Agenda item

2022-2026 Financial Planning and Budget Process: Elected Mayor and Cabinet Budget and Council Tax Requirement Resolution for 2022/23

To receive a report on the Elected Mayor and Cabinet’s Proposals for the 2022/23 General Fund Revenue Budget, Council Tax Requirement and Council Tax Level, the 2022-2027 Investment Plan including the Capital Investment Strategy and proposed prudential indicators for 2022-2026, and the Treasury Management Strategy Annual Investment Strategy for 2022/23 and to consider any objections.

Minutes:

(Councillors K Clark, J Cruddas and JLL Harrison withdrew from the meeting and took no part in the discussion or voting on this item).

 

The Chair explained the procedure for the meeting and indicated that he would first request Councillor M Rankin to move the Elected Mayor and Cabinet Proposals. Once those proposals were seconded, Members would then have the opportunity to ask questions relating to matters of principle.

 

The following additional documents had been also circulated to all Members of the Council:

·          Notification of Final Amendments made under Delegated Authority of the Mayor

·          Conservative Group Notice of Objection

·          List of the Authority’s appointments to outside bodies and dispensations granted

It was moved by Councillor M Rankin and seconded by Councillor C Johnson that:

 

Council agree:

 

(a)    the recommendations and delegations set down in paragraph 1.5.23 of this report in relation to the 2022/23 General Fund Revenue Account Budget, the 2022/23 Council Tax Requirement and Council Tax Level for 2022/23, being the Elected Mayor and Cabinet’s Budget and Council Tax Requirement Resolution.

 

(b)    the Elected Mayor and Cabinet’s proposals for the 2022-2027 Investment Plan, including the Capital Investment Strategy and proposed prudential indicators for 2022-2026, previously agreed at Cabinet on 31 January 2022, attached in the General Fund Annex 1, Appendix D (i), (iii) and (iv) of Appendix A to this report; and

 

(c)    the Elected Mayor and Cabinet’s proposals for the Treasury Management Strategy, Annual Investment Statement for 2022/23, attached in the General Fund Annex 1, Appendix E (i), (ii) of Appendix A to this report.

 

2022/23 Council Tax Requirement Resolution

 

1.     The recommended Budgets of the Authority be approved as noted below, subject to the variations listed in paragraphs 2 and 3 below and noting the estimated allocation of £184.788m in Dedicated Schools Grant, for 2022/23:

 

 

 

 

£

General Fund Revenue Budget

166,368,628

Total

166,368,628

 

2.   The following levies be included in the Budget Requirement:

 

                       

£

The Tyne and Wear element of the Durham,

Gateshead, Newcastle Upon Tyne, North Tyneside,

Northumberland, South Tyneside and Sunderland

Combined Authority Transport Levy

 

 

 

11,881,498

Environment Agency

207,371

Total

12,088,869

 

3.     The contingency be set as follows:

                                                 

£

Contingency

7,848,371

Total

7,848,371

 

4.     Note that at its meeting held on 24 January 2022, Cabinet agreed the

Council Tax base for 2022/23 for the whole Authority area as 62,229 (Item T), in the Formula in Section 31B of the Local Government Finance Act 1992, as amended (the “Act”) and the Local Authorities (Calculation of Council Tax Base) (England) Regulations 2012.

 

5.     Agree that the Council Tax Requirement for the Authority’s own purposes for 2022/23 is £109,720,306 (as set down in paragraph 1.5.22, Table 4).

       

6.     Agrees that the following amounts now calculated by the Authority for the year 2022/23 in accordance with Sections 31 to 36 of the Local Government Finance Act 1992, as amended (the Act):

 

(a)      £359,434,767   Being the aggregate of the amounts which the Authority estimates for the items set out in Section 31A(2)of the Act.

 

(b)      £249,714,461   Being the aggregate of the amounts which the Authority estimates for the items set out in Section 31A(3) of the Act.

 

(c)      £109,720,306   Being the amount by which the aggregate at 6(a) above exceeds the aggregate at 6(b) above, calculated by the Authority in accordance with Section 31(A)(4) of the Act, as its Council Tax Requirement for the year (Item R in the formula in Section 31B of the Act).

 

(d)    £1,763.17         Being the amount at 6(c) above (Item R), all divided by Item T (4 above), calculated by the Authority, in accordance with Section 31B of the Act, as the basic amount of its Council Tax for the year.

                             

(e)    Revised North Tyneside Council Valuation Bands

                 

Council

Tax Band

£

A

1,175.44

B

1,371.35

C

1,567.26

D

1,763.17

E

2,154.98

F

2,546.80

G

2,938.61

H

3,526.34

 

              Being the amounts given by multiplying the amount at 6(e) above by the number which, in the proportion set out in Section 5(1) of the Act 1992, is applicable to dwellings listed in a particular valuation band divided by the number which in that proportion is applicable to dwellings listed in valuation band D, calculated by the Authority, in accordance with Section 36(1) of the Act, as the amounts to be taken into account for the year in respect of categories of dwellings listed in different valuation bands.

