Agenda item

Resolved: that the report be noted.

6.1      David Austin (Head of Corporate Resources) introduced the report. The following key points were noted:

·         The medium term financial strategy began the budget process for the year, which would culminate in February (2018) at Council.

·         The report looked toward the medium term (four years) forecasts and focused back on the budget for the upcoming year.

·         The context for the whole report was uncertainty at the international, national, regional and local levels.

·         The pace of austerity had slowed but the overall direction remained consistent. National government modelling in the four year settlement expected local government to increase taxes and to reduce spending.

·         The budget positon at the end of last year (2016/17) meant that the Council had to use its reserves. This year there was already a forecast overspend.

·         In terms of income, there was uncertainty about the future local government financing, in particular the revenue support grant and the devolution of business rates.

·         There were demographic pressures and inflation (non-pay and pay) uncertainties and the possibility of some transfer of responsibilities from central government.

·         The assumption was that services with defined budgets (public health grant, dedicated schools grant and housing revenue account) would balance their budgets.

·         There were also risks that might need to be managed in these defined budgets, such as the potential for additional fire safety expenditure from the housing revenue account – or loans, deficits and redundancies from the dedicated schools grant.

·         Pessimistic and optimistic assumptions for future budgets had been included in the report.

·         The main case at present was that £32m of savings would be required to 2020 and a further £20m beyond that to 2022 in order to set a balanced budget.

·         In terms of the timetable, savings needed to be brought forward to scrutiny in October/November in order to present a balanced budget.

·         In November the government would produce its budget and in December there would be the local government finance settlement, which might change the assumptions made in order to produce the budget.

6.2      David Austin, Dave Richards, Janet Senior and Selwyn Thompson responded to questions from the Committee. The following key points were noted:

·         Demographic projections were based on data from the previous census, incorporating Greater London Authority and Office of National Statistics projections rather than the numbers of people on the electoral register.

·         The government was likely to follow through on its fair funding changes. The fair funding rules had not been updated. A number of dynamics and demographics, including age, deprivation, need, vulnerability, earning potential and economic potential could be factored in to future projections, depending on the indicators chosen by government.

·         The government weighting for these various factors would influence how much the Council would receive in terms of business rates top-up. Lewisham was becoming proportionately less disadvantaged but its population was growing quickly, which entailed uncertainty for future fair funding decisions.

·         The capital budget could not be used to balance the general fund.

·         Some councils were getting close to the limits cuts they could make to discretionary services. It was expected that there would be Councils that needed to fall back to providing only statutory service in order to set a balanced budget.

·         The Council was regularly challenged by service users on the delivery of services. There were review processes in a number of areas to manage demands.

·         There was a tension being played out at councils between statutory officers responsible for managing budgets and those with statutory responsibilities to provide services.

·         The prudential borrowing for the highways programme lasted for 10 years. A combination of prudential borrowing and revenue budgets were being considered to maintain Lewisham’s highways and footways.

·         Council tax collection rates and exemptions were reviewed every year.

·         The collection rate for council tax remained consistent. Work was taking place across the Council to improve debt collection.

·         The Government recently consulted on restricting the making of loans by local authorities to schools in favour of allowing schools licenced deficits.

·         Schools acquiring academy status were not required to pay back their licenced deficits – whereas they were required to pay back loans.

·         Should all schools with outstanding licenced deficits convert to academy status, there would be a £4m budget pressure on the Council’s general fund.

·         The most common rate of council tax was collected at band D.

·         Any increase in properties would increase the council tax base.

·         The level of council tax required to cover the costs of services to residents was dependent on the services being used by individual residents. There was no average level of council tax which would provide services for the average citizen.

·         The Council was developing a programme to build assets to generate ongoing revenue streams rather than selling assets in order to achieve one off capital receipts.

6.3      Councillor Bonavia addressed the Committee, the following key points were noted:

·         National government’s broad trajectory since 2010 had been to focus a disproportionate level of cuts on local government whilst increasing regulation and demands for provision of services.

·         This was combined with a pressure for councils to provide more of their own resources.

·         Government recognised that there was a crisis in the funding of social care but it had provided a patchy response to mounting pressures.

·         There was potential that the government would change its approach in the autumn statement, but this should be viewed cautiously.

·         At the Council, a number of approaches had been tried to manage the cuts, including incremental cuts to services, increased use of shared services, income generation (which had proved difficult), community resilience and digitisation.

·         The Council had to consider what it was for and then determine how to gather the resources to deliver services. Unfortunately much of this was out of the Council’s hands.

·         Services also needed to be challenged about their requirement for funding and the delivery of savings, cabinet members were leading on this work.

·         A review of council tax would take place over the summer.

·         There were half the number of Council officers in Lewisham that there were in 2010. In discussions with residents who were concerned about the delivery of services or the speed of responses from officers, it was important to highlight the pressures facing the remaining officers.

6.4       In Committee discussions, the following key points were also noted:

·         Members recognised that financial climate was very difficult and uncertain.

·         There was a discussion about the potential to use planning policy to maximise income so that the delivery of services was cost neutral to the borough.

·         Members were concerned about the level of communication with residents regarding the financial pressures facing the Council. It was agreed that the Head of Communications and the Cabinet Member would be invited to the Committee’s meeting in September to discuss the Council’s communication with residents.

6.5       Resolved: that the report be noted.