Agenda item

6.1  The Chair welcomed to the meeting Cllr Geoff Taylor, Cabinet Member for Finance and Customer Services and Ian Williams, Group Director Finance and Corporate Resources from London Borough of Hackney.

 

6.2  Each Year the Commission receives an update on the Council’s proposed budget for the next municipal year.  The Council’s 2017/18 budget report was being finalised and the Commission received a verbal update on the budget. 

 

6.3  The Commission received 3 reports as background information about the Council’s the budget strategy.  These reports are on pages 21-65 of the agenda.  The summary about each report is on page 19 in the agenda.

 

6.4  The Government’s spring budget is expected to be announced 8^th March 2017.

 

6.5  The Council has been lobbying on issues like business rates revaluation. 

 

6.6  A fact sheet for councillors was being finalised.  It will contain information about the key factors that need to be kept under observation and there will be a briefing session arranged.

 

6.7  The Council is currently gathering intelligence about the profile of businesses locally to understand the implications of the business rates revaluation. 

 

6.8  The Council is preparing for a number of business rate appeals following implementation of the revaluation.

 

6.9  The retention of business rates income by local authorities has been branded as a devolution solution.  It was highlighted if the Council becomes responsible for business rates at a time when local businesses are folding, this will have a significant impact on the Council’s revenue and become a challenge for the Council to manage. 

 

6.10  Other areas of pressure on the Council’s budget are: school funding - following proposed policy changes by the Government in the education system with pressure on areas such as special education needs - the homelessness reduction bill; the Council’s work on procurement and the London Finance Committee.

 

6.11  The reports in the agenda provide the foundation information for the Council’s budget.

 

6.12  The Council tax base report estimates a higher revenue collection for 2017/18.  This report estimates business rates income the Council expects to collect following the revaluation.  In addition the report outlines the number of anticipated appeals.  The Council bears the cost of business rate appeals.

 

6.13  The council tax base is based on the number of properties in Hackney this has risen from approximately 92,000 in the 1990s to approximately 110,000.

 

6.14  The Council is carrying out work to reassess the single person’s discount for households to ensure they are still valid.

 

6.15  In 2013 the Council introduced the local council tax reduction scheme.  The council tax reduction scheme is scheduled for review in 2017/18.  This review will consider changes in policy and the cumulative impact of policy changes over that period.

 

6.16  The Capital programme update gives a good indication of new houses, school places and the significant developments.

 

6.17  The overall financial position report is as laid out in the agenda.  This report is important because it gives an indication of the Council’s current financial standing in relation to assets, cash flow etc.

 

Council Budget

 

6.18  For the spring budget (March 2017) the Council has been working with London Councils to make sure the case for London is being put forward in relation to the housing shortfall; council right to buy and its impact on council housing stock levels and the concerns about the sale of high value council homes.  The communication to date is that the Council will not need to pay right to buy receipts to Government this year.  In addition they will be highlighting the pressures of temporary accommodation and that local authorities will need to start thinking about discharging its duty to the private sector.

 

6.19  The Mayor’s budget proposal sets out the intention to increase council tax by 3% which incorporates the 2% social care precept the government introduced to address the adult social care budget pressure.  Adult social care funding remains a key challenge.

 

6.20  School’s funding is an areas that has not received as much media attention as maybe it should.  There is the impact of welfare reform, population growth and the funding for SEN being frozen at 2011/12 levels - in spite of increases in the number of cases for this budget area.  Collectively councils are lobby from a London perspective on the education system particularly the new funding formula the government is proposing to introduce has complicated this area.  The education consultation is proposing a funding cap of 3% but it should be noted that there are significant cost pressures in the system that apply specifically to London.  Hackney Council’s Executive will be writing to the Government to make their case about the implications of these changes for Hackney.

 

6.21  It was noted if the Government returned its spend on Grammar schools and forced academisation back into the system, it would help to reduce the costs pressures in the education system.

 

6.22  Questions, Discussions and Answers

 

(i)  Members enquired about the Council’s plan to manage the impact of the business rates increase locally and/or the economic growth in the borough?

 

The Group Director Finance and Corporate Resources from London Borough of Hackney pointed out although the Council’s name will be on the collection bill sent out to businesses, there will be very little revenue raised from the increase in charges.  The additional revenue from the collection will be offset by the reduction in funding and support from Central Government in other areas of the system.

