Agenda item

RESOLVED:

 

·  To note the overall financial position update.

1.1  Finance Update

2022/23 General Fund Forecast

·  At the end of August 2022 the Council was forecast to have an overspend of £7.856m after the application of the cyber attack and cost pressures set asides, cyber reserve and savings from the National Insurance reduction;

·  Both residents and the Council would continue to face significant financial pressures as the inflation surge was showing no sign of abating;

Inflation will impact on various components of many of the Council’sservices but in particular on those with significant energy, fuel and contract costs;

·  A considerable pressure as a result of 2022/23 pay negotiations was forecasted;

2022/23 Housing Revenue Account Position (HRA)

·  The HRA was forecasting an overspend in net operating expenditure of £9,530m. However, an overspend could be brought back into balance by a reduction in revenue contributions to capital outlay;

·  £9.530m could be used of the £10.712m RCCO budget to mitigate the overspend because a full capital programme was not being delivered in 2022/23 due to the delay in the procurement of the housing maintenance main contracts;

·  The main areas of overspend were in energy cost, reactive repairs and a forecast increase in supervisions and management costs and bad and doubtful debts;

·  London Picture: Boroughs plan to make an estimated £2.5bn of savings over the next 4 years;

·  London picture - An increase of c.£1bn from the 2021 survey and higher than at any point since 2016;

·  London picture - Upward pressure on contracts. The largest general pressure (£650m) over the 4 years followed by pay award (£521m) and other running costs (£379m); 

·  Economic context and pay award; 

·  Bleak economic outlook with ongoing cost of living crisis;

·  Bank of England forecasting 13 % inflation by the end of the year;

Counter-inflationary measures of the Bank of England had seen the cost of borrowing rising;

·  PWLB rates had increased, meaning a higher cost of borrowing to fund the capital programme;

·  Relief from energy prices for households was announced by the Prime Minister;

·  Economic Context and Pay Award; 

·  The 2022-23 pay award was likely to have a significant financial impact on the Council. A flat rate of £1,925 was made by the National Employer (£2,355 inner-London). The cost to the General Fund of the employer proposal was estimated to be £11m in  2022-23 with a cost to HRA of £2.2m;

·  The Mini-Budget;

·  Series of measures put in place including a significant package of cuts and other measures; 

·  Since then announcements had been made, culminating in the statement by the new Chancellor reversing many of these proposals; 

·  On a related matter, counter-inflationary measures of the Bank of England had seen the cost of borrowing rising with the official bank rate increased from 1.75% to 2.25% on 21 September 2022;

The Council’s Energy Costs;

·  From late 2021, wholesale prices had reversed their usual trend and were now higher nearer the point of delivery. In response, for 2023/24, the Council authorised Laser to purchase energy earlier to try to take advantage of the volatility and to seek to buy in the price dips;

·  Pension Fund Impact; 

·  The Hackney Pensions Fund had not been affected by current issues; 

·  The Council’s Capital Programme and Borrowing; 

·  Update on the Council’s capital programme forms part of the performance report with total forecast spend for the current financial year estimated at £180m; 

Cost of Living

·  A corporate response was being put in place to cover the ways that the cost of living crisis was impacting residents, council staff and businesses. Enhanced governance was also under development to support the response;

·  The Council already had a poverty framework in place. Key aspects of work underway builds on learning from the pandemic with delivery in partnership with health and voluntary community sector providers:

·  Financial support made available: Household Support Fund. Information to residents including Help at Hand.

·  Council approach to debt in cost of living crisis set out;

Accounts Update;

·  The Director of Financial Management highlighted:

·  Opinion on the 2020/21 accounts remained outstanding as a result of the moratorium that Mazars have placed on audit opinions resulting from the infrastructure asset issue previously advised;

·  2021/22 draft statement of accounts published on 29 July in line with statutory deadline;

·  Audit of 2021/22 accounts has now started with Mazars due to report progress to the Audit Committee in November 2022;

·  Progress report on the 2021/22 audit to come to the November Audit Committee, but with the draft Audit Committee Completion Report in January 2023;

·  Deep Dive - Term of Reference

·  The deep dive would be an overall analysis of the General Fund reserves. The terms of reference would be circulated to members and comments would be welcomed.

 

4.2  The Chair thanked the Finance Team for their work during a time of

  much change nationally.

 

 

 

4.3  Councillor Gilbert asked for details of the take up on the discretionary

hardship grant and Pensions credit.

 

4.4  Councillor Gordon asked for clarification on the Council’s relationship with the Pan London Energy Framework (PLEF) and how much control there was over the sources of energy and the sustainability of energy sources.

 

4.5   Councillor Garbett asked for clarification on the impact of the reduction in the contributions to the Capital Outlay. She referred to good presentation on benefits team at a recent ward forum. She asked for clarification on the payment of the £150 Council Tax refund.

 

4.6  Councillor Baffour asked for clarification on the rent cap.

 

4.4  The Group Director of Finance and Corporate Resources responded as

follows:

 

·  That the Council had set up a team to signpost residents to ensure

maximum take up of all benefits available. The Group Director agreed

to circulate details how the team was operating together with case

studies that have come through. It was proposed that the team present

to the Committee on their activities; 

 

  Action: Group Director of Finance and Corporate Resources 

 

·  Take up of the discretionary grant was part of the Council Tax billing for

the current financial year with increased communication to residents

on it. It was anticipated that it would be used by the end of the financial

Year; 

 

·  The PLEF was a framework that the Council participated in enabling it

to lock in within the 6 month period. Work was ongoing with Laser to see what can be locked by 1 April 2023. Work was also underway with the Head of Energy and the Head of Procurement on this. The Council bought green energy as opposed to brown source energy;

 

·  The reduction in contributions to the Capital Outlay for the HRA this year to mitigate the overspend was deliverable because we are not delivering a full capital programme in 2022/23 due to the delay in the procurement of the Housing Maintenance main contracts.

 

·  Government consultation on the rent cap had been carried out at the

end of the summer with a closing date of 12 October. Work had been carried out with other Councils to ensure that a considered message was conveyed to the Government in regard to the pressure on the HRA and the need for proper investment  in housing. The inflation figure in September 2022 was 10 per cent and this plus one per cent  would normally be the indice applied to the calculation for rent setting. The Government consultation sought  views on various caps including 5 per cent  but with no compensation proposed for the Housing Revenue Account For the difference. The Group Director suggested that these matters could be the subject of member finance training in the future

 

 

RESOLVED:

 

·  To note the overall financial position update.