Decision details

Cabinet considered a report seeking approval to the proposed 2020-2024 Financial Planning and Budget process including information on the key decision milestones; and as part of the process, the proposed approach to Budget Engagement. 

The report outlined the national context within which local authorities were required to manage their finances. The financial outlook for local government and public services remained challenging and uncertain.  Local government had faced significant funding reductions, and these were likely to continue. 

Medium-term financial planning remained difficult and reflected the continuing funding cuts for local government, coupled with welfare reform and increased demand for social care and other unfunded pressures arising from pay and price inflation.  Therehad been indications that many authorities were overspending against budgets for both Adults and Children’s Services in order to meet increasing cost due to the increased complexity of service users’ needs.  These pressures were evident in the Authority, and as a consequence the Authority would need to explore new financial and organisational initiatives to meet this significant challenge.

At a local level, there were changes in North Tyneside’s demography with an increasing population and a growing number of the Authority’s most vulnerable residents requiring complex health and social care support.  The Authority, wherever possible, aimed to manage demand as effectively as possible, targeting services at those residents with greatest need.  This could only contain, or at best slightly reduce, the overall size of the population in receipt of these services.  However, the average cost of these services had risen due to the increased average complexity of the needs of those clients.

The last few years had been uncertain but financial planning for 2020/21 was

particularly difficult.  The Social Care Green Paper was two years late, the

promised Comprehensive Spending Review had yet to emerge, the Fair

Funding and Business Rates Retention review was in doubt and the future of

Government grants such as the Better Care Fund and Troubled Families was

also uncertain.

As a result of the delayto Brexit until 31 October 2019, political uncertainty remainedhigh and this was causing a delay to many decisions throughout Whitehall.  Details of the Spending Round had yet to be released but it was expected that this would be completed in September 2019.  A one-year settlement was likely to be on the basis of a roll-forward with current resources remaining the same as those in 2019/20.  In real terms, this would mean that the settlement would be “cash flat” with the potential for additional funding for social care. 

A one-year settlement would have implications for the Fair Funding Review (FFR) and reform of the Business Rate Retention Scheme (BRRS).  The FRR had been scheduled for implementation from April 2020 alongside a move to 75% BRR.  Uncertainty would remain as to future local government allocations post 2020/21.  Significant risks remained to the Authority’s funding around the principles yet to be agreed for fair funding distribution and how the move to 75% BRR was implemented.

The current Medium-Term Financial Plan (MTFP) covered the period to the end of 2022/23.  Whilst there was a great deal of financial uncertainty, recommended practice suggested that due consideration was given not only to the short-term but to how the Authority would continue to finance its activities in the medium-term.  It was therefore recommended at this stage that the MTFP covered the four-year period 2020/21 to 2023/24. The MTFP was a key part of the Authority’s Budget and Policy Framework which aimed to ensure that the Authority had the financial capacity and capability to achieve its strategic aims with due consideration to the long-term financial sustainability of the organisation.  As part of the 2020-2024 Financial Planning Process, a review of the MTFS would be carried out. It was proposed this would set out the following:

·         Analysis of the current financial situation, which included the main sources of income, the main financial commitments and the levels of reserves currently held;

·         Provision of a longer term financial “vision” for the Authority which was consistent with the overall strategic aims; and

·         A set of actions that set out how the financial vision was to be achieved with appropriate timescales that could be integrated into the medium- and short-term financial plans.

The Authority had previously agreed a set of principles as part of the process to develop the MTFP Plan and Budget. These were set out in detail in the report and would also be refreshed as part of the update to the Financial Strategy.

The current “Our North Tyneside Plan” had been approved by Council on 15

February 2018. The Plan set out the overall vision and policy context within

which the Financial Plan and Budget proposals were set.  These key policy

priorities informed the direction of resource allocation when developing the

Budget and MTFP.

With regard to the Housing Revenue Account, the 2019/20 financial year marked the end of the four-year 1% per annum rent reduction for all housing stock introduced by Government in the Welfare Reform and Work Act 2016.  From April 2020 the Government had announced that rent policy would return to being based on increases of Consumer Prices Index (CPI) + 1% per annum for at least the next 5 years in order to give housing authorities greater planning certainty. The Authority was also facing the impact of the continued roll-out of Universal Credit and other welfare reforms.