 

       (f)    Police and Crime Commissioner for Northumbria Valuation Bands

 

              Note that for the year 2022/23 the Police and Crime Commissioner for Northumbria have issued the following amounts in precepts to the Authority, in accordance with Section 40 of the Local Government Finance Act 1992, for each of the categories of the dwellings in the Authority’s area, as indicated below:

                   

Council

Tax Band

£

A

102.56

B

119.65

C

136.75

D

153.84

E

188.03

F

222.21

G

256.40

H

307.68

 

 

(g)    Revised Tyne & Wear Fire and Rescue Authority Valuation Bands

 

              Note that for the year 2022/23 the Tyne and Wear Fire and Rescue Authority have issued the following amounts in precepts to the Authority, in accordance with Section 40 of the Local Government Finance Act 1992, for each of the categories of the dwellings in the Authority’s area, as indicated below:

                         

                         

Council

Tax Band

£

A

58.23

B

67.94

C

77.64

D

87.35

E

106.76

F

126.17

G

145.58

H

174.70

 

      (h)          Revised Total Valuation Bands

 

              That, having calculated the aggregate in each case of the amounts at 6(e), 6(f) and 6(g) above, the Authority, in accordance with Sections 30 and 36 of the Local Government Finance Act 1992, hereby sets the following amounts as the amounts of Council Tax for the year 2022/23 for each part of its area and for each of the categories of dwellings shown below:

 

                   

Council

Tax Band

£

A

1,336.23

B

1,558.94

C

1,781.65

D

2,004.36

E

2,449.77

F

2,895.18

G

3,340.59

H

4.008.71

 

      7.     The Authority’s relevant basic amount of Council Tax for 2022/23 is not excessive in accordance with the principles approved under Section 52ZB of the Local Government Finance Act 1992, as amended.

 

      8.     The Authority’s Financial Regulations will apply to the financial management of this Budget.

 

      9.     The level of contingencies will be £7.849m as pressures incurred during 2021/22 have been recognised as part of the 2022/23 Financial Planning and Budget process.

 

      10.   It is proposed that virement levels and approvals for virement shall be in accordance with the rules set down in the Authority’s Financial Regulations in force at the time.

 

      11.   The Reserves and Balances Policy is adopted as set out and is subject to review at least annually.

 

      12.   The Chief Executive, in consultation with the Elected Mayor, Deputy Mayor, Cabinet Member for Finance and Resources and the Senior Leadership Team to manage the overall Efficiency Programme and note that decisions made under this delegated authority will be reported to Cabinet as part of the regular budget monitoring information provided.

 

      13.   The Chief Executive, in consultation with the Elected Mayor and Director of Resources, to authorise the purchase of properties, on the open market, providing value for money is demonstrated and the cost can be contained within existing financial resources of the Authority.  This is to ensure that the programme of delivery of affordable homes and homes at social rent is progressed in line with the Cabinet's priorities.

 

      14.   The Chief Finance Officer be authorised to serve notices, enter into agreements, give receipts, make adjustments, institute proceedings, and take any action available to the Authority to collect or enforce the collection of Non-Domestic Rates and Council Tax from those persons liable.

 

      15.   The Chief Finance Officer be authorised to disburse monies from funds and accounts of the Authority as required for the lawful discharge of its functions.

 

      16.   Agree that the Police and Crime Commissioner for Northumbria and the Tyne and Wear Fire and Rescue Authority receive payment from the Collection Fund in 12 equal instalments on the last working day of each month.

 

      17.   Payments from the Collection Fund to be made to the Authority's General Fund in 12 equal instalments on the last working day of each month.

 


Conservative Group Objection

 

An Objection was moved by Councillor G Westwater and seconded by Councillor L Bones, as set out in Appendix 1 to these minutes.

 

The Chair invited Members to ask questions and then to speak to the Objection.

 

Following questions and debate on the Objection a procedural Motion was moved by Councillor C Johnson and seconded by M Rankin that

the question be now put.

 

Councillor C Johnson withdrew the procedural Motion immediately when a member indicated they wished to continue the debate.

 

The Chair asked that a recorded vote be taken on the Conservative Group Objection.

 

Votes for the Objection to the Budget

Councillors L Arkley, K Barrie, L Bartoli, L Bones, C Johnston, J Wallace and G Westwater.

 

Votes the against the Objection to the Budget

N Redfearn, Elected Mayor, Councillors G Bell, L Bell, T Brady, B Burdis, C Burdis, J Cassidy, D Cox, S Cox, N Craven, E Darke, L Darke, C Davis, S Day, D Drummond, P Earley, S Graham, M Green, M Hall, T Hallway, Janet Hunter, John Hunter, C Johnson, H Johnson, J Kirwin, F Lott, W Lott, G Madden, A McMullen, J Mole, J Montague, T Mulvenna, A Newman, P Oliver, J O’Shea, N Percy, S Phillips, B Pickard, M Rankin, P Richardson, W Samuel, J Shaw, M Thirlaway, J Walker and M Wilson.

 

The Objection, on being put to the meeting, was defeated by 45 votes to 7 votes.

 

The Chair announced that as the Council had not agreed the Conservative Group objection, Members were invited to ask questions and then to speak on the Elected Mayor and Cabinet’s proposals (the substantive motion).

 

The Chair asked that a recorded vote be taken on the Mayor and Cabinet’s proposals.

