Agenda item

Resolved: that the report be noted.

The order of the agenda was changed. This was the first substantive item.

4.1    Sir Steve Bullock (Mayor of Lewisham) introduced the report; the following key points were noted:

·         In 2010 it was assumed that by 2017 the Council would have finished making cuts. The expectation was that the size of the public sector would have decreased and spending would have been constrained but that the process would be complete. However, there was not any end to the process in sight.

·         Savings were more difficult to make each year and were taking longer to deliver. The process for 18/19 would have to start again early next year.

·         There were rising deficits in a number of schools. This rise was concerning, but not surprising because schools were now being impacted by the same spending pressures as other parts of the public sector.

·         The new formula for schools funding would be particularly disadvantageous to London. London Boroughs were working together to try to manage the changes and there had been some movement from government, but London would still suffer more than anywhere else as a result of the changes.

·         The pressure on adult social care was sustained and significant. The crisis in the NHS was well reported and it was having an impact on councils across the country. Funding for social care was not sufficient.

·         The maximum rise for council tax (4.99%) was proposed, including the 2.99% increase to fund social care. Any increase larger than this would require a referendum.

·         In 217/18 the Council would receive some net advantage from the changes to the allocation of the new homes bonus to social care.

4.2    Kevin Bonavia (Cabinet Member for Resources) addressed the Committee, the following key points were noted:

·         The budget proposed that Council Tax be increased by the largest amount possible without triggering a referendum. Residents would notice this more than in previous years.

·         Most other London authorities were planning to increase council tax; Lewisham would not be an outlier.

·         There was an £11.9m overspend forecast for this 16/17 – which would be covered in several ways, with some of the shortfall met from reserves.

·         Savings would need to be made early in the cycle next year in order that they could be successfully delivered.

4.3    David Austin (Head of Corporate Resources) provided an overview of the report, the following key points were noted:

·         The draft budget was based on the provisional financial settlement. The final settlement would not be available until February.

·         Confirmation was awaited from the Greater London Authority on its precept and on the consultation on business rates.

·         There would be £232m in the general fund for 2017/18. Which incorporated the proposed increase in council tax and the welcome increase in the council tax base.

·         In terms of savings – 2017/18 would be another significant year. £23m of savings had already been agreed.

·         There were pressures in a number of areas (detailed in the financial forecasts).

·         Implementation of the new valuations in business rates posed a risk, because of the likelihood of appeals.

·         The Council would need to find funds to meet the requirements of the apprenticeship levy.

·         The capital budget for 2017/18 would be £123.5m, with £78m in the Housing Revenue Account (HRA) and the majority of the balance used to provide school places.

·         The HRA had a revenue turnover of £90m. However, 2017/18 would be the second year of the 1% compulsory rent reduction by the government.

·         New funding arrangements for schools would be implemented over two years.  It was expected that Lewisham schools would lose money under the new formula.

·         Budgets for Public Health were being reduced annually in line with the reduction in government funding.

·         The treasury management strategy included proposals for longer term and property related investments because of low interest rates and the difficulty of achieving good returns on Council investments.

·         There would be additional detail on the proposal to invest to save in the Mayor and Cabinet report to be funded from the Council’s reserves on a once off basis.

·         Full Council would be asked to approve the Council’s admission to the Public Sector Audit Appointments Panel (run by the Local Government Association), to provide selection and engagement of external audit, following the abolition of the Audit Commission.

4.4    Janet Senior (Executive Director for Resources and Regeneration); David Austin (Head of Corporate Resources); and Kevin Bonavia (Cabinet Member for Resources and Regeneration) and David Richards (Group Finance Manager, Children and Young People) responded to questions from the Committee; the following key points were noted:

Schools Budgets

·         There was currently a budget pressure of £1.7m in the schools high needs spending block. This was as a result of the increased number of pupils with high needs.

·         Next year, it was anticipated that there would be an extra 110 pupils who would need educating in special schools or who would need additional support in their existing schools.

·         In the funding settlement for the dedicated schools grant, the Department for Education had built in growth of £500k. This would be used to support high needs block spending.

·         There was a continued pressure on spending in schools. The schools forum recognised that all schools would have some reduction in their funding.

·         There was an increase in schools operating deficits. Officers were putting in place a process with the schools forum to help schools manage their pressures. The pressure was most acutely felt in the secondary sector because of the relatively low number of secondary school pupils.

·         As the bulge in pupil numbers worked its way through from primary to secondary schools, the budget pressures in secondary schools should ease.

No Recourse to Public Funds

·         An operational budget would be provided to fund the Council’s work with people who have no recourse to public funds. Previously, this had been provided on an annual basis for the successful pilot.

Budget Overspend

·         It was unusual for the budget to be overspent by £11.6m at this time of the year. There were some areas where savings that were identified had not been made. There were others where income generating activities were not producing as much revenue as had been anticipated.

·         Officers were attempting to achieve a balance between management action to control spending and accurate budget setting.

·         There were significant pressures in children’s and adult’s social care.

Invest to Save

·         The Children and Young People’s directorate had been allowed to spend in order to save. The Committee might wish to review the implementation of this spending. There were few other areas which had once of funds available to them in order to enable improvement.

·         There were some measures that could be implemented corporately to reduce budget pressures, but a decision had to be made about how stringent these should be. The departmental, corporate and recruitment expenditure panels were still in place.

·         A proportion of the Council’s reserves (approximately £10m) would be used on a one off invest to save basis.

·         Officers were attempting to get the balance right between reducing budgets and ensuring that the Council retained capacity and resources in the right areas.

Adult Social Care precept

·         The three year increase in Council tax would be implemented as 3% in the first year (2017/18) 1% in the second year (2018/19) and 2% in the third year (2019/20). The 3% increase could only be implemented in the first or second year of the three year period.

·         Members agreed to discuss the rationale and the timing of the three year increase further outside of the meeting.

Treasury Management

·         It was highly unlikely that the £25million of LOBO loans that could be called in in 2017/18 would be recalled by lenders.

Resolved: that the report be noted.