To note and approve the annual earmarked reserves review.

The leader of the council introduced the report. He highlighted that Herefordshire had an appropriate level of reserves as a percentage of expenditure, as shown in the comparison with other similar councils. The leader drew attention to the supplement that had been published for this item, which included recommendations for two new earmarked reserves. The first was to undertake research on housing options while the second was to bring forward edge of care services ahead of the current plans.

A minor correction was noted to the supplementary information on the proposed edge of care service – the final sentence should refer to a previously planned introduction from April 2020 rather than 2021.

The chief finance officer explained a number of points in relation to the report namely that:

·         Reserves were held for a number of reasons;

·         School reserves were held on behalf of council run schools;

·         The financial resilience reserve had been established a few years earlier in recognition of the difficulty of projecting future council income and was being topped up each year through the minimum revenue provision;

·         Reserves could also be called on to fund invest to save programmes that could not be delivered through day to day budgets;

·         The pension risk reserve represented an adequate reserve with the pension fund having had a good run on investment returns and being over 90% funded;

·         The government had indicated that roll out of business rate retention would be delayed for at least another year so the business rates smoothing reserve would help to deal with unknowns and guard against successful business rate appeals which could result in significant costs to the council;

·         Unused grants would be examined to see if they could be spent, depending on any conditions attached;

·         Unused schools grants included the devolved schools grant which was held centrally for schools, £400k for high needs and other small grants that the schools forum would determine how to spend;

·         The settlement monies reserve related to an ongoing dispute and would be available once the legal process was concluded;

·         Reserves were reviewed annually and reported to cabinet, in some cases figures were based on estimates of what was required while others related to actual grants received.

The cabinet member housing, regulatory services and community safety explained the background to the proposal to create an earmarked reserve to explore options for delivery of housing in the county. She highlighted that:

·         Residents were facing difficulty in finding suitable housing across the board;

·         There were a number of ways in which the council could deliver additional housing and all would be considered;

·         The investigation would support a business case that would inform consideration of further investment.

The chief finance officer reminded cabinet members that the current proposal would create the new reserves and set out what the money was to be spent on. How it was to be spend would be subject to a further decision at a later date.

Cabinet members were keen to explore all avenues and to consider issues such as the right to buy. It was noted that with the reduction in grants from central government the council had to look for ways to maintain financial stability.

The cabinet member children and families spoke on the proposal to create an additional reserve for children’s safeguarding noting that:

·         The council had historically high levels of LAC and as well as being a matter of concern for the wellbeing of young people in the county it resulted in significant expense for the council;

·         Edge of care services would be an investment in reducing the numbers of children who needed to be taken into care;

·         The proposals had been discussed for some time and there was an opportunity to move ahead during the current financial year by use of this reserve.

Cabinet members noted the comments that had been made during consideration of previous items on the corporate parenting strategy and the need to reduce demand on children’s social care services.

The director for children and families confirmed that the need for this service had been discussed for some time and that a full business case was in the process of being finalised. Part of the proposal would see additional social workers recruited who would not work on child protection but who would reduce workload for the child protection team overall. As with the reserve for housing options, actual spend would require further decision processes.

Group leaders were invited to present the views of their group. The need for the council to hold reserves in order to be able to react to uncertainty was stressed. Demand led services could not always meet all pressures within an annual budget and once reserves were spent it would not be possible to compensate without putting pressure on council tax payers.

Cabinet members recognised that the council was in a positive financial position because of good management by officers and councillors in previous administrations and had the opportunity to invest in delivering the new corporate plan that was currently being drawn up.

The option for the full cabinet to take decisions on actual spend rather than delegate to individual portfolio holders was discussed but it was noted that the same processes in terms of publication of the decision and opportunity for call in would apply in either case. The importance of keeping all councillors and members of the public engaged was stressed.

It was resolved that:

The following changes be made to the reserve balances held, as shown in appendix 1:

i.              Establish a new earmarked reserve of £150k, utilising funds held in the financial resilience reserve, to fund the investigation of different models of delivering council housing; and

ii.            Establish a new ear marked reserve of £550k, utilising funds held in the financial resilience reserve, to fund the initial implementation in 2019/20 of an enhanced edge of care service for young people and support a high quality children’s social care service.