Agenda item
Cabinet Question Time - Finance and Customer Services
Minutes:
5.1 The Chair welcomed to the meeting Councillor Geoff Taylor, Cabinet Member for Finance and Customer Services and Ian Williams, Group Director Finance and Corporate Resources from London Borough of Hackney.
5.2 Topic areas submitted in advance for Cabinet Question time were:
· Council tax
· Pensions
· Business rates
· Procurement.
5.3 The detailed questions under each heading are outlined on pages 19-20 in the agenda.
5.4 The Chair invited the Cabinet Member for Finance and Customer Services to open by providing a response to the questions submitted in advance. The following substantive points were made:
5.5 Council Tax
5.5.1 The Council Tax Reduction Scheme (CTRS) has been operational for approximately 4 years. The scheme is scheduled to be reviewed in 2017.
5.5.2 Before 2012 the council tax benefits system operated on the basis that the local authority would make the reduction and the Government would refund the full cost of the deductions made.
5.5.3 Following austerity local authorities were given 90% of the budget and tasked with setting up their own CTRS. In addition councils were still required to give the same relief to pensioners.
5.5.4 Funding for the CTRS comes in the Council’s main budget the Revenue Support Grant (RSG), so it is not easy to identity the amount the government has given to fund the CTRS.
5.5.5 Since austerity began the budget has reduced significantly. The budget is approximately half the amount from when the Council was initially tasked with setting up the CTRS. The cost of the scheme is still based on the original budget.
5.5.6 If the CTRS was viewed purely as a financial model it would be reduced. However making any reduction to the scheme will be a challenge because of the client group.
5.5.7 The scheme needs to be reviewed and the cost reduced but the key challenge will be to not adversely affect the people in receipt of Council Tax (CT) benefits because they are vulnerable.
5.5.8 The CTRS review will include engagement with stakeholders so the council can better understand the key areas of need for the people on CTRS.
5.5.9 In relation to CT arrears the following points were made:
Paying CT is not optional it is a requirement. There are some people who have to go without luxuries to ensure their bills are paid. But it was acknowledged there are some people who still find it hard to pay the CT and need assistance.
5.5.10 Hackney Council have developed processes that enable residents to make arrangements as early as possible. There are a range of options in place to help make the payments manageable, like a longer period to pay than the standard timeline; paying by direct debit to help manage their finances and a revised debt recovery process. The Council has added additional stages such as a letter, text messages etc to help provide assistance as soon as possible. It was pointed out the support mechanisms in place will only be successful if a person engages and admits they need support. If after all the stages the payment is not recovered the debt will be passed to a collection agency.
5.5.11 The Council tries to prevent from getting to the stage of using a debt collection agency because this process involves entering peoples home and removing their possessions. They also recognise that children could be present and this distressing. The Council has many stages of support in the process but rely on the person to contact the council. There is the view that by having some many stages in the process a person could think the council would forget about the debt, but this is not the case and the debt does need to be paid.
5.5.12 As part of the review of the scheme the Council will be looking at their use of enforcement agencies for the CTRS.
5.5.13 In summary the key message is CT is not negotiable people need to pay the bill and they can make arrangements for their payments.
5.6 Business Rates
5.6.1 The Government’s rationale for 100% business rates retention, is it will encourage local councils to develop businesses within their local economy. It was reported there is no evidence to support this rationale.
5.6.2 The principles behind business rates retention are dependent on land values. If the land value is high this is positive because business rates will increase, however, if the land value is low existing businesses will still pay the same amount of business rates. Even if businesses are developed the rate will not increase. The assumption is by councils keeping business rates they will be in a positon to development more businesses, but this may not be the case.
5.6.3 The impact of 100% business rates retention on the borough is not currently known. The Council is not in the position to calculate the income it would receive under 100% business rates. This is due to having the GLA.
5.6.4 The retention of business rates income by the council will not impact on businesses or the rate they pay. The rates payable are set by the revaluation exercise.
5.6.5 There will be various reliefs available to small business that can be applied to the business rates.
5.6.6 The view is the policy change will not necessarily affect businesses because there will be mechanisms of support set up for businesses.
5.6.7 For the voluntary and community sector there is a discretionary fund available, but this is less than a £¼ of a million. If the Council wishes to increase this fund it would need to take the funding from another part of the budget.
5.6.7 It was noted some charities have a mandatory relief rate of 80% and the Council can give them additional relief to make them 100% proof from business rates.
5.6.8 Not for profit organisation are eligible for rate relief too, but any relief given has to come out of the Council’s budget.
5.6.9 There are other organisations the Council can give money too but there is no set criteria. Therefore the council does not use this discretionary power.