 

Votes for the Elected Mayor and Cabinet’s Proposals

 

N Redfearn, Elected Mayor, Councillors G Bell, L Bell, T Brady, B Burdis, C Burdis, J Cassidy, D Cox, S Cox, N Craven, E Darke, L Darke, C Davis, S Day, D Drummond, P Earley, S Graham, M Green, M Hall, T Hallway, Janet Hunter, John Hunter, C Johnson, H Johnson, J Kirwin, F Lott, W Lott, G Madden, A McMullen, J Mole, J Montague, T Mulvenna, A Newman, P Oliver, J O’Shea, N Percy, S Phillips, B Pickard, M Rankin, P Richardson, W Samuel, J Shaw, M Thirlaway, J Walker and M Wilson.

 

      Votes against the Elected Mayor and Cabinet’s Proposals

 

      Councillors L Arkley, K Barrie, L Bartoli, L Bones, C Johnston, J Wallace and G Westwater

 

The substantive motion, on being put to the meeting, was approved by 45 votes to 7 votes.

 

The Chair announced that the Elected Mayor and Cabinet’s Budget and Council Tax Requirement Resolution for 2022/23 had been approved by the Council and therefore the meeting provisionally scheduled for 3 March 2022 was no longer required.

 

 

 

 

 

 

 

 

 

 

 

Appendix 1

 

North Tyneside Council

Report to Council

Date: 17 February 2022

 

Title: 2022-2026 Financial Planning and Budget Process: Conservative Group Notice of Objection

 

 

 

Report of:

The Conservative Group

 

Wards affected:

ALL

 

 

Conservative Group Notice of Objection for the 2022/23 General Fund Revenue Budget, the proposed Council Tax Level for 2022/23, the Investment Plan for 2022-2027 and the Treasury Management Statement and Annual Investment Strategy for 2022/23

 

 

1.0     Introduction - The Recovery Budget

 

1.1               The budget presented by the Conservative Group is a budget for recovery. All Councillors, whether Conservative, Labour or Independent, should be asking themselves throughout the Budget-setting process “What action can we take to help residents’ finances?”. The Conservative budget answers this question. This is in stark contrast to the Budget presented by the Labour Mayor and Cabinet, which again avoids the major issues, blames the Government and hikes Council Tax for everyone across North Tyneside. 

 

1.2               The Labour Mayor and Cabinet have again chosen to hike Council Tax by the legal maximum, this Conservative Budget proposal provides a Council Tax rebate of at least £150 for every household across North Tyneside, paid for by a reallocation of Hardship support for those residents on LCTS. This will help all residents recover from Labour's wilful refusal to freeze Council Tax in recent years. 

 

1.3               This budget also includes a discretionary hardship fund of£550,000 to offer additional support with rising energy costs for those on the lowest incomes. Our budget also asks the Mayor and Cabinet to remove the Rent increase for the HRA Tenants for 2022/23 and look for further efficiencies for 2022-23 and beyond that sustain this reduction for Tenants.

 

1.4               At a time when incomes are being squeezed, the Labour Mayor and Cabinet are choosing to spend taxpayers’ money on ludicrous follies. Whether it is £48,000 on giant plasticine men, the chauffeur-driven car used by the Mayor and Cabinet, the £85,000 set aside for Councillors’ expenses, the £1.5 Million Dutch-style roundabout on Rake Lane or the continued publication of the Council Magazine (which the Mayor promised to scrap). The Conservative budget will help North Tyneside recover from this reckless spending. 

 

1.5               The Conservative budget brings the Council spending back to basics - fixing our roads and pavements, cleaning up our local environment and dealing with the backlog of tree issues caused by the recent storms. These measures will aid our recovery from almost a decade of Labour neglect.  

 

1.6               The Conservative budget will remove charges at recycling centres in North Tyneside to help reduce fly-tipping across the Borough. We have all seen an increase in this in recent months, not only causing public health issues but also making our communities look untidy. Only the Conservatives have a plan to stop this. 

 

1.7               Our budget would provide a community warden for each ward in North Tyneside. This would be a seven-day service where wardens would be able to respond rapidly to issues such as graffiti, litter, anti-social behaviour and dog fouling to help our communities recover form Labour’s decade of neglect.

 

1.8               Our budget also tackles the skills problem facing North Tyneside. It would introduce a member of staff to oversee Apprenticeship Levy Transfer between businesses in North Tyneside, meaning more funding for apprenticeships in the borough and a more skilled workforce fit for the future.

 

1.9               Bus services in North Tyneside are facing cuts, potentially leaving many residents isolated. The Conservative budget sets aside £80,000 to support our Public Transport, ensuring services are able to recover from Covid and provide essential connectivity across our Borough.

 

1.10           Our coastline is the best in the UK but recently announced plans from Labour make some parts below the standard our residents expect. The Conservative budget includes funding to extend the surface of the Northern Promenade, in the same style as the work already completed. There is also provision to repaint St Mary’s lighthouse, undoing years of neglect under the Labour administration which has resulted in the paintwork being discoloured.

 

1.11           The main issue that residents have complained about is the state of our roads and pavements. Under this Labour administration we have seen them worsen, with harrowing stories of pensioners having fallen over with broken bones or worse. Council data shows that only 3% of our footpaths are considered to be ‘good’. The Conservative budget is a budget for recovery for our roads and pavements, more than tripling the amount of investment in fixing our roads and pavements with a £4.540m cash injection.

 

1.12           The Conservative budget is balanced. It does not use any of the millions of pounds in reserves held by the Council and contains realistic action to tackle the rising cost of living. The support of the Chancellor, Rishi Sunak, has meant Conservatives in Government are working to tackle the rising cost of living in North Tyneside - and this budget continues that hard work. 

