Agenda item
Finance Update - Presentation
Decision:
RESOLVED:
To note the finance update.
Minutes:
6.1 Ian Williams presented the finance update, highlighting the following:
General Fund Forecast 2021/22/ Forecast variance against budget (After reserves) - £4630m
2021/22 – General Fund Forecast
· Neighbourhoods and housing are forecasting a significant overspend of £2.9m of which £2m is COVID related;
· The forecast as at the end of February 2022 showed an overspend of £4.9m after the application of COVID-19, Social Care and the Cyber-attack;
2021/22 Housing Revenue Account (HRA) Position
· Forecast of a breakeven position on the HRA but there was a forecast overspend of £4.7m which included impact from COVID-19 of £3.2m;
Medium Term Financial Plan (MTFP)
· Balanced Budget for 2022/ 23 was agreed by Council in March 2022;
· The MTFP indicated a budget gap of between £14m and £29m for the next year;
Assumptions and Risks
· Risks around inflation, fairer funding, recovery from the cyber-attack, increase in demand for services and worsening economic position;
Budget Timeline
· The Council is legally required to balance the budget each year;
· Work on the impact of inflation was ongoing;
The London Picture
· High staff/ running costs. In particular, Leisure Centres were under much financial pressure;
Account Update
· 2020/21 Council and Pension Fund statement of accounts are substantially completed;
· Plan to publish the draft 2021/22 statement of accounts by the end of June.
6.2 Councillor Troughton asked if the overspend, referred to, related to one
of costs that would not carry over into the next financial year
6.3 The Group Director of Finance and Corporate Resources reported that
some costs were recurrent while others would require ongoing provision. Work was ongoing to support those who were in financial difficulties in their occupations. Further, there were costs arising from the cyber-attack. More detail on these costs and the location of overspends would be included in the Overall Financial Position to be submitted to Cabinet in July 2022.
6.4 Councillor Young asked if the SEN overspend was reflected in the
financial figures presented.
6.5 The Group Director of Finance and Corporate Resources told the
Committee that there were difficulties in funding SEN nationally. A deep dive had been carried out and a report produced. It was agreed to circulate this report.
Action: The Group Director of Finance and Corporate Resources
It was noted that SEN funding was included in the dedicated schools grant area and was not included in the figures presented.
6.6 Councillor Garbett asked for clarification on the £2m COVID-19 related spend.
6.7 The Group Director of Finance and Corporate Resources referred to the
challenge of income lost by the Council as a result of the pandemic, in particular affecting the Leisure Service.
6.8 Councillor Gordon asked for clarification on how the fairer funding
proposals would impact Hackney Council.
6.9 The Group Director of Finance and Corporate Resources told the Committee that fairer funding was a term given to a review of how funding is distributed to Local Authorities, calculated on a formula driven by factors such as population, deprivation, demographics and the cost of providing the service. The formula used was now considered to be dated and it was not expected that funding would increase significantly with the fear that increased resources would be allocated to the north-east of the country. Active lobbying to secure increased funding was carried out.
6.10 Councillor Chapman referred to the politically led agenda in this regard and reiterated that lobbying would continue in this area.
6.11 The Chair referred to the fact that when considering the budget and fairer funding worst case scenario should be considered. She asked that presentation slides be circulated to members prior to meetings.
6.12 Councillor Gordon asked how the current pressure on the HRA would impact on the Council’s capital spending.
6.13 The Group Director of Finance and Corporate Resources reported that the HRA business plan was being reviewed to ensure that the Council was in a position to fund and maintain stock with the ability to invest in new homes and retrofit.
6.14 Councillor Smyth expressed concern at the financial forecast and asked what measures would be used to manage this position, in particular in the light of the challenge of inflation.
6.15 The Group Director of Finance and Corporate Resources referred to financial challenges arising from the current external factors. An experienced finance team existed in the Council and over the past months new planning arrangements were put in place to balance the budget for 2023/24. Work was being carried out with colleagues across London Councils to identify opportunities and lobby the government. The medium term financial plan was being reviewed with updates to Cabinet, Audit Committee, relevant chairs and members drop in sessions, to ensure effective engagement.
6.16 Councillor Billington asked what the available options were to the council given the new external drivers and how the impacts on residents would be ascertained. She asked if groundwork should be in place as some individuals can pay more.
6.17 Councillor Troughton asked what percentage of the General Fund was spent on salaries and estate. She asked how the current circumstance would impact planned programmes.
6.18 Councillor Young asked about the relationship between the cost of sustainable retro-fitting challenges and the new build programme.
6.19 Councillor Garbett stressed the need to consider the wellbeing of Council staff who in some cases were also residents, providing support together with the prioritisation of services that impact on residents.
6.20 The Director of Finance and Corporate Resources told the Committee that:
· In relation to inflation, the Council was working with advisers to ascertain the most accurate forecasts with work commissioned on where inflation was used as a proxy for change in relation to fees and charges and contracts being clear on whether there were any opportunities, for instance, in considering the possibility of renegotiating a contract. Consideration was given to the ability to collect any increase in rent and council tax. Work was ongoing with various forums including the Audit Committee and Scrutiny Commissions to properly understand any unintended consequences of decisions made. Work was ongoing on understanding the necessary decisions that would need to be made in relation to capital programmes and considering different ways of procuring given changes of circumstances. There was a need to be agile in this regard, including around retro-fitting, new homes and other capital programmes. It was noted that, with shifts in energy prices some business cases had changed with a need now to consider the Capital Programme in this regard;
· Payroll was the biggest area of controllable expenditure and accounted for £200m expenditure including National Insurance and Employer Pensions contributions;
· Much work was ongoing in relation to policy based budget setting. Slides on this would be shared with members of the Committee.
Action: The Director of Finance and Corporate Resources
The Council recognised the contributions made by staff to its work. A Wellbeing Package was available and would be circulated to members of the Committee. Staff were supported and helped during the challenges of COVID-19.
Action: The Director of Finance and Corporate Resources
6.21 Councillor Gilbert stated that the Council had made a commitment to ‘Fire and Re-Hire’ and asked whether there were proposals to change this reconfiguration.
6.22 Councillor Gordon asked for further detail on policy led budget setting in
relation to how it worked and considerations.
6.23 The Director of Finance and Corporate Resources told the Committee that:
· There were no proposals to change the ‘Fire and Rehire’ configuration. This related to contracts that may contain clauses on inflationary uplift, of which there were few in the council. Those contracts that contained these clauses were being reshaped;
· On policy led budget setting, areas of council expenditure had been identified together with inputs and outcomes. This could not sit alone from the development of the strategic plan and had to be embedded in transformation work, ensuring a balanced financial plan for the coming 3 years. Relevant Committees and Members would be updated on balancing the budget for 2023/24 and setting a framework for a medium term forecast through the current administration.
RESOLVED:
· To note the finance update.