Draft Budget 2019/20 MTFS to 2023/24 2 Headlines What am I going - - PowerPoint PPT Presentation

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Draft Budget 2019/20 MTFS to 2023/24

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What am I going to cover in summary?

Government Funding Business Rates Council Tax New Homes Bonus Draft Budget 2019/20 Financial Strategy Funding Horizon Assumptions & Risks

Headlines

• Projected financial position has worsen
• Local Authority Funding Model changes from

2020/21

• Greater uncertainty = higher risk
• Longer report
• More unknowns, particularly from 2020/21
• nwards
• Savings need to be found in order to bring

budgets back into balance

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What am I going to cover in summary?

Government Funding Business Rates Council Tax New Homes Bonus Draft Budget 2019/20 Financial Strategy Funding Horizon Assumptions & Risks

Report & Presentation

• Pick out / highlight key points
• Questions as go along
• Sum up and conclusions
• Recommendations at end / debate &

discussions

• Provide reasons and rationale to support why

we reached the recommendations

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Provisional Settlement 2019/20

• The “calm before the storm”
• Last year of 4 year settlement so few

surprises

• Rural Delivery Grant – additional funding for

2019/20 - £94k for Torridge

• No change to New Homes Bonus Rules
• Release of £180m Surplus Business Rate

Levy monies – Torridge share £35k payable in 2018/19

• Additional Social care monies £650m, no

impact for Torridge being a lower tier authority

• Referendum limits
• Shire Districts - £5 for Band D or 3%

whichever is the greater

• Counties – 3% plus 2% for Social Care

Precept

• Fire Authorities – 3%
• Police & Crime Commissioners - £24 for

a Band D (increase from £12)

• Town & Parish Council – No referendum

limits

• Special Referendum Limit for

Northamptonshire County Council – additional 2%....reflects financial issues partly explained by not raising Council Tax in previous years

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2019-20 MTFS Projected Deficit

• Deficit is projected to grow

significantly

• Ignores potential impact of Fair

Funding Review & 75% Business Rate Retention 2020- 21 – discussed later!

• Without corrective action the

2020-21 budgets cannot be balanced as the Transition in Government Funding Reserve will be exhausted.

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Why has the projected deficit moved adversely?

• LGA pay award created new pay points, other pay

points were deleted or combined - after consultation with Unions new Torridge pay scales were approved. Referenced to National Living Wage.

• Increased the salary bill for the Council
• Job Evaluation for Council HGV drivers = increased

salary costs

• Revised Refuse Collection Service from June

2018

• Resulted greater than anticipated recycling

tonnage = additional staff resource (and income)

• Operational / H&S issues have also resulted

in increased staffing resource

• Agency staff terms and conditions are

required to mirror TDC employed staff costs and therefore costs have risen by more than inflation. The LGA pay award was weighted towards the lower pay grades applicable within the Operations Team

• Shortage of HGV drivers; therefore it is

difficult and expensive to recruit Agency HGV drivers

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Why has the projected deficit moved adversely?

• Homeless Reduction Act 2017 increased

local authorities’ responsibilities for clients who are homeless or threatened with homelessness from 28 days to 56 days

• Lack of privately rented accommodation at

LHA (Local Housing Allowance) rates – difficult to find sustainable tenancies for clients leading to increases stays in B&B.

• The Council suffers a funding shortfall for

B&B placements, for example the Council can claim £92.05 per week from Housing Benefits for single person in B&B; however the weekly costs to the Council can often exceed £400 per week…..the Council bearing the difference

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Summary of major movements in Funding & Expenditure

2019-20 2020-21 2021-22 2022-23 Funding Movement - (favourable) / adverse £'000 £'000 £'000 £'000 Rural Delivery Grant (93) Prior Year Council Tax and Business Rate Surplus (325) Business Rate Income (include S31 Grant & contribution to Business Rate Pool) 1 (60) (126) (198) Council Tax Income 19 (18) (53) (88) New Homes Bonus Income 94 66 32 (7) Contribution to Reserve (Economic Development) (190) TOTAL (495) (12) (147) (292)

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Current State of Local Authority Funding

• Councils increasingly dependant

upon their own resources rather than Central Government Grant Funding

• Increasingly reliance of Councils
• n Council Tax to fund services

Council Tax Business Rates Fees & Charges Grant Funding

• ** SFA = Settlement Funding

Assessment

• ** = Comprehensive Spending

Power

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Importance of Council Tax Funding

• Expectation from Central Government when allocating Grant Funding

that Councils will increase Council Tax up to Referendum limits

• Long term impact from increasing (not increasing) Council Tax
• Council Tax income is an increasing proportion of local authority

funding and is more predictable and reliable than Central Government Grant Funding

• Torridge has forgone £1.8m in

income over the period 2011/12 – 2018/19 by not increasing Council Tax in line with Referendum Limits.