 

1.13           Our budget would see our roads and pavements fixed, our local areas maintained by a seven-day service of community wardens, our tree backlog slashed and an end to fly-tipping across our borough. It sets a plan for recovery from Labour’s decade of neglect. 

 

            This is a budget to tackle the cost-of-living crisis and help North Tyneside recover. We hope all members will support it. 

 

2.0         2022/23 Council Tax Requirement Resolution

 

2.1          The Conservative Group recommends that:

 

1.     The recommended Budgets of the Authority be approved as noted below, subject to the variations listed in paragraphs 2 and 3 below and noting the estimated allocation of £184.788m in Dedicated Schools Grant, for 2022/23:

 

 

£

General Fund Revenue Budget

163,512,396

Total

163,512,396

 

2.     The following levies be included in the Budget Requirement:

 

                   

£

The Tyne and Wear element of the Durham,

Gateshead, Newcastle Upon Tyne, North Tyneside,

Northumberland, South Tyneside and Sunderland

Combined Authority Transport Levy

 

 

 

11,881,498

Environment Agency

207,371

Total

12,088,869

 

3.     The contingency be set as follows:

                                                 

£

Contingency

8,700,371

Total

8,700,371

 

4.     The following individual objections are proposed to be incorporated within the Authority’s Budget.

 

            Growth

 

Item

 

£m

1.

Extend £150 Energy costs rebate for Council Tax bands E-H, including administration costs

0.940

2.

Invest £0.600m in the Community Wardens for each ward, full time to deal with issues such as ASB

0.600

3.

Double the resourcing of the Arborist Team

0.030

4

Remove all charges for recycling activities (approx. £0.080m)

0.080

5.

0.5 FTE Post to support the delivery of an Apprenticeship Levy Transfer Scheme

0.026

6.

NEXUS – Local Bus Services

0.080

 

If All Objections are accepted the Total Growth will be

1.756

 

 

            Savings / Income

 

Item

 

£m

1.

Sell Civic Car licence registration

(0.001)

2.

Cease publication of the Council magazine

(0.030)

3.

Scrap all expenses for Councillors (approx. £85k)

(0.085)

4

Reduce by 50% the Trade Union Facility time.

(0.120)

5.

Remove £150 Local Council Tax Hardship Support

(1.520)

 

If All Objections are accepted the Total Savings will be

(1.756)

 

5.     Note that at its meeting held on 24 January 2022, Cabinet agreed the

Council Tax base for 2022/23 for the whole Authority area as 62,229 (Item T), in the Formula in Section 31B of the Local Government Finance Act 1992, as amended (the “Act”) and the Local Authorities (Calculation of Council Tax Base) (England) Regulations 2012.

 

6.     Agree that the Council Tax Requirement for the Authority’s own purposes for 2022/23 is £109,720,306, as set out below:

 

 

£

£

2021/22 Budget Requirement

 

163,512,396

Financed by:

 

 

Revenue Support Grant

(11,796,682)

 

Retained Business Rates

(22,814,043)

 

Business Rates Top Up

(20,505,024)

 

Council Tax Collection Fund Surplus

1,323,659

 

 

 

(53,792,090)

Council Tax Requirement

 

109,720,306

 

       

7.     Agrees that the following amounts now calculated by the Authority for the year 2022/23 in accordance with Sections 31 to 36 of the Local Government Finance Act 1992, as amended (the Act):

 

(a)  £359,434,767    Being the aggregate of the amounts which the Authority estimates for the items set out in Section 31A(2)of the Act.

 

(b)  £249,714,461    Being the aggregate of the amounts which the Authority estimates for the items set out in Section 31A(3) of the Act.

 

(c)  £109,720,306    Being the amount by which the aggregate at 6(a) above exceeds the aggregate at 6(b) above, calculated by the Authority in accordance with Section 31(A)(4) of the Act, as its Council Tax Requirement for the year (Item R in the formula in Section 31B of the Act).

 

(d)  £1,763.17          Being the amount at 6(c) above (Item R), all divided by Item T (4 above), calculated by the Authority, in accordance with Section 31B of the Act, as the basic amount of its Council Tax for the year.

                             

 

(e)  North Tyneside Council Valuation Bands

                                   

Council

Tax Band

£

A

1,175.44

B

1,371.35

C

1,567.26

D

1,763.17

E

2,154.98

F

2,546.80

G

2,938.61

H

3,526.34

 

                          Being the amounts given by multiplying the amount at 6(e) above by the number which, in the proportion set out in Section 5(1) of the Act 1992, is applicable to dwellings listed in a particular valuation band divided by the number which in that proportion is applicable to dwellings listed in valuation band D, calculated by the Authority, in accordance with Section 36(1) of the Act, as the amounts to be taken into account for the year in respect of categories of dwellings listed in different valuation bands.

