Agenda item

Report of the Deputy Chief Executive (Place)

The Cabinet considered a report of the Deputy Chief Executive (Place), which set out the forecast outturn position for revenue and capital expenditure and of the Council’s treasury management activity as at the end of September 2017.

The Cabinet noted that the report was also to be considered by the Audit and Procurement Committee at their meeting on 18^th December 2017.

The headline forecast for 2017/18 was an overspend of £3.1m.  This had improved since the Quarter 1 position, when it stood at £4.6m, whilst at the same point in 2016/17 there was a projected overspend of £7.1m.  Notwithstanding the relative improvement since Quarter 1, and the equivalent position last year, the reasons for the overspend represented some concerning trends for the Council.  At a time of continued tightening of local authority resources, the current position still represented one that demanded a strong focus on addressing the underlying issues.

The position continued to reflect areas for which overspends had been reported previously but also incorporated the emergence of new budgetary issues.  The main areas of financial pressures resulted from a shortfall in delivering savings targets set in previous budgets in some areas and some local externally driven demand pressures, in particular, in relation to looked after children and an increase in homelessness.  Where relevant, these pressures had been incorporated within the 2018/19 Pre-Budget report, although the expectation was that some of these pressures may increase substantially during 2018/19 compared with the current year.

The Cabinet noted that the capital spending was projected to be £119.9m for the year, a net decrease of £9.1m on the position reported at Quarter 1.

The report also set out the Treasury Management Activity for 2017/18.  In relation to interest rates, the economic outlook for the UK remained uncertain, with Brexit negotiations ongoing.  However the most recent inflation data indicated that CPI inflation was currently at 3.0%.  The Bank of England Committee, who set the official interest, indicated at their last meeting that an increase in interests was likely to be appropriate to return inflation to a lower level and a subsequent meeting of the Committee has approved an interest rate increase to 0.5% applicable from November.

The net long term borrowing requirement for the 2017/18 capital programme was £43.8m, taking into account borrowing set out in Section 2.4 of the report, less amounts to be set aside to repay debt, including non PFI related Minimum Revenue Provision.  No long term borrowing had been undertaken for several years, in part due to the level of investment balances available to the authority.  Any future need to borrow would be kept under review.

In managing the day to day cash-flow of the authority, short term borrowing or investments were undertaken with financial institutions and other public bodies.  The Council currently held no short term borrowing.  Short term investments were made at an average interest rate of 0.61%.  This rate of return reflected low risk investments for short to medium durations with UK banks, Money Market Funds, Certificates of Deposits, other Local Authorities, Registered Providers and companies in the form of corporate bonds.

In addition, a mix of Collective Investment Schemes or “pooled funds” was used, where investment was in the form of sterling fund units and non-specific individual investments with financial institutions or organisations.  These funds were generally AAA rated, were highly liquid as cash, could be withdrawn within two to four days, and short average duration.  As at 30^th September 2017, the pooled funds were valued at £39.9m, spread across a number of funds identified within the report.

Under the CIPFA Prudential Code for Capital Finance, authorities are free to borrow, subject to them being able to afford the revenue costs.  The framework required that authorities set and monitor against a number of Prudential Indicators relating to capital, treasury management and revenue issues.  The indicators and relevant figures as at 30^th September 2017 were included in Appendix 6 to the report and highlighted that the Council’s activities were within the amounts set as Performance Indicators for 2017/18.

RESOLVED that the Cabinet:-

1.  Note the forecast revenue overspend at Quarter 2.

2.  Approve the revised capital estimated outturn position for the year of £119.8m incorporating £1m net increase in spending relating to approved/technical changes as detailed in Appendix 2, and £9.1m of expenditure rescheduled into 2018/19 as detailed in Appendix 4.