Agenda item
Finance Update
Presentation by the Interim Group Director, Finance.
Decision:
RESOLVED: To note the update on the overall financial position
Minutes:
4.1 The Chair decided, at the request of the Interim Group Director, Finance to take agenda item 4, Finance Update, and agenda item 5, Treasury Management Update, as one agenda item for discussion.
4.2 The Interim Group Director, Finance gave a presentation, highlighting the following:
· The General Fund Forecast as reported to October Cabinet was an overspend of £9.3m.
· The increase in the overspend related to pressures in adult’s and children’s social care, primarily increases in the care packages being commissioned and an increase in the number of Looked After Children, and pressures in Finance and Resources as a result of the cyber attack.
· The pay award for 2023/24 had not been finalised, but would be more than had been budgeted for.
· The Housing Revenue Account (HRA) was forecast to draw down £1m from reserves in order to breakeven in 2023/24. This was a planned drawdown.
· Non-dwelling rent was forecast to be £817k over budget.
· Income from tenant charges was forecast to be £959k over budget.
· In September 2023 the inflation rate was 6.7%, which was higher than forecast at the beginning of the financial year, but was falling and expected to reach 5% at the end of the year.
· The Bank of England counter inflationary measures had an impact on the Council as the cost of borrowing from the Public Works Loan Board (PWLB) had increased.
· The Medium Term Financial Planning (MTFP) indicated a Medium Case budget gap of £57.583m in 2026/27, and £22.167m in 2024/25.
· The gap was significant and would require some difficult decisions by the Council on expenditure plans and income assumptions.
· Group Directors were currently working with Cabinet Members to develop proposals to try to close the gap.
· These proposals would be subject to the Budget Scrutiny procedure.
· Proposals relating to Estates Management and Car Parking had been agreed by July Cabinet, and the savings were £1.05m and £2.5m respectively.
· In relation to other London local authorities, Hackney was just below the average in terms of the budget gap, but just above average in terms of the savings required as a share of total net revenue expenditure.
· In relation to ongoing and emerging risks there were increasing pressures related to Adult Social Care and Children and Education, but the MTFP had factored in significant levels of budget growth.
· The cost of living and fuel price crises continued to impact the cost of some Council services, though that pressure was expected to reduce.
· Group Directors and Directors would continue to prioritise in-year recovery, but realistically this would likely contain rather than reduce pressures.
· There remains some uncertainty about the Dedicated Schools Grant (DSG) high needs deficit post 2025/26.
· The quarter 1 capital forecast was for £244.7m, against a programme of £357.9m, and this was largely due to economic factors resulting in higher tender prices. There were also some issues related to capacity.
· Although there was a potential underspend, this would eventually be spent, and reflected that programmes were being delivered slower than anticipated, which was an issue across London.
· The higher interest rates had resulted in an uptick in investment income, but this was a one-off gain.
· In response to the estimated £28m in benefits that was underclaimed by Hackney’’s residents, the Council’s Money Hub had supported over 6000 households, and paid out £860k in one-off crisis grants and increased benefits incomes by £1.3m a year.
· The 2021/22 accounts were anticipated to receive their audit opinion in early November 2023.
· The 2022/23 accounts were published on time, by 31 May 2023, and the audit was underway with the audit completion report expected to be considered at the January 2024 Audit Committee meeting.
· In relation to Deep Dives it was anticipated that the Public Interest Reports report would be considered at the January meeting of the Audit Committee, along with the Schools Budget and Financial Sustainability report, with the Cost of Capital and Borrowing report being considered in April.
4.3 The Chair welcomed the tremendous work of the Money Hub, and members of the committee asked for further information on the estimated benefits underspend; the decline in CIL and S106 monies; possible delays in the Money Hub getting money to residents; and, whether the 10% increase in the Living Wage would have an impact on contracts.
4.4 The Interim Group Director, Finance, and the Interim Director of Financial Management, responded and confirmed that:
· The estimated benefits underspend was not the Council’s money, but represented the amount of benefits that Hackney residents were likely eligible for, but not receiving.
· There had been a general decline in CIL and S106 monies, in part because of the impact of delays in construction projects.
· The Money Hub team would look into any issues that residents had raised.
· The Council is both a London Living Wage (LLW) employer and LLW contractor, so the increase would have an impact, but the Council had always budgeted for this.
RESOLVED: To note contents of the reports and their appendices.