Agenda item

Briefing note

The Finance and Corporate Services Scrutiny Board (1) received a Briefing Note and Presentation of the Director of Finance that reported on the Medium-Term Financial Strategy 2021-22 to 2023-24.

The Scrutiny Board’s Work Programme included an item to review the Council’s Medium-Term Financial Strategy. The Strategy has been delayed this year as a result of the Covid pandemic and the ongoing medium uncertainty in relation to Local Government finance. The draft Strategy was provided in an Appendix to this report for their review. The final Strategy would be approved as part of the overall Budget Report at Cabinet and Council meetings in February 2021.

The Strategy (MTFS) was the base on which the revenue budget and capital programmes were built, including the policy assumptions and financial management framework which underpin these.

The Board noted that nationally, local authorities faced acute financial pressures as a result of longer-term reductions in government financial support, exacerbated by the effects of Covid-19, both on businesses and directly on local authority income and expenditure levels. In addition, local authorities must plan in an environment of great uncertainty, for example about the future course of any recessionary dip, the impact of Covid-19 and the UK’s future relationship with the EU. The recent Government Spending Review primarily covered only one year rather a multi-year period.

Locally, government funding of the Council was c£120m less in 2020/21 than in 2010/11. Against this backdrop the starting point for the Council had been a large 3-year budget gap of £19m rising to £38 by 2023/24 as at February 2020 (an accumulated three-year shortfall of £88m).

The 2020/21 financial forecast at quarter 2 was for a net overspend of £3.5m, taking into account the impact of Covid-19, and prior to the implementation of measures to balance spend to budget as at the year end. Significant pressures existed across several areas including children’s services, waste and highways and transport including car parking income.

The Council had revenue reserve balances of £89.9m; £32.9m of capital reserves earmarked to fund major capital schemes, and £21.3m of reserve balances belonging to or earmarked to support schools.

The Council’s substantial 4-year capital programme of £470m was funded in the main by grant (£321m) and prudential borrowing (£122m), across a number of areas including regeneration, transport and infrastructure, housing and investment in school buildings.

The Cabinet Member for Strategic Finance and Resources confirmed the financial pressures faced by all Local Authorities resulting from the longer-term reductions in government financial support and the effects of Covid-19 on finances. Unemployment was rising and there was an increased demand on local services. It had been difficult to prepare a Medium-Term Financial Strategy due to future uncertainty and that the Government had only provided a one-year settlement, but was pleased to report that the Council’s finances had been well managed and Coventry was in a good position compared to many other Local Authorities. Looking to the future, there was an ambitious capital programme and it was hoped that this year a balanced budget could be achieved without the need to cut services.

The Board questioned officers, received responses, and discussed the following issues:

·  Borrowing Limit – Self defined limit determined by capital expenditure and how much could be generated to repay loans

·  Lending Streams – Need to be clear how projects were funded which could include multiple lending streams

·  Municipal Bonds – credit rated and lengthy process. Public Works Lending Board preferred option

·  Local investments - made if considered prudent

·  Government settlement – will support the 2021/2022 funding gap and there would be further local government funding to support collection fund losses

·  Transformation – assess finance and policy going forward. Item to be added to the Work Programme for consideration in 2/3 months-time.

·  West Midlands Pension Fund – employer and employee contributions and benefit calculations, required employer contributions to ensure benefits for all pension liabilities now stands at 98%.

·  Current Reserves of £140m – External Auditors recommended level for the Authority.

Members requested that information be circulated to the Board on Council Capital Reserves used to help fund expenditure.

Reference to the Board’s consideration of the Strategy would be included in the Budget Report being submitted to Cabinet in February 2021.

RESOLVED that the Finance and Corporate Services Scrutiny Board (1):

1)  Notes the presentation and the attached Medium-Term Financial Strategy.

2)  Agrees that an item be added to the Board’s Work Programme on Transformation.