• The annual recurrent income forgone

as at 2018/19 is £366k, which is circa 50% of the current projected deficit at 2023/24 (£752k).

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So what could £1.8m have purchased ?

• One Burrows Centre
• Four Artificial Sports Pitches
• 11 Recycling Vehicles

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Impact of Torridge Council Tax increases to Taxpayers

• Torridge collects less than

9% of the total council tax charged

• The percentage has declined
• ver time as other

preceptors referendum limits have exceed that for Shire Districts

• Additionally other

preceptors have increased their charge whilst in some prior years Torridge did not increase its Council Tax.

• If Council Tax had been increased by

Referendum limits since 2011/12 the increased charge to a Band D Council Tax payer would be £15.55 per year more (or 30p per week)

Council Tax Band Actual 2018/19 Council Tax Charged 2018/19 Council Tax (if increased by Referendum Limits) Additional charge to Council Tax payers forgone Equates to weekly increase A £105.77 £116.13 £10.37 £0.20 B £123.39 £135.49 £12.09 £0.23 C £141.02 £154.84 £13.82 £0.27 D £158.65 £174.20 £15.55 £0.30 E £193.91 £212.91 £19.01 £0.37 F £229.16 £251.62 £22.46 £0.43 G £264.42 £290.33 £25.92 £0.50 H £317.30 £348.40 £31.10 £0.60

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Business Rates - Complexities

• Pre – 2013 easy and risk free
• 50% BRRS 2013 – reward for growth
• Business rates pilot for 2018/19
• Revaluation – 2017
• 75% BRRS 2020/21?
• Back to Pool – 1st April 2019
• New Retail Relief for 2019/20 &

2020/21

• Reliefs – changed at Government

discretion

• Rateable Value - VOA
• Rate in £ = Government
• RPI increases - Government
• Appeals - VOA

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Business Rates – benefits & risks Benefits

• Business rates pool - £0.3m
• Renewable energy - £0.775m

(2019/20)

• SBRR – 100% collection
• Business rates pilot - £0.374m

(2018/19)

Risks

• Appeals – 61 at £5.5m RV (against

2010 rating list)

• Appeals provision - £0.867m
• New scheme – 2020/21?
• No formal appeals against the 2017 list

received to date

• Court Cases – ATMs etc
• Significant source of funding

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New Homes Bonus

• How is it currently allocated / spent

– 50% Capital – 25% Community and Members Grants – 25% Support to Revenue budgets

• No changes for 2019/20 – deadweight 0.4%

– Circa 100 Band D properties before any gain to Torridge

• Reduction in cumulative bonus – 6 yrs to 5yrs – 4yrs in 2018/19
• 2019/20 = £1.189m was £2.028m in 2016/17
• 2019/20 – Last year of current New Homes Bonus Scheme

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So what's on the Funding Horizon ?

• Fair Funding Review 2020/21
• 75% Business Rate Retention
• Business Rate Revaluation 2021/22
• Change to New Homes Bonus

Scheme

• Little detail currently available

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Fair Funding Review – Needs & Resources

• Last review undertaken in 2013/14 with the

introduction of Business Rate Retention

• Ties in with Comprehensive Spending Review

(CSR) which determines the overall funding envelope for local government

• Assesses the relative needs of local authorities

based upon various factors

• Population (by far the largest driver)
• Rurality
• Responsibilities
• Social Services
• Education
• Highways etc.
• Also assesses the resources available to local

authorities.

• Council Tax rises at Referendum limits
• Assumes growth in Council Tax Base
• Income from Business Rates

In very simple terms the Fair Funding Review determines how big the funding cake will be for the local authority sector and what will Torridge’s share be.

Gap

Assessed Need

• Population,

Rurality, Responsibilties etc

Assumed

Resources - Council Tax increases at Referendum Limits

Actual

Resources - Council Tax not increased to Referendum Limits Funding Provided Funding Provided

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Fair Funding Review - continued

• The last Fair Funding Review coincided with the introduction of the local Business

Rate Retention Scheme (BRRS)– 50% retained locally (Torridge as a shire district retained 40%, Devon County 9%, Fire 1%)

• Torridge’s assessed need at circa £2m was less than its 40% share of Business

Rates equating to circa £4m; obliging it to pay over £2m to Central Government in the form of a tariff.

• Since the introduction of BRRS Shire Districts like Torridge have enjoyed

significant income from business rates relative to their baseline funding level

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Fair Funding Review - Continued

• Torridge’s growth in business rate income (circa £900k) since 2013/14 at risk with

the 2020/21 Fair Funding review of need and resources.

• As with any review of funding there will be relative winners and losers, to-date

there is no detail available from Central Government (beyond basic principles) as to how any transitional arrangements will be implemented.

