Members were informed the trends show demand is increasing year on year. The Group Director, Finance and Corporate Resources explained a briefing was produced and he offered to circulate this briefing to members of the Commission.
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ACTION
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Group Director Finance and Corporate Resources to circulate a briefing outlining the trends and drivers for the changes to temporary accommodation. |
The Cabinet Member for Finance from LBH explained it’s a combination of an individual’s circumstance and the Government’s policy changes (government policy is continuously evolving). It is anticipated that the Housing and Planning Bill will impact further on this area too.
Members were informed a recent update on the impact of the welfare reform changes was presented to the Community Safety and Social Inclusion Scrutiny Commission earlier this month.
The Group Director Finance and Corporate Resources explained the Collective Investment Vehicle relates to Pensions and it enables local authorities to bring investment of funds together into one investment vehicle to reduce fees. The Officer offered to circulate a briefing for Members on CIV. The Officer pointed the use of CIVs is largely mandated by the Government.
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ACTION
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Group Director Finance and Corporate Resources to circulate a briefing explaining what a Collective Investment Vehicle is. |
The Group Director, Finance and Corporate Resources advised this related to the funding cuts from government and how they were applied.
Group Director, Finance and Corporate Resources confirmed it was and the impact on the collection rate was due to the transient population in the borough.
The Council’s collection rate for business rates has increased but the changes in relation to appeals for business rate relief makes it difficult. Many businesses especially large corporate organisations regularly appeal against the rate applied. The Council is experiencing an increase in number of appeals from businesses. It was noted that big organisations have teams to keep logging appeals.
The Cabinet Member Finance explained what needs to be understood is how local government finance is changing and how vast this change has been. The Cabinet Member Finance agreed the public needs a better understanding of how the public purse is managing risk and the changes to its income.
The Council is also trying to reduce costs and exit out of PFI high cost schemes.
The Cabinet Member Finance agreed the public needed to become aware of the vast changes and the whole pattern of change.
The Chair commented that the assumption appears to be that councils will become more self-sufficient.
The Group Director, Finance and Corporate Resources informed when the economy dips people tend to pay fines early because they cannot afford to pay the higher charge at the later date. There is also less traffic and fines related to road errors e.g. a yellow junction box. Therefore as the economy recovers, PCN income can be expected to rise.
In response Members were informed Hackney has a high number of properties in the lower band rates. It was explained this was attributed to the value of properties in the borough at the time council tax was implemented.