Agenda item

Report of the Director of Finance

The Cabinet considered a report of the Director of Finance, which set out the proposals for the Council’s final revenue and capital budget for 2021/22.

The report followed on from the Pre-Budget Report approved by Cabinet on 15th December 2020, 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 2021/22 incorporating the following details:

·  Gross budgeted spend of £774m (£30m increase from 2020/21)

·  Net budgeted spend of £244m (£5m and 2% higher than 2020/21) funded from Council Tax and Business Rates less a tariff payment of £19.8m due to Government.

·  A Council Tax Requirement of £146.3m (£4.9m and 3% higher than 2020/21); reflecting a City Council Tax increase of 4.9% detailed in the separate Council Tax Setting report on today’s agenda.

·  A number of new expenditure pressures and technical savings proposals.

·  A Capital Strategy including a Capital Programme of £220.4m including expenditure funded by Prudential Borrowing of £32.2m.

·  The Council’s Medium Term Financial Strategy and an updated Treasury Management Strategy, Capital Strategy and a Commercial Investments Strategy.

The financial position set out in the Budget Report is based on the Final 2021/22 Local Government Finance Settlement.  The core funding position broadly matched that of 2020/21 although there were several new one-off funding streams, linked in the main to the effects of COVID-19.  The position after 2021/22 remained uncertain and would be subject to the Government’s medium-term spending decisions and decisions about any revised local government financial allocation model and a new 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 would be a substantial gap for the period following 2021/22.  The view of the Director of Finance was that the Council should be planning for such a position.

The Pre-Budget Report was based on an increase in Council Tax of 4.9% 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% above which a referendum would need to be held plus a further 3% Adult Social Care (ASC) Precept in line with Government expectations.  The Precept was trailed in the 2020 Spending Review and included in the Local Government Settlement as the means for councils to maintain their “core spending power”.  Pending the delayed ASC Green Paper – the policy document which it was hoped would set out future funding arrangements for ASC – the precept was essential to enable councils including Coventry to manage increases in the costs of care.  In total, the rise in Council Tax bills would be the equivalent of around £1.25 or less a week for a typical Coventry household.

The Local Government Finance Settlement was announced as having broadly maintained local government funding, supplemented with new grant funding to compensate councils for the effects of the Covid pandemic.  In reality, the Council’s Budget position included forecast costs and income loss from Covid for which it would not receive total compensation.  Overall, the Council had been left needing to address a significant financial gap which had been balanced by additional Council Tax resources, lower costs in contingency budgets and a proposed contribution from reserve balances.  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 2021/22.  The Council’s current medium term bottom line incorporated a combination of future inflationary and service pressures, uncertain specific grant resources and potential Government resource reductions.  Some of the future funding assumptions were speculative at this stage and would be revised through 2021 as any changes to local government finance and as the longer term impacts of Covid become clearer.  The initial approach would however be dictated by a need to make significant further efficiencies from, or generate further income within, Council services.  The Council’s development of a ‘One Coventry’ transformation programme was being refined and it was planned that it would become a key part of work programmes to feed into Budget proposals for 2022/23.

Whatever the future holds for national changes to local government finance the Council remained committed to strengthening its own financial self-sustainability and the need to support the vibrancy and growth of the city.  Over the coming year the Council would invest in both new and existing schemes and support its existing financial interests, including those that have been affected detrimentally by Covid.  The Council’s view was that this continues to be the correct approach.  A more passive strategy would risk the Council being further exposed to central government funding decisions and losing value within its portfolio of external interests.  The Council’s existing financial resilience and its belief in the city’s long-term economic strength meant that this remained an ideal time to commit to Coventry’s reset and recovery.

The recommended Capital Programme proposals were a key part of the Council’s approach and amounted to £220.4m in 2021/22.  The proposals reflected the Council’s ambitions for the city and included: the latter stages of extensive public realm works in the city centre; extensive highways infrastructure works including specific schemes relating to air quality, Pinchpoint and the Eastern Green Housing Infrastrucutre Fund (HIF); final stages of the redevelopment of Coventry Railway Station (the Station Masterplan); the initial construction phase of a second office building within the Friargate district of the city; the initial construction phase also of the Council’s Materials Recycling Facility and continuation of the A46 link road to the south of the city.  Over the next 5 years the Capital Programme was estimated to be £480m 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.  The Council’s Medium Term Financial Strategy, considered previously by the Council’s Finance and Corporate Services Scrutiny Board and consistent with the proposals within the report was also included for approval as an Appendix to the report submitted.

RESOLVED that the Cabinet recommend that Council:

1.  Approve the spending and savings proposals in Appendix.

2.  Approve the total 2021/22 revenue budget of £774m in Table 1 and Appendix 3, 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 Director of Finance’s comments confirming the adequacy of reserves and robustness of the budget in Section 5.1.2 and 5.1.3.

4.  Establish and Innovation and Development Fund as set out in section 5.1.2 with decisions on the Fund delegated to the Strategic Management Board following consultation with the Leader, Deputy Leader and Cabinet Member for Strategic Finance and Resources.

5.  Approve the Capital Strategy incorporating the Capital Programme of £220.4m for 2021/22 and the and the commitments arising from this programme totalling £479.6m between 2021/22 to 2025/26 detailed in Section 2.3 and Appendix 4 (that element represented by reports on the same agenda in relation to The Albany Theatre and the Collections Centre is subject to approval of these reports).

6.  Approve the Council’s Treasury Management Strategy and Minimum Revenue Provision Statement for 2021/22 in Section 2.4 and the Prudential Indicators and limits described and detailed in Appendix 6a, the Commercial Investment Strategy for 2021/22 in Section 2.5 and Appendix 5, the Commercial Investment Indicators detailed in Appendix 6b and the Medium Term Financial Strategy in Appendix 7.