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75% Business Rate Retention – 2020/21

50% 40% 10% DCC & Fire Central Government Torridge Current Splits

25% 75% Retain Locally Central Government Splits between local authority tier still to be determined New Splits - 75% Retention

• Safety net still in place (for Councils incurring significant falls in Business Rate Income),

funded from Central Government top-slice rather than from a levy

• No Levy – Councils keep 100% of growth, but likely to be a threshold beyond which 100%
• f growth will be lost. No incentive to form Business Rate Pools.
• Simplified approach aims to mitigate the impact of movement on appeals provisions

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Business Rate Revaluation – 2021/22

• Reflects changes within the

property market

• Should be neutral at both a national

level and cost neutral to local authorities….but not neutral for individual businesses

• But 2017/18 revaluation increased

rateable values for renewables (Solar & Wind Farms) …increased income to Torridge by £100k.

• 2021/22 revaluation potentially put

this income circa £775k at risk

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MTFS Assumptions

• Council Tax rises – 0% 2019/20 there after £5 per Band D (circa 3%)
• No Revenue Support Grant from 2020/21
• Rural Delivery Grant – @ 2017/18 value (no assumption that additional grant

allocations in 18/19 & 19/20 are continued)

• No Homelessness Prevention Grant beyond 2019/20
• Local Authority Employer pension contribution rate 17.3% from 2020/21
• Officer pay awards 2% for duration of MTFS
• Fees & Charges to rise by inflation
• Council contribution to underlying pension deficit to increase by £260k per annum

by 2023/24

• No assumptions made regarding the impact of:
• Fair Funding Review
• 75% Business Rate Retention
• Business Rate Revaluation
• Changes to New Homes Bonus Scheme

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Bridging the Funding Gap

• Members have three separate reports
• Homelessness Temporary Accommodation Options – 2020/21 onwards
• New Homes Bonus – Community and Member Grants
• Council Tax – Changes to Discounts and Premiums
• The reports outline potential savings which if approved by members would

contribute towards setting a balanced budget In light of the projected funding gap of £752k at 2023/24 it would be imprudent of the Council not to take steps to bridge the funding gap.

2019/20 Deficit

£270k 2019/20 Deficit - Council Tax Rise £5 £151k 2019/20 Deficit - Tax Rise £5 & Council Discounts / Premiums £116k 2019/20 Deficit - Tax Rise £5 & Council Tax Discounts / Premiums & Top Slice NHB Grants £0k

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Bridging the Gap - continued

Advantages of recommendations

• Raising Council Tax

– Central Government assessment of resources available to Torridge assumes Council Tax raises in line with Referendum limits. – Council Tax is the Council’s most stable form of income – Contributes to the deficit identified within the MTFS – Torridge share of total council tax bill is relatively small so the impact of any increase is minor to the individual tax payer

• Council Tax Discounts and Premiums
• Increasing the discounts for empty and unfurnished properties from three months

to one month brings Torridge in line with neighbouring authorities

• Raises additional Council Tax and contributes towards the deficit identified within

the MTFS

• Increasing the Council Tax charged on long term empties should incentivise
• wners to bring their properties back into occupation
• Raises additional revenue for our precepting partners

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Recommendations and rationale

• Torridge’s Band D Council Tax for 2019/20 be increased by £5 (3.15%) from

£158.66 to £163.66 per year to contribute to the projected funding deficit

• responsibility to provide long term options on managing the finances
• Recognises Council Tax is the Council’s most stable source of funding
• Central Government funding assessment assumes increased council tax.
• less savings / cut to find in future years
• External Auditors review Torridge’s “going concern” & financial sustainability
• Adopt the recommendations included within the Council tax Discount and

Premiums Report

• Raises additional Council Tax for Torridge and Preceptors and contributes to

deficit identified within the MTFS

• Top slice the Community and Member Grants by £116k
• Enables the 2019/20 revenue budgets to balanced
• Torridge’s Net Revenue Budget 2019/20 is £10.149m

– Specific requirement

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Recommendations and rationale

• The contributions to the Council’s reserves as outlined in paragraph 10.4 are

approved. – Set aside resources for specific priority areas

• £0.270m will be transferred from the Transition in Funding Reserve to balance

the 2019-20 budgets – Legal obligation to set balanced budget – Will depend upon recommendations 1 - 3

• That Members note the Chief Finance Officer (s151 Officer) assurance of the

robustness of the Budget 2018/19 set out in section 13 of the report – Specific requirement

• Notes the assumptions and forecasts applied to develop the MTFS outlined in

section 14 – Prudent to highlight where these are, but subject to change

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Recommendations and rationale

• Notes the forecast deficit of £0.752m in the MTFS for 2023/24.

– May change depending on recommendations 1 - 3

• Notes the risks associated with the Budget 2019/20 and MTFS outlined

in paragraph 16.

– Recommended / good practice to highlight these once known

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