 

                     (f)  Police and Crime Commissioner for Northumbria Valuation Bands

 

                          Note that for the year 2022/23 the Police and Crime Commissioner for Northumbria have issued the following amounts in precepts to the Authority, in accordance with Section 40 of the Local Government Finance Act 1992, for each of the categories of the dwellings in the Authority’s area, as indicated below:

                         

Council

Tax Band

£

A

102.56

B

119.65

C

136.75

D

153.84

E

188.03

F

222.21

G

256.40

H

307.68

 

                    (g)  Tyne & Wear Fire and Rescue Authority Valuation Bands

 

                          Note that for the year 2022/23 the Tyne and Wear Fire and Rescue Authority have issued the following amounts in precepts to the Authority, in accordance with Section 40 of the Local Government Finance Act 1992, for each of the categories of the dwellings in the Authority’s area, as indicated below:

 

 

 

 

                                                           

Council

Tax Band

£

A

58.23

B

67.94

C

77.64

D

87.35

E

106.76

F

126.17

G

145.58

H

174.70

 

                    (h)  Total Valuation Bands

 

                          That, having calculated the aggregate in each case of the amounts at 6(e), 6(f) and 6(g) above, the Authority, in accordance with Sections 30 and 36 of the Local Government Finance Act 1992, hereby sets the following amounts as the amounts of Council Tax for the year 2022/23 for each part of its area and for each of the categories of dwellings shown below:

 

                         

Council

Tax Band

£

A

1,336.24

B

1,558.94

C

1,781.65

D

2,004.36

E

2,449.77

F

2,895.18

G

3,340.59

H

4,008.72

 

            8.     The Authority’s relevant basic amount of Council Tax for 2022/23 is not excessive in accordance with the principles approved under Section 52ZB of the Local Government Finance Act 1992, as amended.

 

            9.     The Authority’s Financial Regulations will apply to the financial management of this Budget.

 

            10.   The level of contingencies will be £8.700m as pressures incurred during 2021/22 have been recognised as part of the 2022/23 Financial Planning and Budget process.

 

11.   It is proposed that virement levels and approvals for virement shall be in accordance with the rules set down in the Authority’s Financial Regulations in force at the time.

 

            12.   The Reserves and Balances Policy is adopted as set out and is subject to review at least annually.

            13.   The Chief Executive, in consultation with the Elected Mayor, Deputy Mayor, Cabinet Member for Finance and Resources and the Senior Leadership Team to manage the overall Efficiency Programme and note that decisions made under this delegated authority will be reported to Cabinet as part of the regular budget monitoring information provided.

            14.   The Chief Executive, in consultation with the Elected Mayor and Director of Resources, to authorise the purchase of properties, on the open market, providing value for money is demonstrated and the cost can be contained within existing financial resources of the Authority.  This is to ensure that the programme of delivery of affordable homes and homes at social rent is progressed in line with the Cabinet's priorities.

            15.   The Chief Finance Officer be authorised to serve notices, enter into agreements, give receipts, make adjustments, institute proceedings, and take any action available to the Authority to collect or enforce the collection of Non-Domestic Rates and Council Tax from those persons liable.

 

            16.   The Chief Finance Officer be authorised to disburse monies from funds and accounts of the Authority as required for the lawful discharge of its functions.

 

            17.   Agree that the Police and Crime Commissioner for Northumbria and the Tyne and Wear Fire and Rescue Authority receive payment from the Collection Fund in 12 equal instalments on the last working day of each month.

 

            18.   Payments from the Collection Fund to be made to the Authority's General Fund in 12 equal instalments on the last working day of each month.

 

3.0           2022-2027 Investment Plan

 

3.1           The Conservative Group recommends the following amendments to the draft 2022-2027 Investment plan for 2022/23.

Project

2022/23

£000

General Fund

Draft Investment Plan

36,818

Re-Paving Northern Promenade

350

St Mary's Lighthouse and Island

500

Roads and Pavements

4,540

Total General Fund

42,208

General Fund Financing

 

Unsupported Borrowing

(13,763)

Capital Receipts

(254)

Revenue Contribution (use of reserves)

(93)

Grants and Contributions

(22,708)

Amendments Financed by Capital Receipts:

 

Sale of Civic Car

(15)

Sell 50% of shares held by the Council in Newcastle Airport

(3,915)

Sell surplus employment land 3.08 hectares

(1,425)

Sell artwork held by the Council

(35)

Total Financing

(42,208)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.2         Draft Prudential Indicators

 

            There are changes to the draft Capital Expenditure Prudential Indicator which is reflected in Appendix A table 4.

 

4.0         EQUALITIES IMPACT ASSESSMENT

 

            An Equalities Impact Assessment has been completed and no negative impacts have been identified

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix A – 2022-2026 - Prudential Indicators

 

Introduction

 

1.0       The Local Government Act 2003 requires the Authority to adopt the CIPFA Prudential Code and produce prudential indicators. The framework established by the Prudential Code is designed to support local strategic planning, local asset management planning and proper option appraisal. The objectives of the Prudential Code are to ensure, within a clear framework, that the capital expenditure plans of local authorities are affordable, prudent and sustainable, and that treasury management decisions are taken in accordance with good professional practice and in full understanding of the risks involved and how these risks will be managed to levels that are acceptable to the organisation. In exceptional cases the Prudential Code should provide a framework which will demonstrate that there is a danger of not ensuring this, so that the local authority concerned can take timely remedial action.

1.1   These indicators have been prepared using the current code (2017).  A revised Prudential Code has recently been introduced for adoption in 2023/24.  There is not expected to be a significant impact for the Authority.

 

1.2   The Prudential Code requires authorities to look at capital expenditure and investment plans in the light of overall organisational strategy and resources and ensure that decisions are being made with sufficient regard to the long run financing implications and potential risks to the authority. Effective financial planning, option appraisal, risk management and governance processes are essential in achieving a prudential approach to capital expenditure, investment and debt. The Capital Investment Strategy Is included as Appendix B (iii) to this report.

