Agenda item
Medium Term Financial Strategy - summer update
This report sets out the overall financial position facing the Council and highlights the significant risks, issues and uncertainties with regards to the Council’s Medium Term Financial Strategy (MTFS). This includes risks and uncertainties that already existed prior to COVID-19 and the new risks that must now be addressed. It also sets out the proposed budget setting strategy for 2023/24, which is the Council’s minimum legal duty in respect of local authority budget setting, in order to maximise the period of consultation with residents, businesses and other key stakeholders.
Minutes:
This update was presented by Councillor Mili Patel (Deputy Leader and Cabinet Member for Finance, Resources & Reform) and Minesh Patel (Director of Finance, Brent Council). The report highlighted the uncertainties and risks with regard to budget setting, as part of the process of setting the Council’s budget for the year 2023/24. There were no new proposals by way of this report, other than the estimate of a budget gap of around £28 million from the budget of 2023/24 to 2024/25. The report also outlined how the medium term financial framework of the Council would aim to provide investment to longer-term priorities, such as those outlined in the Borough Plan, as well as the response to Covid-19 and the cost of living crisis.
It was acknowledged that the report reflected financial uncertainty in the national economy, owing to factors such as Covid-19, high levels of inflation and the global impact of the war in Ukraine. Together with local changes, this required the need for substantial savings within the Council’s budget. Due to the lack of clarity around future levels of funding for local government, the Committee were updated that it was difficult to be precise around future financial targets. When the budget for 2022/23 was initially agreed by the Council in February 2022, it was assumed that a further savings of £12 million were required in the next few years. However, based on the new information since then, the Committee were updated that the current working assumption was that £28 million of savings would need to be made. These estimates would be a major factor in the construction of the Council’s budget for 2023/24.
The Committee were then invited to raise questions, which are summarised below:
· Regarding the impact that the rate of inflation would have on contracts and levels of service, it was noted that inflation would be factored in when considering awarding new contracts. A number of contracts organised by the Council did also contain inflationary clauses within them.
· The Committee asked if analysis had been undertaken of the Council’s major suppliers financial viability/resilience, especially those services for which the Council is supplier of last resort; it was noted that within the care sector, the Council were cognizant of the need for contractors to be able to continue delivering services. It was not guaranteed that all care providers could be protected in the borough, though within the budget there was a focus on areas and contracts that were experiencing financial difficulties.
· On the issue of Adult Social Care, it was asked whether the pressures to adult social care budgets were likely to lead to a change to any of the thresholds of social care funding; it was noted that eligibility criteria for funding was decided nationally. In relation to charging residents for services, it was explained that this was decided on a means testing basis.
· The Committee questioned what the Council was doing to reduce its reliance on the private rented sector for temporary accommodation and to reduce government funding being paid into the private sector; it was responded that Brent Council had built more affordable housing than any other London Borough in the last few years.
· Raising the issue of Council Tax, it was asked how the financial burden could be reduced for the most vulnerable residents; the Council Tax support scheme provided by the Council was cited as benefitting over 20,000 households in Brent. This was alongside the Residents’ Support Fund, as well as other measures adopted by the Council to address the Cost of Living Crisis.
· The Committee asked what the impact of a reduction in Business Rates income would have on the Council, it was noted that Brent were exposed to this risk. With regards to Business Rates, there was a safety net whereby the Government could intervene if levels fell below the agreed rate.
· Regarding raising new forms of income for the Council, the Committee were updated that due to the failures of other local authorities in commercial ventures, this was now made more difficult by the Government to do.
· It was asked what the potential impacts of the Capital build programme would be for the Council; it was highlighted that the report referred to the fact that the Council had not spent as much money in this year as it was intended. The issue of inflation was identified as a major risk going forward, particularly if rent levels did not keep up with the costs of building. This would also potentially have an impact on the levels of affordable housing the Council was able to provide.
· In relation to the financial risks presented by the Council’s subsidiary bodies, it was asked what risk these could present to the Council. It was noted that I4B and First Wave Housing were not fully commercial, rather operating against a specific business plan. There was consistent monitoring of these companies against performance indicators to mitigate risks.
· Regarding schools in Brent that ended up in a financial deficit, it was asked if there were any characteristics that these schools shared; it was noted that the consistent thread was in supporting children with SEND, in addition to inflation and associated cost pressures.
· Following on from this, the Committee were updated that EHCP plans were delivered to schools that required them, and the Council utilised DSG funds to provide this.
· Going forward, it was asked if schools would be able to fill the demand of pupils and full time staff with current funding; it was noted that theSchool Place Planning Strategy 2019-2023 Refresh taken to Cabinet on the 8th of Nov 2021 indicated that there was currently sufficient capacity to meet the need in the Primary and Secondary phase.
The Chair thanked those present for their responses during the discussion, and invited the Committee to make information requests and recommendations.
The Committee made the following information requests:
i) A fuller response from Housing/CWB on the issue of vulnerable residents of other boroughs being placed in housing within Brent was requested. Focus on the smaller number of vulnerable people (who may require support for their needs) who had taken up an accommodation option in Brent – is there a process and what is the process?
ii) A breakdown of housing to be provided including data to show shift from private to council provided accommodation.
The following recommendations were made:
Schools deficit area of the financial outlook is effectively scrutinised by the relevant community (CWB). RPR would endorse and support the CWB committee. Cllr Fraser and Cllr Moeen (CWB) attended on 19 July RPR meeting – RPR Chair requested that they make the link with Cllr Sheth and the rest of CWB.
Supporting documents: