Agenda item

Report of Councillor Paul Parkin, Portfolio Holder for Finance. 

The Chair invited the Monitoring Officer to explain how this item would be handled by Council.

 

The Monitoring Officer advised that the Medium Term Financial Plan report to Council would be voted on and dealt with in two parts. The first part would include recommendations 6.1 to 6.6, and the second part would include recommendations 6.7 to 6.13. This meant that the second part would encompass the recommendations that three Members had declared a displaceable pecuniary interest in because of their roles on the Rykneld Homes Board. The Members in question would be unable to participate or vote on the second part.

 

Councillor Paul Parkin (Portfolio Holder for Finance) presented the Medium Term Financial Plan 2020/21 to 2023/24 report to Council for recommendations 6.1 to 6.6. He paid tribute to the hard work of Finance officers in producing the Plan and helping him to achieve a balanced budget. The proposals had been approved by Cabinet on 13 February 2020 and were now being presented to Council. He informed Members that a number of efficiencies and savings being identified had allowed the Council to balance the budget.

 

The Portfolio Holder for Finance continued by warning Members that because of the budget shortfalls forecast for the next few years in Table 1 of the 13 February 2020 report to Cabinet, even more hard work would be required in future to balance the budget. He drew attention to paragraphs 1.9 and 1.10, which explained how the Government’s settlement had been planned to come in the form of the Spending Review for 2019, but this had instead become a one year rollover of the current four year settlement with a new medium term settlement due for 2021 onwards. This meant that the impact of national funding changes (including the Fair Funding Review and Business Rates reset that were expected to affect the 2020/21 budget) had been delayed until 2021/22. This relieved some of the pressure on the 2020/21 budget, but assumptions had continued to be made where sufficient information was available.

 

Recommendations 6.1 to 6.6 in the report were moved by the Portfolio Holder for Finance and seconded by Councillor A Dale. As the seconder, Councillor A Dale congratulated the Portfolio Holder on finding the line-by-line savings necessary to achieve a balanced budget, particularly since this would allow a Council Tax freeze to be delivered.

 

Councillor P Kerry spoke on the contents of the report segment under consideration. He acknowledged that Local Government finance was in a difficult place and different people would have their own ideas on how to address it, but he believed that this proposed budget put corporate image before the needs of the vulnerable. This was because he felt the budget would fail to fund organisations that had been helped in previous years, like the Citizens Advice Bureau, the Law Centre, the Unemployed Workers’ Centre and Links CVS.

 

 

Councillor P Kerry continued and made reference to how non-domestic rates appeared to be the Council’s main source of funding, and how it was current Government policy to review this and give help to small businesses. He expressed concerns that if the Government did not fund this, it could be disastrous for the Council. He shared similar concerns about Planning fees, stating that it would be an important source of income if the Council judged it well, but it could also become a significant expenditure because of factors like lost appeals. He believed this was a situation which could be exacerbated by the Cabinet’s decision to pause the Local Plan, so he implored them to un-pause it. He also pointed out that the possible end of the New Homes Bonus settlement was an added financial pressure, as it could see the Council miss out on £800,000 a year.

 

Councillor P Kerry concluded his statement by speaking on Council Tax, and the report’s proposal that “no Council Tax increase will be levied in respect of a notional Band D property.” He stated that when his previous administration raised Council Tax, he felt they tried to keep the increases as low as possible – their 2% increase amounted to approximately £140,000 of additional income to meet the shortfalls in future Medium Term Financial Plan years, also in the knowledge that future increases would create less income because of a lower base rate.

 

Councillor D Hancock also spoke on the contents of the report segment under consideration. He congratulated the Portfolio Holder for Finance on finding the efficiencies necessary to balance the budget, and acknowledged that the significant shortfall figures in future years in the Medium Term Financial Plan would make the situation even more difficult if the Council could not call on its reserves. He shared Councillor P Kerry’s concerns with the proposed Council Tax freeze, stating that freezing Council Tax at this time could force the Council to make a large increase three or four years down the line instead, and he believed small incremental increases would be less of a burden on the public. He also shared Councillor P Kerry’s concerns about pausing the Local Plan.

