Agenda item
Finance Update; Performance Update; Treasury Management Update
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 Vice 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 8, Finance Update, first, which would also include agenda item 9, Performance Update, and agenda item 10, Treasury Management Update.
4.2 The Group Director of Finance and Corporate Resources gave a presentation, highlighting the following:
· The General Fund Forecast as reported to April Cabinet was an overspend of £7.844m.
· The overspend related to cost pressures including in Adult Social Care, a reduction in Planning income, and continued pressures related to Children and Education, particularly Access and Assessment, and Housing Needs.
· One-off costs related to the cyberattack, included backlog clearance, system investment, and income pressures.
· Residents and the Council would continue to face significant financial pressure as a result of inflation, which had shown no sign of abating.
· Inflation would particularly impact Council services with significant energy, fuel, and contract costs.
· The pay award for 2022/23 was higher than budgeted for, and this would be a pressure in 2023/24.
· The Housing Revenue Account (HRA) was forecasting an overspend in net operating expenditure of £10.728m, but this would be brought into balance by not drawing down on the Revenue Contribution to Capital Outlay (RCCO).
· Without a full capital programme in 2022/23 the RCCO would not be required and so could be released. However, there would be a backlog of maintenance work that would need to be funded in future years.
· There remained a difficult economic outlook due to the ongoing cost of living crisis. The Office for Budget Responsibility’s (OBR) latest forecast was that GDP would fall by 0.2% in 2023.
· Despite Bank of England counter-inflationary measures, the cost of borrowing continued to rise.
· Public Works Loan Board (PWLB) interest rates had also increased, meaning a higher cost of borrowing for Local Authorities, which brought further pressure on capital programmes.
· The annual unemployment rate in 2023 was expected to be 4.1%, compared to 3.7% in 2022.
· In relation to Public Sector Net Borrowing (PSNB), total Government borrowing was expected to exceed the total UK GDP for the first time since 1961.
· Work continued on the Medium Term Financial Planning (MTFP) and progress was being made analysing the challenges to the Council’s Budget, and on identifying timetables and programmes of work with the Elected Mayor and Cabinet to have proposals in place to balance the Budget in 2024/25.
· Emerging risks in 2023/24 included the ongoing pay negotiations and the need for Group Directors and Directors to prioritise in-year recovery actions and bring forward savings proposals from 2024/25.
· The capital monitoring report prepared for April Cabinet showed a forecast of £139.8m, £28.9m below the revised budget of £168.7m. This was in part due to construction industry inflation resulting in tender prices above cost estimates, and other external factors requiring scheme reviews and re-profiling.
· As part of Closedown 2022/23, Officers undertook an analysis of variances and significant factors including external pressures which impacted the CCG Primary Care project and provided challenges for S77 applications as well as S106 applications for highway schemes.
· No new long-term borrowing had been undertaken by the Council, however the overall cost of borrowing had risen sharply.
· Higher interest rates had also resulted in an uptick in investment income, but this was a one-off gain and not sustainable.
· The Money Hub had seen over 5,000 residents request support since the team launched in November 2022, which is more than applied for Discretionary Housing Payments (DHP) and Hackney Discretionary Crisis Support Scheme (HDCSS) in the whole of the previous year.
· In 2022/23, the Money Hub had paid £198k in relation to HDCSS; £1,204k in relation to DHP; and £400k in relation to the Council Tax Reduction Discretionary Fund.
· In relation to benefits update, the Money Hub had confirmed additional benefits income worth a total of £655k, which is worth on average £1,840pa to 355 households.
· The Money Hub team was on target to meet its goal of £1m of additional income for residents during its 12 month pilot.
· Hackney was one of only 8 London boroughs to publish their 2022/23 accounts before the 31 May 2023 statutory deadline.
· Deep Dives were confirmed on Public Interest Reports, for October 2023; School Budgets and Financial Sustainability, for January 2024; and Cost of Capital and Borrowing, for April 2024.
4.3 Members of the committee asked for further information on the underspend in capital expenditure, particularly in relation to the asbestos surveys, the solar project, and community halls.
4.4 The Director of Financial Management responded:
· That in relation to underspend in capital programmes the Council would expect to see a balance over several years of capital programmes, and would update Committee members on the specific projects referenced.
ACTION: 1. The Director of Financial Management to update relevant Committee members re. solar project and community halls capital projects.
2. The Group Director of Finance and Corporate Resources to circulate the presentation slides.
RESOLVED: To note the update on the overall financial position, the Treasury Management Update Report, and the Performance Update.