5.6.10 In summary there is a hardship fund available and this is assessed on a case by case basis but this covers a variety of organisations and the fund is limited.
5.7 Pensions
5.7.1 The ratio of assets to liability improved between 2013-2016 and rose to 77%.
5.7.2 The biggest challenge to the Council’s ability to pay pensions is the fact that people are living longer.
5.7.3 The pension fund is doing well and in a better position than in previous years. The investment return for the equity investment has been good.
5.7.4 Contributions to the pension fund have been better than expected. The taper has been lower than expected.
5.7.5 Pension increase has been lower than expected because CPI has been built in and fewer people are taking the 50/50 scheme.
5.7.6 It was noted when the fund is in a strong position this is the time to reduce the risk to the fund. The current policy is if the council can get the pension fund to the point of funding 83% of its liabilities they can look at de-risking the fund.
5.7.7 Given the factors described above the Council is giving some thought to moving the fund out of equities into better paying bonds for security. Bonds are considered to be safer because they do not increase and decrease in value to the extremes that equities can.
5.8 Procurement
5.8.1 The only provider of concierge services in the Borough is G4S. Members were informed if residents are reporting differences in services this is a difference in service provision by G4S not different providers.
5.8.2 Hackney Housing conducted a survey of concierge services and where the services were good people wanted to keep them and where they were poor they want to remove the service.
5.8.3 It was explained residents pay for concierge services by the block and if residents received a poor service they are likely want to withdraw from paying for the provision.
5.8.4 Approximately 2 years Hackney Housing reduced its concierge service by 25%. This reduction was applied to the contract for G4S.
5.8.5 The uptake of provision has led to a reduction in the overall contract of approximately 40% and this may be the reason for the differences being experienced.
5.8.6 The Chair explained through Councillors casework the question was raised to G&R to review.
5.9 Questions, Answers and Discussion
(i) Members raised the following comments and enquires:
(a) If the Council had a role in monitoring and checking the quality of concierge service.
(b) How the Council monitored the provision of concierge services and;
(c) When the contract was being re-tendered would the council take the information about poor service into consideration.
The Cabinet Member for Finance and Customer Service advised the contract was due to be retendered next year. Outsourcing was a key activity for local government over the last 20 years. Members were informed the Council had learnt that outsourcing required robust contract management. Increasingly the Council had become conscious of having the right KPIs included in the contract. It was pointed out what people want from a service is not always measureable (e.g. a person that smiles and helpful). As a way of dealing with these soft (unmeasurable) performances the Council has implemented things like requiring all contractors to pay the London Living Wage to their staff. The Council is of the view this helps with staff morale, motivations, happiness and staff retention.
In regards to the re-tender of the contract, it was noted the Council will specify as much as possible in the document.
Members welcomed the review by the Council and pointed out other councils, in particular London Borough of Lewisham had transferred their bailiff service back in-house to reduce the problems with bailiff actions. The change has been reported to produce savings. Lambeth Council was cited as another example of a local authority taking a whole council approach to distinguish between those who are too poor to pay, won’t pay and can’t pay. This approach has been reported to be having a positive effect on the council tax collection rate.
(ii) Members urged the Council to invite the 2 councils mentioned above when the Council embarks on the review of the CTRS, to find out more about their work and their success in achieving savings.
(iii) Members highlighted a recent report called Taking control - the need for fundamental bailiff reform - produced in partnership by a variety of advice agencies - highlights some concerns about the operating practices of bailiffs. It highlights the use of private bailiffs by councils and their practices being problematic.
(iv) Members encouraged the Council to invite the organisations that produced the report to their stakeholder sessions when they were embarking on the review of the CTRS.
(v) Members also highlighted another report by Child Poverty Action Group called Still too Poor to Pay too poor to Pay and encouraged the Council to invite this organisation to the stakeholder engagement session too.
(vi) Members pointed out one of the key principles for the CTRS review was for it to be cost neutral. However the Council plans to increase its council tax and this will place a further burden on poorer households. Members enquired if some of the extra funds raised could be used to support or reduce the burden on poorer households?
The Cabinet Member for Finance and Customer Services advised if the support is increased in one area that would impact another area (reduction) and the council would need to agree to this change. The aim for the CTRS review is to be cost neutral.
It was highlighted that the Council’s RSG would have reduced by 50% by 2020.
(vii) Members welcomed The CTRS review and the focus on the use of bailiffs. The Members made the following comments and queries:
(a) It has been highlighted that councils seem to be quick to use bailiff companies that private organisations
(b) Bailiffs are known not to follow the guidelines when collecting a debt.
