Agenda item
Finance Update; Deep Dive - Council Resources; Treasury Management Update Report
Presentation by the Group Director of Finance and Corporate Resources
Decision:
RESOLVED: To note the update on the overall financial position
Minutes:
4.1 The Chair decided, at the request of the Group Director of Finance and Corporate Resources, and with the agreement of the Committee, to take agenda item 4, Finance Update, agenda item 8, Deep Dive – Council Reserves, and agenda item 9, Treasury Management Update Report, as one agenda item for discussion.
4.2 The Group Director of Finance and Corporate Resources gave a presentation, which had been circulated to members in advance, highlighting the following:
· The Council continued to find itself in a challenging financial position, on the back of the cyberattack, the higher than anticipated pay award, and cost pressure from issues related to inflation.
· 2022/23 General Fund Forecast; the forecast as reported to March Cabinet was an overspend of £7.916m, but the Council continued to contain any increase in the overspend.
· The Housing Revenue Account (HRA) continued to see significant pressures, and was forecasting an overspend in net operating expenditure of £10.728m.
· Inflation has started to plateau, but not significantly reduce, and costs remained more expensive than one year ago.
· Counter-inflationary measures have been introduced by the Bank of England, which had seen the cost of borrowing rising to 4% in February 2023.
· For residents the Energy Price Guarantee would cease at the end of March, and a £2,500 cap would apply before increasing to £3,000.
· The National Budget in March 2023 set out plans for departmental revenue expenditure to 2027/28, but the increase of 10% was in cash terms, so before any adjustment for inflation.
· The Government also expected Council Tax income to increase by at least 5% in each year following 2024/25.
· The Council cannot expect any future funding increases from the Government to offset any unaddressed budget overspends in 2024/25 and beyond.
· The £63m Swimming Pool Support Fund was announced during the National Budget, but Officers were still waiting for the key details.
· The Council was successful in securing nearly £20m of Levelling Up funding for the Hackney Central area.
· Emerging risks for the 2023/24 financial year included the latest pay negotiations suggesting it would be more expensive than anticipated; increases in social care costs; and that the whole insurance market continued to be very challenging for local authorities, with significant increases in insurance premiums that might require the consideration of alternative approaches.
· The Council’s capital programme is expected to spend an estimated £150m in the current (2022/23) financial year.
· There were continuing challenges in the Housing Asset Management capital programme, particularly in relation to procuring the main planned maintenance contractor.
· A number of potential contractors had entered significant financial difficulty.
· As set out in the Treasury Update the Council had undertaken no new long term borrowing, but the cost of borrowing continues to rise.
· Local authorities were still facing challenges with getting their accounts signed-off by external auditors.
· Accounts closure for 2022/23 was underway and progress was being made to make sure they were published at the end of May, in line with the pre-Covid statutory deadlines.
· The Deep Dive of Council reserves identified Hackney as being in the middle of London local authorities in relation to actual reserves, as of 01 April 2022.
· HRA reserves were slightly higher than average, reflecting the Council having one of the largest housing stocks in London.
· In 2022/23 some of the General Fund reserves had been employed to enable the Council to mitigate risks such as those driven by cost of living pressures, rising demand in areas such as social care, the pay award being above what is budgeted and the ongoing recovery from the cyber attack.
· Future deep dives were recommended for public interest reports; school budgets and financial sustainability; and cost of capital and borrowing.
4.3 Members of the committee asked for clarification about energy costs; further detail on the Swimming Pool Support Fund; work related to funding for schools; resources available in case of future cyberattacks; the interplay between retrofitting and damp and mould; and expected changes in HRA reserves.
4.4 The Group Director of Finance and Corporate Resources, the Director of Finance, Climate, Homes and Economy, and the Director of Financial Management responded:
· That the Council was a participant in the LASER consortium which had enabled the Council to get good energy deals. Officers have also ensured that the 2023/24 Budget had sufficient provision for anticipated energy costs.
· Providing confirmation that schools had access to the Government’s Energy Business Discount Scheme.
· Confirming that Officers were still waiting for details of the Swimming Pool Support Fund, but that it was not anticipated that the Council would receive a significant amount from the Fund.
· School funding was an issue that would be focused on in a future Deep Dive.
· The provision for the cyberattack wasn’t one that was already allocated before the attack, but was set aside once estimates of the cost to recover were prepared.
· The HRA was under more pressure than in previous years, and work was underway to ensure systems were in place to manage the capital programme and ensure that revenue and capital budgets are considered together.
· A full stock condition survey was being considered, which would provide a detailed analysis to inform decisions about affordability.
· HRA reserve changes are set out in the Council Budget, but the Council was facing issues related to the cost of living crisis and the continued transition of tenants in receipt of full Housing Benefit to Universal Credit, but the impacts of both were being closely monitored.
4.5 The Group Director of Finance and Corporate Resources committed to sharing recent correspondence with individual Committee members with the full Committee membership.
ACTION: 1. Director of Finance, Climate, Homes and Economy to provide Members with further detail of the Swimming Pool Support Fund.
2. Group Director of Finance and Corporate Resources to provide members with an update on the Money Hub and wider Council support packages at the next Audit Committee meeting.
3. Group Director of Finance and Corporate Resources to circulate correspondence with the full Committee membership.
RESOLVED: To note the contents of the Finance Update, the Deep Dive of Council Reserves, and the Treasury Management Update Report.
Supporting documents:
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