 

1.3   To demonstrate that local authorities have fulfilled these objectives, the Prudential Code sets out the indicators that must be used, and the factors that must be taken into account. The Prudential Code does not include suggested indicative limits or ratios. These will be for the local authority to set itself.

Each indicator either summarises the expected capital activity or introduces limits upon that activity, and reflects the outcome of the Authority’s underlying investment appraisal systems.

 

1.4   Within this overall prudential framework there is an impact on the Authority’s treasury management activity as it will directly impact on borrowing and investment activity. The draft Treasury Management Strategy for 2022/23 is included within the annex to this report.

 

1.5   The Prudential Code requires the following matters to be taken into account when setting or revising the prudential indicators:

 

a)    Service Objectives – e.g. strategic planning for the Authority

b)    Stewardship of assets – e.g. asset management strategy

c)     Value for money – e.g. options appraisal

d)    Prudence and sustainability – e.g. implications of external borrowing

e)    Affordability – e.g. impact on Housing rents

f)      Practicality – e.g. achievability of the forward plan

 

1.6   Matters of affordability and prudence are primary roles for the Prudential Code.

 

1.7   The revenue consequences of capital expenditure relating to the HRA must to be paid for from HRA resources.

 

1.8   Capital expenditure can be paid for through capital receipts, grants etc, but if these resources are insufficient then any residual capital expenditure will add to the HRA’s borrowing need.

 

1.9   The key risks to the plans are that the level of funding, such as capital receipt levels or revenue contributions may change as capital receipts are reliant on an active property market.

 

1.10The indicators cover:

 

·     Affordability;

·     Prudence;

·     Capital expenditure;

·     External debt; and

·     Treasury management.

 

1.11Prudential indicators are required to be set as part of the Financial Planning and Budget process. Any revisions must be reported through the financial management process.

 

1.12The prudential indicators for the forthcoming and future years must be set before the beginning of the forthcoming year. They may be revised at any time, following due processes and must be reviewed, and revised if necessary, for the current year when the prudential indicators are set for the following year.

 

1.13The following sets down the draft Prudential Indicators as calculated and proposed for North Tyneside Council for 2022–2026.  The indicators include those for the Housing Revenue Account.

 

Prudential Indicators for Affordability

 

1.14 The fundamental objective in considering affordability of the Authority’s Investment Plan is to ensure that the total capital investment of the Authority remains within sustainable limits, and in particular to consider the impact on the “bottom line” and hence Council Tax and Housing rents.  Affordability is ultimately determined by a judgement on acceptable Council Tax or housing rent levels.

 

1.15In considering the affordability of its Investment Plan, the Authority is required to consider all the resources that are currently available and estimated for the future, together with the totality of the Investment Plan, revenue income and revenue expenditure forecasts for the forthcoming year and following two years (as a minimum).  The Authority is also required to consider known significant variations beyond this timeframe.  This requires the development of rolling revenue forecasts as well as capital expenditure plans.  In line with the Financial Plan and the Investment Plan, four-year forecasts have been provided for the prudential indicators.

 

1.16When considering affordability, risk is an important factor to be considered. Risk analysis and management strategies should be taken into account.

 

1.17Looking ahead for a four year period, the following is a key prudential indicator of affordability:

 

·     the ratio of financing costs to net revenue stream for both the Housing Revenue Account (HRA) and non-HRA services.

 

Ratio of financing costs to net revenue stream

 

1.18 This indicator identifies the trend in the cost of capital (predominately external interest and MRP) as a proportion of the net revenue budget for the General Fund and housing income for the HRA and is shown in Table 1 below:

 

Table 1:  Ratio of Financing Costs to Net Revenue Stream

 

 

2021/22

2022/23

2023/24

2024/25

2025/26

 

Est.

Est.

Est.

Est.

Est.

 

 

 

 

 

 

General Fund

17.74%

17.52%

14.90%

14.86%

15.12%

HRA

27.88%

27.03%

26.13%

23.31%

23.04%

 

1.19The above indicator shows costs for all borrowing, both supported and unsupported.  It also includes the financing costs of PFI schemes and leases.  A new accounting standard for leasing (IFRS16) was due to come into force for Local Authorities from 1 April 2020 due to the Covid-19 pandemic this was further delayed until 1 April 2022.  Under this new standard leases that have previously been treated as operating leases and expensed to the revenue account on an annual basis, will now be required to be added to the authority’s balance sheet.  Work is ongoing to calculate the actual impact of this change on the cost of borrowing.  At this stage an estimate of £4m has been assumed as the cost of borrowing.  This will be refined and an updated figure reported as part of the final budget proposals.  It should be noted that there is not expected to be a bottom line impact to the revenue budget as a result of this change.

 

To enhance the information available for decision-making we have also provided a local indicator to show the proportion of the budget that is spent on unsupported borrowing.  This is shown in Table 2 below:

 

Table 2:  Ratio of Financing Costs for prudential (unsupported) borrowing to Net Revenue Stream

 

 

2021/22

2022/23

2023/24

2024/25

2025/26

 

Est.

Est.

Est.

Est.

Est.