(viii) Members referred to the services being provided by G4S on behalf of the Council. Members enquired how much consideration was given to a contractor’s history when granting a council contract compared to another organisation with a good track record. Advising that G4S had been sanctioned by other public bodies for its operations in relation to their handling of prison services and over charging.
The Cabinet Member for Finance and Customer Services advised in the procurement process the view may be that the council always selects the cheaper provider. Generally the procurement process can be split of 60/40 or even 80/20 between price and quality. It was explained that it is essential that when awarding a contract the Council is confident that the service specified could be provided. Every tender submitted is scored but also assessed for confidence that the service can be provided.
(ix) Members enquired why the council was accepting tenders and considering tenders from organisations that have a poor track record of operation and have been sanctioned by other public bodies. Members asked about the Council’s ethics policy for engagement with organisations that have a poor service provision history?
The Cabinet Member for Finance and Customer Services advised the procurement process does not allow them to exclude an organisation based on another organisations reports of poor service.
(x) Members probed further about the Council’s policies and ethics in this instance.
The Cabinet Member for Finance and Customer Services advised the Council is prohibited from considering ethics as part of the procurement process. It was pointed out under the local authorities’ regulations and guidance, they cannot exclude an organisation from the tender process unless the company has been prosecuted. Therefore they can still apply and consideration must will be given to them in the tender process.
(xi) Members enquired if the Council’s previous experience can be taken into consideration as part of the procurement process.
The Cabinet Member for Finance and Customer Services confirmed the council can take its own previous experience into consideration during the procurement process.
(xii) Members enquired why the council tax collection rate was set so low and asked if the council can increase the targets and achieve them without creating more of a burden to poorer households?
(xiii) Members made the following comments and enquires:
(a) The net effect of the business rates reform given the scheme and policies have been published.
(b) Where the council should be looking for its income over the next 3-4 years
(c) How the expected income compares to the loss of Revenue Support Grant (RSG) funding from central government and how this was likely to impact on the composition of the Borough.
(d) The Council was facing a mirage of issues to manage and make decisions on. The Council will need to manage competing challenges like the need for higher rates because business rates will be the main sources of income and the need to keep smaller enterprises going to create diversity in the borough. It was also anticipated that these challenges would impact on services and the council’s response would be guided by this too.
(xiv) Members commented there is scope for better use of Audit Committee given the complexity of challenges faced, highlighting it could be used to look at the broader issues related to performance and achievement. Members enquired if there could be a commitment to discuss this outside the meeting with the Chair of Audit Committee?
(xv) Members enquired about the Council’s strategy and policy around asset management for the VCS sector. Members pointed out there have been cases referred that involve organisations being given a property 20/30 years ago at very low rent. Now there are issues about the payment of rent over this term or the property is required for redevelopment. The concern being raised was about the council having a consistent or coherent policy in situations like this.
(xvi) Members referred to the business rates review and the Government’s provisions for businesses to access support. Members queried how the Council would be accessing the relief fund. Would access to the fund be via an application or will it be made available to all local authorities?
The Cabinet Member for Finance and Customer Services advised for CT collection rates the budget set did not impact on the amount collected. The advantage of exceeding the target meant they would have a surplus and this could be used on other expenditure. If the council exceed the target it does not make a practical difference to the income collected.
The Group Director Finance and Corporate Resources pointed out the council has increased the collection target over the years. Hackney Council’s target for collection was comparable to other like boroughs of similar composition and their in year collection rate had increased. It was highlighted Hackney has a very transient population and the revenues and benefits team spend a significant amount of time chasing for payment from people who have moved out of a property.
The Cabinet Member for Finance and Customer Services explained it was hard to predict the future income the council would receive following the withdrawal of RSG. It was pointed out over the last 7 years the council has been working to contain expenditure within the parameters of its income. It was also highlighted that a change in government policy can impact on the Council’s expected income too. This was the case when the Government introduced the 1% rent reduction for social housing. This reduction impacted on the Council’s expected income and their 30 year housing business plan.
The Cabinet Member for Finance and Customer Services agreed to discuss the use of Audit Committee with the Chair of Audit outside this meeting.
The Cabinet Member for Finance and Customer Services advised the Council does have a consistent approach for asset management. It was noted there has been changes in the council’s approach and management over the last 30 years and over time VCS organisations have evolved too. The council is more careful and gives consideration to the use of its assets. Generally the council’s asset management has improved and more able to assess the value of their assets, but equally their management of VCS organisations has improved too.
The Cabinet Member for Finance and Customer Services advised in relation to the business rates relief funding they are still waiting for confirmation of the details.