 

The perceived benefits to councils will materialise as promoted from this policy change.  The key message the Council needs to communicate is it does not set the rate or dictate how the system revenue is distributed.  It should be noted the Council will be administering the collection of the revenue but will have very little influence over how the revenue in the system is redistributed. 

 

(ii)  Members raised concern about the impacts of the business rates revaluation on small businesses in the borough and enquired about the Council’s campaign work on the implications of this policy change locally.

 

The Group Director Finance and Corporate Resources highlighted a number of English governments agreed not to increase their council tax bills over the threshold because business rates retention was presented ad a solution.  The up rise from local businesses to the increase following the revaluations was not perceived.  This presents an interesting situation. 

 

In the budget on the 8^th March it is anticipated there might be some concessions made for smaller businesses due to the big change in rateable values.  In Hackney it is anticipated a number of businesses will move from no rates to small business rates or from small business rates to a higher rateable value.  The Council will review any proposed concessions to see how it relates to the profile of Hackney businesses.  The Council will need to encourage businesses that are struggling to access support if it is made available.

 

(iii)  In relation to business rates members pointed out there was a conflict for the Council.  On one hand the increase in property prices has been advantageous for all in the borough but also the revaluation by the Government is the right thing to do.  The concern is not with the change but the pace of change and the negative impact on businesses that cannot keep pace with the changes.

 

(iv)  Members referred to the capital programme report and agreed this report was important in relation to population increases and infrastructure and to keep them notified of capital expenditure.  It was important for this area of spend to have monitoring and oversight like the revenue reports of the Council.  Members asked for an explanation about movements in the capital programme?

 

The Group Director Finance and Corporate Resources explained going forward the financing for the capital programme will shift.  Predominantly for local government the funding has been one off grants or from resources that are already available.  The first priority is to ensure any external grant funding (external) is retained, then to make sure the programme keeps to budget which involves accurate forecasting.  In the future, the Council may need to go out to borrow money until they are in receipt of the funding for the programme.

 

Officers have improved their report monitoring of the capital programme and there is regular monitoring of the capital programme as a whole.

 

Some of the changes to the programme relate to the timing of the work.  For schools they may have deferred the work until the next school holiday period.  Members were referred to page 41 in the agenda which summarizes the Council’s extensive repairs programme for maintained schools.  The Council plans to publish the work being carried out on school estates so local people can be aware of the Council’s spend on maintained schools.

 

For some capital programmes like housing the delay has occurred due to challenges with contractors and completion of works to the desired standards.

 

(v)  Members referred to efficiency savings and the change programme and enquired if there was any evidence from the data collated about a reduction in the level of service from the changes implemented.

 

(vi)  Members enquired why the council was not using the London housing consortium framework.  The Member advised her attendance at this consortium would enable the council to access surplus funds but this is not possible because the council does not use the framework.

 

The Group Director Finance and Corporate Resources advised the council has made efficiencies and savings totalling approximately £150 million since austerity commenced in 2010.  Some of changes have resulted in improvements to services the example cited was the closure of the cashier’s services.  Residents can now transact with the Council online and this has led to the closure of the cashier’s service.  The reclaim social work model made improves to the model of service delivery making it more efficient.  However, it was acknowledge there are some functions that are stretched like the back office and if the council does endure a further 5 years of austerity this is likely to have an impact on service provision.

 

The Group Director Finance and Corporate Resources and Cabinet Member for Finance and Customer Services advised they were not in receipt of this funding and would explore why.

 

ACTION

The Group Director Finance and Corporate Resources and Cabinet Member for Finance and Customer Services to explore why the Council does not use the London housing consortium framework.

 

(vii)  Members enquired about the long term financing for business rates.

 

The Cabinet Member for Finance and Customer Services confirmed Hackney will see a 46% increase in the next 2/3 years for business rates.  It was highlighted although this presents the council with a challenge in relation to the impact on local businesses, it is unlikely to change in the near future. 

 

It was pointed out if there is a property tax system it can change the fabric of society.  If there is a property bubble this accelerates gentrification of that place.  A fairer system would be to base the taxation on business turnover or profit margin rather than the value of the property.

 

It was acknowledged this taxation will impact the vast majority of people.  However the lobbying by the Council about the negative impact of the business rates revaluation to the boroughs local businesses is unlikely to result in any change to this policy area in the immediate future.

 

Members commented what was needed was a taxation on land owners to make the taxation fair.