 

The Leader of the Council responded to both Councillors by stating that a Council Tax freeze was an election manifesto pledge that the Cabinet had committed to delivering, and there was a Council Tax increase cap of 1.99% that would require a referendum if breached. He sought to clarify Councillor D Hancock’s statement about reserves, stating that no reserves had been used to balance the budget for this year. He also clarified Councillor P Kerry’s concern about support for local organisations, stating that the grants to these organisations had not only been preserved, but the Council was one of only two local authorities in Derbyshire that had increased its grants to these types of organisations. He used the example mentioned by Councillor P Kerry of the Unemployed Workers’ Centre, and informed Members that the Council had supported the Centre with £10,000. He added that the Council had also provided Action Grants for community groups, and set up funding initiatives to support those with disabilities.

 

The Leader of the Council continued by stating that one of the financial pressures facing the Council was the Police and Crime Commissioner raising the Police’s proportion of Council Tax by £10, in response to the Commissioner’s own demands from Chief Constables. The Leader felt that with numerous financial pressures like this, the Council had to make a strong decision to draw the line for the benefit of North East Derbyshire residents.

 

Councillor N Barker spoke on the contents of the report segment under consideration. He thanked the Leader for the aforementioned £10,000 contribution to the Unemployed Workers’ Centre. He believed that nobody wanted to increase Council Tax, but the issue must be considered in the context of Government funding to the Council decreasing by £8m since 2010. He agreed with the concerns expressed by Councillor P Kerry, and stated that not increasing Council Tax now could have a negative cumulative effect in the future and put the Council’s ability to provide services at risk in three or four years.

 

Councillor J Funnell spoke on the contents of the report segment under consideration. He asked if the £1m saving quoted for this year could be broken down into more detail, and if that saving would be the same in future years and carry over. He agreed with the other concerns expressed about freezing Council Tax, and how it could lead to the Council having to make a bigger increase in future years.

 

The Chair passed to Councillor P Kerry to allow him to speak by way of an explanation. Councillor P Kerry thanked the Leader for the £10,000 contribution to the Unemployed Workers’ Centre, and explained that he included the organisation in his earlier statement because he had not seen written confirmation of the contribution. The Leader of the Council responded by saying he met with the Co-ordinator from the Centre about the contribution, and it was given without publicity to ensure that nobody in the District was left in difficulty. He thanked Councillor P Kerry for the acknowledgement.

 

Councillor R Shipman spoke on the contents of the report segment under consideration. He congratulated the Portfolio Holder for Finance on achieving a balanced budget, but he echoed Councillor J Funnell’s comments about needing more detail on the approximately £1m savings before being able to vote on the budget. He added that he did not think the Council Tax freeze was the right option at this moment in time.

 

The Chair offered the Portfolio Holder for Finance the right of reply as mover of the motion. He referenced Councillor P Kerry’s concerns about the New Homes Bonus settlement, and advised that the total income for this would be £422,000 in the current year and nothing from that point onwards, as far as the Council knew so far. He clarified some of Councillor P Kerry’s figures about Council Tax increases, stating that lost income for a 1% increase in Council Tax would amount to £59,000, and the same for a 1.99% increase would amount to £119,000. He referenced Councillor J Funnell’s request to have the £956,000 savings broken down, and informed Members that £611,000 was ongoing savings and approximately £200,000 was from vacancy management.

 

The Chair put recommendations 6.1 to 6.6 to the vote, and advised that a recorded vote would be taken in line with the Council’s Constitution, which directed that when matters affecting the setting of the Council’s budget or Council Tax were considered by Council, then a recorded vote must take place as a matter of course.

 

For the motion – 17

(Councillors P Antcliff, W A Armitage, C Cupit, A Dale, L Deighton, O Gomez Reaney, R Hall, A Hutchinson, B Lewis, H Liggett, P Parkin, A Powell, C Renwick, M Roe,  D Ruff, M Thacker MBE JP and P Wright.)

 

Against the motion – 3

(Councillors D Hancock, R Shipman and P Windley.)

 

Abstentions – 15

(Councillors N Barker, J Barry, J Birkin, A Cooper, S Cornwell, J Funnell, L Hartshorne, M Jones, P R Kerry, J Lilley, G Morley, S Pickering, T Reader, K Rouse, L Stone and B Wright.)

 

The motion was carried.

 

The Portfolio Holder for Finance presented the Medium Term Financial Plan 2020/21 to 2023/24 report to Council for recommendations 6.7 to 6.13. In presenting the part on the Housing Revenue Account, he explained that Government guidance stated the Council could increase rent by up to whatever the Consumer Prices Index rate was plus 1% (so a maximum of 2.7% at present), but after taking into consideration people who might struggle to pay their rent, it was decided to make the proposed rent increase 1.7% for this year. He stated that with the economy as it was, still having a rent increase of some kind was important to be able to keep homes well maintained and managed. Putting the proposed increase into force this year would also give residents plenty of notice to plan their finances accordingly.

 

The Portfolio Holder for Finance presented the Fees and Charges section of the report, and explained how garage rents had been adjusted by Rykneld Homes to reflect the current market, and a review would be undertaken in 2020 regarding the management fee in the Housing Revenue Account paid to Rykneld Homes. The management fee in the HRA for Rykneld Homes in 2020/2021 retained at £9.852m.

 

The Portfolio Holder for Finance also spoke on the Capital Programme, and explained that a stock condition survey had been undertaken this year, which resulted in more investment for Rykneld Homes to bring the stock up to energy efficiency standards. The management fee in the Capital Programme for Rykneld Homes for 2020 onwards was retained at £1.1m.

 

Recommendations 6.7 to 6.13 in the report were moved by the Portfolio Holder for Finance and seconded by Councillor W Armitage. As the seconder, Councillor W Armitage thanked the Portfolio Holder for Finance on what he felt was a rigorous piece of work. He believed that the proposals achieved savings, but also ensured that properties were kept up to scratch.

 

Councillor D Hancock spoke on the contents of the report segment under consideration. He thanked the Portfolio Holder for Finance for what he felt was an accurate summary, and indicated he would be supporting the motion.

 

Councillor P Kerry spoke on the contents of the report segment under consideration. He stated that after years of enforced rent reductions, he felt the business plans of housing providers had become untenable. New directives had stipulated a period of rent rises, and the proposals included further rent increases during the life of the Medium Term Financial Plan in addition to the initial increase of 1.7%. He feared that residents would not welcome this. He also noted that the report proposed rent collection in 52 weeks per year instead of 48, and although the reasons for this appeared sound, he believed residents would take exception to being told they would no longer have four rent-free weeks. He expressed concerns that this could just be an attempt to make the rent increase appear smaller, since it would be collected over four more weeks.

 

Councillor P Kerry continued by making reference to the rents for garages (new and existing), and he noted that these had increased, and in the table for ‘garages annual’, it would cost significantly more to pay the rent in one instalment than it would to pay it weekly, and he was concerned that this would be an attempt to get the tenancy back quicker.

 

The Leader of the Council responded to Councillor P Kerry by acknowledging that the proposed change to 52 weeks could be unpalatable to the public, but public consultation on the change would be carried out by Rykneld Homes. He added that there was no attempt to deceive the public on the change, and in fact, he believed a change to 52 weeks would be far more palatable to the public than pretending the four week rent-free period existed.

 

The Leader of the Council wished to emphasise that the proposals for the rent changes had originated from Rykneld Homes and been recommended to Cabinet. Cabinet considered the rationale behind the proposal, and agreed that it was the best way forward for the Council.

 

Councillor N Barker spoke on the contents of the report segment under consideration. He was pleased to see the rent increase for the first year only being 1.7%, but he was concerned that if future rent increases were taken on the Government’s guidance of being able to increase rent by up to whatever the Consumer Prices Index rate was plus 1%, Britain’s exit from the European Union could make the future CPI rate difficult to predict. He suggested that to mitigate this, the proposals should have included set rent increases for the next five years instead. For this reason, he would not be supporting the motion.

 

Councillor R Shipman spoke on the contents of the report segment under consideration. He agreed with the Leader of the Council’s point about 52 weeks being more palatable to the public than 48 weeks, because he felt it made it easier for resident to budget for the rent, and he believed the four week period of no rent was not actually free. He added that he felt the garage rent increases only appeared significant because they had barely been amended for years, and he also felt that the proposed increase would help fund Council services.

 

The Chair offered the Portfolio Holder for Finance the right of reply as mover of the motion. He referenced Councillor N Barker’s point about future rent increases going up with the CPI rate, and he explained that it had to be approached like this because costs at Rykneld Homes also increased in line with the CPI rate, so rent increases had to be tied to CPI to allow Rykneld to carry out the upkeep and repair of houses. He added that in his opinion, the rent collection change from 48 weeks to 52 weeks was a simple mathematical equation, and there was no real rent-free period of four weeks.

 

The Chair put recommendations 6.7 to 6.13 to the vote, and advised that a recorded vote would be taken in line with the Council’s Constitution, which directed that when matters affecting the setting of the Council’s budget or Council Tax were considered by Council, then a recorded vote must take place as a matter of course.

 

For the motion – 19

(Councillors P Antcliff, W A Armitage, A Cooper, L Deighton, J Funnell, O Gomez Reaney, R Hall, D Hancock, A Hutchinson, B Lewis, H Liggett, P Parkin, C Renwick, M Roe, D Ruff, R Shipman, M Thacker MBE JP, P Windley and P Wright.)

 

Against the motion – 13

(Councillors N Barker, J Barry, J Birkin, S Cornwell, L Hartshorne, M Jones, P R Kerry, J Lilley, G Morley, S Pickering, T Reader, K Rouse and B Wright.)

 

Abstentions – 0

 

The motion was carried.

 

RESOLVED – That:-

 

(1)            It be accepted that in the view of the Chief Financial Officer, the estimates included in the Medium Term Financial Plan 2020/21 to 2023/24 are robust and that the level of financial reserves, whilst at minimum levels, are adequate.

 

(2)            Officers report back to Cabinet and the Audit and Corporate Governance Scrutiny Committee on a quarterly basis regarding the overall position in respect of the Council’s budgets. These reports are to include updates on achieving the savings and efficiencies necessary to secure a balanced budgets over the life of the Medium Term Financial Plan. 

 

(3)            No Council Tax increase will be levied in respect of a notional Band D property.

 

(4)            The Medium Term Financial Plan in respect of the General Fund as set out in the report to Cabinet (Appendix 1) be approved as the Current Budget 2019/20, as the Original Budget 2020/21, and as the financial projections in respect of 2021/22 to 2023/24.

 

(5)            Any under spend in respect of 2019/20 be transferred to reserves to be available for reinvestment in transformation and increased financial resilience as required.

 

(6)            On the basis that income from planning fees is anticipated to exceed £0.480m in 2020/21, the Chief Executive in consultation with the Leader be granted delegated powers to authorise such additional resources as are necessary to  effectively manage the resultant increase in workload.

 

(7)            Council sets its rent levels in line with the Social Housing Rent Standard increasing rents by 1.7% from 1^st April 2020 and by CPI + 1% for years 2021/22 to 2023/24.

 

(8)            The increases in respect of all other charges be implemented in line with the table shown at 1.33 with effect from 1 April 2020.

 

(9)            The Medium Term Financial Plan in respect of the Housing Revenue Account as set out in the report to Cabinet (Appendix 1) be approved as the Current Budget in respect of 2019/20, as the Original Budget in respect of 2020/21, and the financial projection in respect of 2021/22 to 2023/24.

 

(10)      The Management Fee for undertaking housing services at£9.852m and the Management Fee for undertaking capital works at£1.1m to Rykneld Homes in respect of 2020/21 be approved.

 

(11)        Members endorse the section in the current Financial Protocol which enables the Council to pay temporary cash advances to Rykneld Homes in excess of the Management Fee in order to help meet the cash flow requirements of the company should unforeseen circumstances arise in any particular month.

 

(12)        Members note the potential requirement to provide Rykneld Homes with a ‘letter of comfort’ to the company’s auditors and grant delegated authority to the Council’s Chief Financial Officer in consultation with the Portfolio Member for Finance to agree the contents of that letter. 

 

The Capital Programme as set out in the report to Cabinet (Appendix 1) be approved as the Current Budget in respect of 2019/20, and as the Approved Programme for 2020/21 to 2023/24.