Agenda item

Report of the Deputy Chief Executive (Place)

The Cabinet considered a report of the Deputy Chief Executive (Place), which set out the proposals for the Council’s final revenue and capital budget for 2019/20.

The report followed on from the Pre-Budget report approved by the Cabinet on 27th November 2018, which had been the subject of 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 2019/20, incorporating the following details:

·  Gross budgeted spend of £744m (£17m and 2% higher than 2018/19).

·  Net budgets spend of £232m (£3m lower than 2018/19) funding from Council Tax and Business Rates less a tariff payment of £19.6m due to Government.

·  A Council tax Requirement of £135.2m (£7.9m and 6% higher than 2018/19) reflecting a City Council Tax increase of 2.9% detailed in the separate Council Tax Setting report on the Cabinet agenda.

·  A number of new expenditure pressures and savings proposals within Council services.

·  A Capital Strategy including a Capital Programme of £195.3m, including expenditure funding by Prudential Borrowing of £50.3m.

·  An updated Treasury Management Strategy.

·  In the response to the new regulatory requirements and for the first time, a Capital Strategy and a Commercial Investments Strategy.

The financial position within the Budget Report was based on the Final 2019/20 Local Government Settlement and incorporated anticipated reductions in funding over the next 3 years.  This position contained significant uncertainty for the period after 2019/20 which would be subject to the combination of a new national Spending Review, a revised allocation model within the Local Government sector and a new national 75% Business Rates retention model.  As a result it was impossible to provide a robust financial forecast at this stage.  Nevertheless, initial assumptions and existing trends were sufficiently firm to indicate that in all likelihood there would be a substantial gap for the period following 2020/21.  The view of the Council’s Director of Finance and Corporate Services was that the Council should be planning for such a position.

2019/20 would see the Council continue, along with the other 6 West Midlands councils, to participate in a 100% Business Rates Pilot scheme.  This would enable the Councils to retain 99% of Business Rates income including any growth against an historic baseline which would otherwise have been returned to the Government.  The financial model and assumptions that support the Pilot have been incorporated within the financial position included in this report.

The Pre-Budget Report was based on an increase in Council Tax of 2.9% and this position has been maintained for the final proposals in the report submitted.  This was within the Government’s limit of 3%, above which a referendum would need to be held.  This proposed increase would be the equivalent of around 70p 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 have been approved previously.  However, after taking into account a delay in the likely achievement of some savings and the emergence of new expenditure pressures, the Council had needed to address a significant financial gap.  In broad terms, the Budget had been balance by additional Council Tax resources, lower costs in contingency budgets and a range of savings identified within services, many of them relating to additional income.  All these proposals were set out in detail in appendix 1 of the report submitted.  Where these were different to the proposals that were included in the Pre-Budget report, this had been indicated within the appendix.

In contrast to recent Budget reports, the proposals did not provide the Council with a balanced medium term position (i.e. beyond 2019/20).  The Council would need to take stock through 2019 both of the revised funding position that would arise from the changes to local government finance this year and of the need for an updated approach to identifying ways to address the expected budgetary gap.

Given the forthcoming national proposals for local government finance to be based on a 75% Business 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 £195.3m in 2019/20.  These continued to represent an ambitious approach to investing in the City and included the near-completion of the Council’s new city centre leisure facility, progression of the extensive UK Central and Connectivity, Coventry Station Master Plan, UKBIC and Whitley South Infrastructure projects.  Over the next 5 years the Capital Programme was estimated to be £722m as part of the largest recent investment programmed delivered by and through the City Council.  The Council was aware that it had not delivered significant amounts of its budgeted programmes in recent years and it would seek to ensure that momentum was maintained on those elements of the schemes over which it was able to control.

The annual Treasury Management Strategy, incorporating the Minimum Revenue Provision policy, and also the Commercial Investment Strategy were set out within the report.  These covered the management of the Council’s treasury and wider commercial investments, cash balances and borrowing requirements.  These strategies and other relevant sections of the report submitted reflected the requirements of the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management Code and Prudential Code for Capital Finance, as well as statutory guidance on Minimum Revenue Provision (MRP) and Investments.

RESOLVED that the Cabinet recommend that Council:

1.  Approve the spending and savings proposals in Appendix 1.

2.  Approve the total 2019/20 revenue budget of £744m in Table 1 and Appendix 3 of the report, established in line with a 2.9% City Council Tax increase and the Council Tax Requirement recommended in the Council Tax Setting Report considered on today’s agenda.

3.  Note the Director of Finance and Corporate Services’ comments confirming the adequacy of reserves and robustness of the budget in Sections 5.1.2 and 5.1.3.

4.  Approve the Capital Strategy incorporating the Capital Programme of £195.3m for 2019/20 and the future years’ commitments arising from this programme of £526.3m between 2020/21 to 2023/24 detailed in Section 2.3 and Appendix 4.

5.  Approve the proposed Treasury Management Strategy for 2019/20 and Minimum Revenue Provision Statement in Section 2.4, the Treasury Investment Strategy in Appendix 5 and the Prudential Indicators and limits described in Section 2.4.9 and detailed in Appendix 7a.

6.  Approve the Commercial Investment Strategy for 2019/20 in Section 2.5 and Appendix 6 and the Commercial Investment Indicators detailed in Appendix 7b.