 

 

 

 

 

 

General Fund

12.36%

11.71%

9.76%

10.18%

10.51%

HRA

5.87%

5.20%

4.81%

0.38%

0.00%

 

 

1.20The cost of capital related to past and current capital programmes has been estimated in accordance with proper practices.  Actual costs will depend on the phasing of capital expenditure and prevailing interest rates, and will be closely managed and monitored on an ongoing basis.  Any reprogramming in the Investment Plan, whether planned or unplanned, may delay the impacts of debt financing costs to future years.

 

Prudential Indicators for Prudence

 

1.21 A key indicator of prudence is that, over the medium term, gross debt will only be used for a capital purpose.  Under the Code the underlying need to borrow for a capital purpose is measured by the Capital Financing Requirement (CFR).  Gross debt includes external borrowing and also other liabilities including PFI schemes and Finance Leases.

 

Gross debt and Capital Financing Requirement (CFR)

 

1.22 This key indicator shows that gross debt is not expected to exceed the total CFR including additional capital requirements for 2021/22 to 2025/26. 

 

Table 3: Gross external debt compared to CFR

 

 

2021/22

2022/23

2023/24

2024/25

2025/26

 

Est.

Est.

Est.

Est.

Est.

 

£000s

£000s

£000s

£000s

£000s

 

 

 

 

 

 

External Borrowing

439,716

447,776

445,647

442,544

439,681

Other Liabilities (including PFI and Finance Leases)

107,502

179,126

178,238

174,538

170,676

Total Gross debt

547,218

626,902

623,885

617,082

610,357

 

 

 

 

 

 

Capital Financing requirement

610,882

679,539

675,022

 

665,719

 

652,828

 

 

 

 

 

 

Internal borrowing

63,664

52,637

51,137

48,637

42,471

 

 

Prudential Indicators for Capital Expenditure

 

Estimate of capital expenditure

 

1.23 This indicator requires reasonable estimates of the total capital expenditure to be incurred during the current financial year and at least the following three financial years.

 

1.24 The Investment Plan for 2022-2027 is included in the annex to the report and the figures below are based on that report.  A full breakdown of individual projects is shown in Appendix D (i).

 

Table 4:  Capital Expenditure

 

 

2021/22

2022/23

2023/24

2024/25

2025/26

 

Est.

Est.

Est.

Est.

Est.

 

£000s

£000s

£000s

£000s

£000s

General Fund

56,871

42,208

23,494

19,178

15,435

HRA

30,657

27,814

28,100

30,651

32,126

Total

87,528

70,022

51,594

49,829

47,561

 

1.25There is a risk of cost variations to planned expenditure against the Investment Plan, arising for a variety of reasons, including tenders coming in over/under budget, changes to specifications, slowdown/acceleration of project phasing.  There is also the possibility of needing to bring urgent and unplanned capital works into the Investment Plan.  These risks are managed by project officers on an ongoing basis, by means of active financial and project monitoring, they will be overseen by the Investment Programme Board and any changes will be made in accordance with Financial Regulations.

 

1.26The availability of financing from capital receipts, grants and external contributions also carry significant risks.  These risks are particularly relevant to capital receipts, where market conditions are a key driver to the flow of funds, causing problems in depressed or fluctuating market conditions.  There is a much reduced reliance on capital receipts in the proposed plan.

 

Estimate of Capital Financing Requirement (CFR)

 

1.27The CFR can be understood as the Authority’s underlying need to borrow money long term for a capital purpose.  The CFR is simply the total historic outstanding capital expenditure which has not yet been paid for from either revenue or capital resources.  The CFR will increase annually by the amount of capital expenditure which is not immediately paid for by grants, contributions, direct revenue funding or capital receipts.  The General Fund CFR will also be reduced each year by the amount of Minimum Revenue Provision (MRP) that is set aside in the revenue budget.  In addition, the CFR may be reduced by additional voluntary contributions in the form of capital receipts or revenue contributions.  The HRA business plan includes provision to reduce the HRA CFR in this way.

 

1.28The CFR also includes any other long term liabilities eg PFI schemes and finance leases.  As outlined in paragraph 1.19 above the new accounting standard for leasing (IFRS16) now comes into force for Local Authorities from 1 April 2022.  This means that leases that have previously been treated as operating leases and expensed to the revenue account on an annual basis, are now required to be added to the authority’s balance sheet.  An initial estimate of the impact of this change (£75m) has been added to the CFR.  Work is ongoing to refine this estimate and the impact of this change on the CFR.  This will be reported through part of the final budget proposals.

 

1.29In accordance with best professional practice the Authority does not associate borrowing with particular items or types of expenditure.  The Authority has a number of daily cash flows, both positive and negative, and manages its treasury position in terms of its borrowing and investments in accordance with the approved Treasury Management Strategy.  In day to day cash management no distinction can be made between revenue cash and capital cash.  Over the long term external borrowing may only be incurred for capital purposes.

 

        Table 5:  Capital Financing Requirement

 

 

2021/22

2022/23

2023/24

2024/25

2025/26

 

Est.

Est.

Est.

Est.

Est.

