Agenda item

Report of the Director of Finance and Corporate Services

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 2020/21.

The report followed on from the Pre-Budget Report approved by Cabinet on 19th November 2019 which had since been subject to a period of public consultation.  The proposals within the report now formed the basis of the Council's final revenue and capital budget for 2020/21 incorporating the following details:

•  Gross budgeted spend of £744m (no change from 2019/20).

•  Net budgeted spend of £239m (£7m and 3% higher than 2019/20) funded from Council Tax and Business Rates less a tariff payment of £19.9m due to Government.

•  A Council Tax Requirement of £141.4m (£6.2m and 4.6% higher than 2019/20), reflecting a City Council Tax increase of 3.9% detailed in the separate Council Tax Setting report on today’s agenda.

•  A number of new expenditure pressures, savings and income generation proposals within Council services.

•  A Capital Strategy including a Capital Programme of £232.7m  including expenditure funded by Prudential Borrowing of £33.1m.

•  An updated Treasury Management Strategy, Capital Strategy and a Commercial Investments Strategy.

The financial position set out in the Budget Report was based on the Final 2020/21 Local Government Finance Settlement and incorporated a funding position which broadly matched that of 2019/20. This position contained significant uncertainty for the period after 2020/21 which would be subject to medium-term spending decisions by the new Government.  Decisions were awaited on whether this would include a revised allocation model within the Local Government sector and a new national Business Rates retention model. As a result it was impossible to provide a robust financial forecast at this stage and the Council had included some prudent planning figures.  Initial assumptions indicated the likelihood that there will 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.

2020/21 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 Council 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 had been incorporated within the financial position included in the report.

The Pre-Budget Report was based on an increase in Council Tax of 3.9% and this position had been maintained for the final proposals in the report now submitted.  This incorporated an increase of 1.9%, which was within the Government’s limit of 2% and above which a referendum would need to be held, plus a further 2% relating to the Adult Social Care Precept.  This proposed increase would be the equivalent of around 90p a week for a typical Coventry household.

In broad terms the Government Settlement had maintained the level of resources available to the Council to support its financial position through a combination of Council Tax and retained Business Rates less a tariff payable back to Government.  Set against this was the need for the Council to reflect a range of inflationary pressures, the non-achievement of some savings plans and the emergence of new expenditure pressures, the bulk of which reflected socio-demographic trends across the country.  This combination of results had left the Council needing to address a significant financial gap which had been balanced 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.  Where these were different to the proposals that were included in the Pre-Budget Report, this had been indicated within the appendix.

The proposals did not provide the Council with a balanced medium term position beyond 2020/21.  Local government still awaited the setting out of a medium term funding settlement from Government and the Council’s current medium term bottom line incorporated a combination of future inflationary and service pressures, uncertain specific grant resources and potential resource reductions through the Fair Funding review.  The current assumptions on future funding were purely speculative at this stage and the possibility remained that the position could be somewhat better than planned currently (with a lower probability that they could be worse).  The Council would need to take stock through 2020 as Government thinking emerged on the changes to local government finance.  The initial approach would however be dictated by a need to make significant further savings from or generate further income within Council services.  The Council was developing a transformation programme under the banner of ‘One Coventry’ with key strands incorporating more commercialisation of services, an enhanced digital approach and Place Based services (how services were delivered across the city).

It was not yet clear on what basis any forthcoming national proposals for local government finance would be established but it was highly likely to continue to include a Business Rates retention model beyond 2020/21.  This added further impetus to the need for the Council to continue to support the vibrancy and growth of the city to provide for a secure level of Business Rates income and move towards greater self-sufficiency.  The recommended Capital Programme proposals were designed to help achieve this and amounted to £232.7m in 2020/21.  The proposals reflected the Council’s ambitions for the city and included the completion of the UK Battery Industrialisation Centre, extensive public realm works in the city centre, significant redevelopment of Coventry Railway Station, early works on two new buildings within the Friargate district of the city, progression of the extensive UK Central & Connectivity programme and continuation of the Whitley South Infrastructure projects. Over the next 5 years the Capital Programme was estimated to be £703m as part of on-going massive investment delivered by and through the City Council.

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 reflected the requirements of the Chartered Institute of Public Finance and Accountancy’s (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 2020/21 revenue budget of £744m in Table 1 and Appendix 3, established in line with a 3.9% 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 Section 5.1.2 and 5.1.3.

4.  Approve the Capital Strategy incorporating the Capital Programme of £232.7m  for 2020/21 and the future years' commitments arising from this programme of £703m between 2020/21 to 2024/25 detailed in Section 2.3 and Appendix 4.

5.  Approve the proposed Treasury Management Strategy for 2020/21 and Minimum Revenue Provision Statement in Section 2.4, the Treasury Investment Strategy and Policy in Appendix 5 and the Prudential Indicators and limits described in Section 2.4.9 and detailed in Appendix 7a.

6.  Approve the proposed Commercial Investment Strategy for 2020/21 in Section 2.5 and Appendix 6 and the Commercial Investment Indicators detailed in Appendix 7b.

7.  Approve a new scheme within the Capital programme for the refurbishment of St Marys Guildhall at a total cost of £3m funded from Prudential Borrowing as outlined in paragraph 2.3.3.