The 2020-2024 Financial Planning and Budget process would include a review of the current plan and the Capital Investment Strategy with a view to the development of a five year Investment Plan for the period 2020/21 to 2024/25. The Treasury Management Strategy would be reviewed in light of the refreshed Investment Plan and the overall MTFP for both the General Fund and the HRA.

In terms of the 2020-2024 General Fund Financial Plan and Budget, although there was a great deal of uncertainty, overall it was estimated currently that the Authority would need to close a funding gap of £31.730m by 2023/2024. This funding gap was summarised in Table 1 of the report. The figures included in the table did not include any assumptions on Council Tax increases in the period of the MTFP.

Reserves were reviewed during the financial year and Table 2 in the report showed the estimated use, following review of all General Fund reserves over the period to March 2024.

In assessing the adequacy of reserves, consideration was given to the level of un-earmarked reserves available for the management of financial risk to the Authority.  There was anticipated use of the Redundancy and Remuneration Reserve and the Support Change Fund Programme Reserve over the period of the MTFP leaving the Strategic Reserve as the only material un-earmarked reserve. Table 3 set out the level of un-earmarked general fund reserves held at the end of the 2018/19 financial year and the forecast position at 31 March 2024 as a proportion of Gross Expenditure budget and General Fund net revenue budget over the period of the MTFP.  

Un-earmarked reserves were lower than most in the region; however, the Chief Finance Officer considered that those reserve levels were adequate, particularly when considered against the degree of uncertainty surrounding local government finance.  She also considered that the Strategic Reserve should be sustained at least at this level over the period of the four-year medium-term financial plan.

The report referred to the Authority’s responsibilities under the Equality Act 2010 and Public Sector Equality Duty, part of which was to ensure that the potential effects of decisions on those protected by the Equalities legislation were considered prior to any decision being made.  The effect of the Authority’s budget setting process and decision-making would continually be monitored by using Equality Impact Assessments.

Key aspects of the 2020/2022 Financial Planning and Budget process timetable were set out at Appendix A to the report. This highlighted key decision milestones in the process.

The Elected Mayor and Cabinet were responsible for formulating the Council Plan and the Authority’s Budget.  The Cabinet Member for Finance and Resources, in close consultation with the Elected Mayor, had been nominated as the lead Cabinet Member for the overarching 2020-2024 Financial Planning and Budget Process.  The Head of Resources would be the project sponsor.

Details of the Budget Engagement Strategy for 2020/2021 were set out at Appendix B to the report. The aim of the Strategy was to reach different sectors of the population through an approach that encompassed engagement with residents as a whole and customers/users of services as well as particular groups of people, including those with protected characteristics.  The approach also ensured reach with particular interest groups and also ensured that targeted activity with specific external and internal stakeholder groups. 

Cabinet considered the following decision option: to agree the recommendations as set out in paragraph 1.2 of the report. The Authority‘s Constitution and Budget and Policy Framework Procedure Rules set out the stages to the completed in relation to agreeing the Budget of the Authority.  There were no other options available in relation to this.  The Budget Engagement Strategy formed part of the 2020-2024 Financial Planning and Budget Process.

Resolved that (1) the proposed outline 2020-2024 Financial Planning and Budget process, which incorporates the key decision milestones and dates, as set out at Appendix A to the report, be approved;

(2) the Budget Engagement Strategy as part of the 2020-2024 Financial Planning and Budget Process, set out at Appendix B to the report, be approved; and

(3) The Chief Executive, in consultation with the Elected Mayor, Deputy Mayor, Cabinet Member for Finance and Resources, Cabinet Member for Community Safety and Engagement, the Head of Law and Governance and the Head of Resources, be authorised to make any changes necessary to the 2020-2024 Financial Planning and Budget process following the outcome of the Constitution review as described in paragraph 1.4.2 of the report. 

(Reason for decision:  The recommendations are mainly legal in nature, as stated in paragraphs 2.1 and 2.2 of the report.)