 

£000s

£000s

£000s

£000s

£000s

 

 

 

 

 

 

General Fund

303,220

377,046

377,716

372,230

363,557

HRA

307,662

302,493

297,306

293,489

289,271

 

 

 

 

 

 

Total

610,882

679,539

675,022

665,719

652,828

 

1.30The above indicator shows the total borrowing requirement, both supported and unsupported.  To enhance the information available for decision-making we have provided a local indicator to show the Capital Financing Requirement for unsupported borrowing.  This is shown in Table 6 below:

 

Table 6:  Capital Financing Requirement for Unsupported Borrowing

 

 

2021/22

2022/23

2023/24

2024/25

2025/26

 

Est.

Est.

Est.

Est.

Est.

 

£000s

£000s

£000s

£000s

£000s

 

 

 

 

 

 

General Fund

179,145

188,011

190,089

190,693

186,938

HRA

7,171

3,671

274

0

0

 

 

 

 

 

 

Total

186,316

191,682

190,363

190,693

186,938

Prudential Indicators for External Debt

 

Authorised limit for total external debt

 

1.31For the purposes of this indicator the authorised limit for external debt is defined as the authorised limit for borrowing plus the authorised limit for other long term liabilities.

 

1.32This indicator requires the Authority to set, for the forthcoming financial year and following years, an authorised limit for total external debt, separately identifying borrowing from other long term liabilities such as PFI and Finance Leases.

 

1.33The authorised limit represents the maximum amount the Authority may borrow at any point in time in the year.  It has to be set at a level the Authority considers is “prudent” and has to be consistent with the plans for capital expenditure and financing.

 

1.34This limit is based on the estimate of the most likely, but not worse case, scenario with additional headroom to allow for operational management, for example unusual cash movements.

 

1.35As outlined in paragraphs 1.19 and 1.28 above the new accounting standard for leasing (IFRS16) comes into force for Local Authorities from 1 April 2022.  An uplift has been applied to the external and operational boundaries to allow for this change.  Work is ongoing to calculate the actual impact of the change.  This will be reported through the Financial Management reports to Cabinet.

 

1.36Full Council will be requested to approve these limits and to delegate authority to the Chief Finance Officer, within the total limit for any individual year, to effect movement between the separately agreed limits for borrowing and other long-term liabilities, in accordance with option appraisal and best value for money for the Authority.

1.37Any such changes made will be reported to the Cabinet at its next meeting following the change.

 

Table 7: Authorised Limit for External Debt

 

 

2021/22

2022/23

2023/24

2024/25

2025/26

 

Est.

£000s

Est.

£000s

Est.

£000s

Est.

£000s

Est.

£000s

Borrowing

1,040,000

1,020,000

1,010,000

1,000,000

980,000

Other Long Term Liabilities

135,000

235,000

235,000

210,000

205,000

Total

1,175,000

1,255,000

1,245,000

1,210,000

1,185,000

 

1.38   The Chief Finance Officer reports that these Authorised Limits are consistent with the Authority’s current commitments, existing plans and the proposals in this 2022/23 budget report for capital expenditure and financing, and in accordance with its approved Treasury Management Policy Statement and Practices.

Operational Boundary for total external debt

 

1.39The proposed operational boundary is based on the same estimates as the authorised limit.  However, it excludes the additional headroom which allows for unusual cash movements.

 

1.40The operational boundary represents a key management tool for in year monitoring by the Chief Finance Officer.  Within the operational boundary, figures for borrowing and other long term liabilities are identified separately.  Full Council will be requested to delegate authority to the Chief Finance Officer, within the total Operational Boundary for any individual year, to effect movement between the separately agreed figures for borrowing and other long-term liabilities, in a similar fashion to the Authorised Limit.

 

1.41Any such changes will be reported to the Cabinet at its next meeting following the change.

Table 8: Operational Boundary for External Debt

 

 

2021/22

2022/23

2023/24

2024/25

2025/26

 

Est.

£000s

Est.

£000s

Est.

£000s

Est.

£000s

Est.

£000s

Borrowing

520,000

510,000

505,000

500,000

490,000

Other Long Term Liabilities

115,000

185,000

185,000

180,000

175,000

Total

635,000

695,000

690,000

680,000

665,000

 

Prudential Indicators for Treasury Management

 

Adoption of the CIPFA Code of Practice for Treasury Management

 

1.42    The Authority has an integrated Treasury Management Strategy and has adopted the CIPFA Treasury Management in the Public Services: Code of Practice and Cross-Sectoral Guidance Notes.  North Tyneside Council has, at any point in time, a number of cash flows, both positive and negative, and manages its treasury position in terms of its borrowings and investments in accordance with its approved Treasury Management Strategy and Practices.

 

Upper limits on interest rate exposure 2022-2026

 

1.43Full Council will be requested to set an upper limit on its fixed interest rate exposures for 2022/23 through to 2025/26 of 100% of its net outstanding principal sums.

1.44Full Council will be requested to set an upper limit on its variable interest rate exposures for 2022/23 through to 2025/26 of 50% of its net outstanding principal sums.

1.45The proposals to set upper and lower limits for the maturity structure of the Authority’s borrowings are as follows:

 

        Table 9: Amount of projected borrowing that is fixed rate maturing in each period as a percentage of total projected borrowing that is fixed rate

 

 

Upper Limit

Lower Limit

Under 12 months

50%

0%

12 months to 2 years

50%

0%

2 years to 5 years

50%

0%

5 years to 10 years

75%

0%

10 years to 20 years

100%

25%

20 years to 30 years

100%

25%

30 years to 40 years

100%

25%

40 years to 50 years

100%

25%

 

 

 

 

Supporting documents: