To receive a presentation on the Medium Term Financial Strategy and consider the report to Cabinet and make recommendations to Cabinet.

The Committee received a presentation on the Medium Term Financial Strategy (MTFS) and considered a report to Cabinet on 17 January 2013.

The Chief Officer Finance and Commercial (COFC) informed the Committee of the position regarding the Medium Term Financial Strategy. The Committee had previously been circulated with copies of the report to Cabinet (17 January) entitled ‘Draft Medium Term Strategy and update on the provisional Local Government Settlement 2013/14’. At the meeting the Committee were also supplied with copies of the presentation by the Chief Officer Finance and Commercial, a copy of which has been placed in the minute book.

The Chief Officer Finance and Commercial (COFC) highlighted the following principal points:

·         The Strategy included the local and national policy, financial context and covered 2013/14 to 2015/16.

·         The provisional settlement on 19 December indicated for 2013/14 a reduction of £5.45m (6.9%).  The final settlement was still to be confirmed but if it followed the pattern of previous years it is not expected to alter the indicated position.

·         Under the new Business Rate system from 2013/14 Herefordshire will be a ‘top-up’ authority and will receive £6.5m.

·         The Government had offered a further Council Tax Grant of 1% but for only 2 years.

·         Comparisons were made with other authorities to seek the national context and assess any impact or significant changes.

·         The strategy included an assessment of the Council’s future funding including: estimated Council Tax rates, inflation, and local approach to reserves and capital funding.

·         Treasury Management covered borrowing and investment; addressed key risks; bank base rates and the external economic and political environment.

·         The Financial Model was the heart of the strategy.  The model assumed that in 2013/14 £9.142m of ‘Root and Branch’ budget reductions would be delivered with further reductions in future years.  It also recognises £5.18m of pressures in 2013/14 with further pressures in future years.  It assumed 1.9% council tax increase (£1.66m) in 2013/14 with no increase in future years.

·         In 2013/14 the Model also included a contribution of £2m to reserves and an additional £1m for change management with £2.6m for inflation.

In the course of discussion the following principal points were noted:

·         The report charted how Herefordshire’s funding equated in the national context.  It was noted that government lobbing via the SPARSE Rural Network Group was undertaken in an attempt to emphasise to government the particular funding issues faced by rural authorities and thereby seek to raise funding levels for rural authorities.  The Strategy identified pressures due to increased life expectancy and future demand for adult social care due to an increasing ageing population in the county.

·         From April 2013 funding (£3.15m) will be transferred from NHS Commissioning.  This was already ring-fenced to projects identified through the Joint Strategic Needs Assessment. The Council will be responsible for managing contracts and ensuring value for money.  This will need to be considered in the wider context, not just within adult social care but across the whole of council services.  The Health & Wellbeing Board and the Health and Social Care Overview & Scrutiny Committee were monitoring the situation.  The transfer of NHS funding would be the subject of a separate report to Cabinet.

·         While Herefordshire had good collection rates for council tax (98%) and business rates (99%) it will be essential that this level is maintained particularly in view of any potential adverse impact following changes to the council tax benefit regime.

·         Changes to the business rate regime placed greater emphasis on attracting business to the areas. While the Enterprise Zone was an advantage the county still had a small business base and therefore would be talking to similar authorities in an attempt to collaborate in attracting new businesses to the area. 

·         While Treasury Management had a good track record of managing investment and borrowing, the Committee sought assurances that the borrowing portfolio, particularly in relation to the higher rate LOBO Loans, were regularly reviewed and restructured.

·         The level of budget reserve had taken on a greater significance due to reduced levels of government funding and increased levels of pressures on the Council’s finances.  Given the pressures the MTFS proposed that over the next two years the minimum level should be increased to 4% of the net revenue budget.

·         For 2013/14 savings of nearly £10m are expected to be delivered through the Root and Branch process. It was noted that some social care services can be very expensive and a small increase in the number of people requiring a high level of care can soon have a significant adverse impact on the budget. These budgets are regularly monitored.

RESOLVED: That

1.    This Committee urges Cabinet to increase the lobbying of MPs and the government to highlight how the ’sparsity’ issue adversely effects this Council’s budgetary position;

2.    Cabinet must ensure that the predicted savings identified through the Root and Branch reviews are delivered to ensure that the Council’s budget is robust and deliverable; and

3.    The scope to restructure the Council’s existing borrowing portfolio and in particular the LOBO Loans be reviewed.

At this point the Committee adjourned for 10 minutes and reconvened at 11.25am