Agenda item

Report of the Executive Director of Resources

The Cabinet considered a report of the Executive Director of Resources, which set out proposals for the Council’s final revenue and capital budget 2017/18.

The report followed on from the Pre-Budget Report approved by Cabinet on 29th November 2016, which had been subject to a period of public consultation. The proposals within the report now submitted formed the basis of the Council's final revenue and capital budget for 2017/18 incorporating the following details:

·  Gross budgeted spend of £703m (£11m and 2% higher than 2016/17).

·  Net budgeted spend of £232.5m (£0.9m lower than 2016/17) funded from Council Tax and Business Rates less a tariff payment of £0.7m due to Government.

·  A Council Tax Requirement of £118.5m (£7.7m and 7% higher than 2016/17), reflecting a City Council Tax increase of 4.9% detailed in the separate Council Tax Setting report on today’s agenda.

·  New service savings of £1.4m in 2017/18 rising to £10.4m in 2019/20.

·  A Capital Programme of £123.2m (£42.2m and 52% more than the latest estimated 2016/17 programme) including expenditure funded by Prudential Borrowing of £60.9m.

·  An updated Treasury Management Strategy.

It was noted that, at the time of producing the report, the final 2017/18 Local Government Finance Settlement had not yet been published. The proposals within the budget report had been made on the basis of the latest information regarding the likely details of the Settlement.  In particular, this included the estimated impact of joining the ‘100% Business Rates Pilot’. The difference between these estimates and the details in the Final Settlement were likely to be insignificant and would be met by reserve contributions.

The Settlement was anticipated to incorporate continued reductions in core Government funding over the next 3 years with a planned reduction of £24m in Coventry’s funding assessment.  However, along with the other 6 West Midlands councils, Coventry was taking part in a 100% Business Rates Pilot scheme.  This would enable Coventry to retain 99% of Business Rates income including an element of growth against an historic baseline which would otherwise have been returned to the Government. This money is available for the Council to use within the budget proposals within this report and is in addition to the resource base assumed within the Pre-Budget Report.

In previous years the City Council has had the flexibility to increase Council Tax by up to 2% without holding a local referendum on the matter. In 2016/17 the Government allowed councils to increase this flexibility by a further 2%, up to a maximum of 4%, recognising the increasing pressure on Adult Social Care (ASC) services across the country. This was the basis on which the Pre-Budget position was reported.  The Government had subsequently announced a further extension of this ASC flexibility from 2% up to 3%.  The recommended budget assumed taking up this 3% flexibility in order to increase the resources available to fund ASC services in the city. As a result, the budget was being proposed on the basis of increasing Council Tax by 4.9%. This proposed increase would be the equivalent of around a pound a week for a typical Coventry household.

The Council’s medium term financial position included the impact of reductions in Government funding that had already been anticipated and savings programmes that had been approved previously.  At the start of the 2017/18 Budget Setting process the Council faced a financial gap of £19m after taking these factors into account, including a temporary delay in the likely achievement of some savings. In broad terms, the Budget had been balanced by additional resources available from Council Tax and Business Rates resources, including those available as a result of the Council’s participation in the West Midlands 100% Business Rates Pilot.  Costs were also now expected to be lower than planned previously in the areas of contingency budgets, capital financing costs and pensions.  New savings totalling £1.4m (rising to £10.4m) had also been identified in service budgets, reduced from £3.2m (rising to £14.7m) following the period of consultation triggered by the Pre-Budget Report.  All these proposals were set out in detail in Appendix 1 of the report submitted.  The Cabinet noted that, where these are different to the proposals that were included in the Pre-Budget Report, this had been indicated within the appendix.

The proposals had been designed to provide the Council with a robust medium term position and subject to the recommendations being approved the Council would have a balanced budget over the medium term period, 2017/18 to 2019/20. 

The report indicated that, given the forthcoming national proposals for local government finance to be based on a 100% Business Rates model from 2020/21, the vibrancy and growth of the city was vital to ensure a secure level of Business Rates income.  Proposals within the recommended Capital Programme were designed to help achieve this and amounted to £123m in 2017/18. These represented an ambitious approach to investing in the City and included the completion of the Council’s Friargate office building, the initial construction phase of the new city centre leisure facility, the first phases of the City Centre South and Connecting Coventry schemes and continued advancement of the Coventry Station Master Plan. Over the next 5 years the Capital Programme was estimated to be £600m and represented the largest ever investment by and through the City Council.

The annual Treasury Management Strategy was also set out, incorporating the Minimum Revenue Provision policy that was revised in 2016/17 and covered the management of the Council’s investments, cash balances and borrowing requirements.

RESOLVED that the Cabinet recommend that Council:-

1.  Approve the spending and savings proposals in Appendix 1 of the report submitted.

2.  Approve the total 2017/18 revenue budget of £703m in Table 1 and Appendix 4, established in line with a 4.9% City Council Tax increase and the Council Tax Requirement recommended in the Council Tax Setting Report considered on today's agenda.

3.  Note the Executive Director of Resources' comments confirming the adequacy of reserves and robustness of the budget in Section 5.1.2 and 5.1.3. of the report

4.  Approve the Capital Programme of £123.2m for 2017/18 and the future years' commitments arising from this programme of £480.5m between 2018/19 to 2021/22 detailed in Section 2.3 and Appendix 5.

5.  Approve the proposed Treasury Management Strategy for 2017/18 in Section 2.4, the revised Investment Strategy and Policy at Appendix 6 of the report for immediate implementation and the Prudential Indicators and limits described in Section 2.4.11 and summarised in Appendix 7.