Agenda item

INFORMATION REPORT - Draft Revenue Budget 2019/20 and Medium Term Financial Strategy 2019/20 to 2020/22

Report of the Director of Finance.

Minutes:

The Forum received a report of the Director of Finance which set out the draft Revenue Budget 2019/20 and Medium Term Financial Strategy (MTFS) 2019/20 to 2020/22, as reported to Cabinet at its meeting held on 6 December 2018.  The Forum was informed that the budget and MTFS would return to Cabinet, which would submit its recommendation to full Council in February 2019 for final approval.  The Director explained that this was the formal consultation process on the budget with the ECF, whose comments would be submitted to the February 2019 meeting of the Cabinet by inclusion of this minute as an appendix to the Budget Report.

 

The Director introduced the report and outlined the following key aspects of the report:

 

-               table 1, page 24 of the agenda, set out the position in relation to the Revenue Support Grant (RSG) received by the Council which had reduced by 97% over a 7-year period;

 

-               paragraph 1.5, page 25 of the agenda, set out the external funding position with the Council being one of the lowest funded Councils in London.  Harrow’s revenue spending power per head continued to be  lower than the London average;

 

-               the Council’s social care budget continued to be under significant demand pressure and there was uncertainty surrounding future funding of local government.   No assumptions had been made in the three year MTFS other than those factors known to minimise risk.

 

The Director reported on the challenges facing the Council on the delivery of the 2018/19 budget.  She emphasised the need to maintain the Council’s financial standing and to protect front line services.  She referred to the pressures both in the Adults Division and the Community Directorate.

 

The Director informed the Forum that the Council was required to set a balanced budget for 2019/20 and referred to table 2, page 29 of the agenda.  She referred to the provision of an agreed 2% pay award for 2019/20 and mentioned that the same figure had been assumed in the 3-year MTFS. She referred to paragraph 1.39, page 33 of the agenda, which set out the savings and growth put forward in the budget for 2019/20.  The growth related to frontline services.

 

The Director stated that reserves and contingencies also needed to be considered in the context of the budget and re-iterated the need to protect the Council’s good financial standing.  The Council did not have large cash reserves and, as a result, it had limited ability to ‘smooth out’ funding gaps or invest.

 

In concluding her remarks, the Director stated that consultation on the budget had commenced in December 2018 and would continue until its consideration by full Council in February 2019.  She invited comments on the report.

 

The Employees’ side representatives asked questions on the budget, which were responded to as follows:

 

A large sum of money had been spent by the Council in relation to the redevelopment of the Depot and the Regeneration Programme as a whole.  There was also a delay in the Programme.  How much money had been spent/wasted on the Regeneration Programme and what impact would it have on members of the Trades’ Unions and the services they provided?

 

In response, the Director of Finance stated that whilst a review of the Regeneration Programme was underway, she did not consider that the money spent to date could be considered to have been wasted.  She informed the Forum that £25m had been spent on the Regeneration Programme to date, £10m of which had been used to buy the 72 affordable units at Gayton Road to support the homelessness budget. All the 72 units were occupied. Land assembly work, totalling approximately £5m, had been undertaken to enhance land value during the Regeneration Programme.   The design of the proposed new Civic Centre Project was being reviewed, including the project finance, and work undertaken to date was informing the future direction to ensure best value from sites.

 

The Director of Finance responded to the impact of the Regeneration Programme on jobs and services.  As an example, she explained the financial benefits from the Gayton Road development which were supporting the revenue budget,  including staff and care budgets, which prevented the need for additional savings . The 72 affordable units were generating £500k savings against the temporary accommodation budget which had been built into the MTFS.  The 53 units at Gayton Road were to be rented on the open market and would generate a significant return to the Council which,  once confirmed in the business plan, would be built into the budget.  There were a number of schemes that had helped to support the Council’s revenue budget, otherwise additional savings to those already proposed would have been necessary.

 

A Council side representative added that the Regeneration Programme was vast and complex.  It also included various sites in Harrow Town Centre, including Gayton Road, together with the provision of affordable housing, and the proposed new Town Centre Library.  The Community Infrastructure Levy (CIL) had helped to bring in additional income.  It was important to recognise that the Regeneration Programme had provided new employment opportunities.

 

Another Council side representative stated that he too did not consider that money had been wasted on the Regeneration Programme.  He added that it was important to recognise that the Council did not have large cash reserves and this aspect needed to be factored in as part of the Regeneration Programme.  It was important that the design of the proposed new Civic Centre was fit for purpose.  The situation was compounded by the uncertain economic climate and Brexit, which had resulted in construction companies ‘pausing’ on their planned developments.  Fluctuating house prices and the cost of building materials were also an issue.  The existing Civic Centre was situated on a major development site, Poets Corner site, with borrowing levels originally at £350m.  The Council needed to weigh the pros and cons, assess the levels of risk associated with the various aspects of the Regeneration Programme and reassess the proposed scheme at Poets Corner to secure maximum commercial return and the delivery of affordable housing.  The Poets Corner site was directly linked to the new Civic Centre project.  As a result, the Council needed to ensure that the Regeneration Programme did not place a burden on the General Fund.  Otherwise, the government would step in and close down services.  In response to a further question from an employees’ side representative, the Member stated that it was not intended to make a loss on the Poets Corner site and housing would form a key element on this valuable site.

 

What costs were associated with empty housing units on the Grange Farm estate who were now occupying properties in Gayton Road?

 

The Director of Finance agreed to provide this information separately.

 

What was the spend on salaries for the ‘old’ and the ‘new’ regeneration teams?

 

In response, the Director of Finance agreed to provide this information separately.

 

When would the refresh of potential impact on FTE (full-time equivalent), as a result of the budgetbe provided?

 

In response, the Director of Finance stated that there would be a small reduction in FTE.  The potential FTE impact of the budget would be included in the final budget report but she undertook to provide the employees’ side with final figures in advance of the final budget being published.  She confirmed that £300k of growth at item 3 on page 48 of the agenda would be removed from the final budget.

In conclusion, the Chair outlined the information required, such as the percentage spend on salaries for Regeneration, loss of rental income on Grange Farm estate, and potential impact on FTE of the budget.  The Director of Finance undertook to send the relevant information to all members of the Forum.

 

Resolved to RECOMMEND:  (to Cabinet) 

 

That the report be noted and the comments of the Forum be submitted to February 2019 Cabinet meeting for consideration.

 

Reason for Recommendation:  To ensure that the views of the Forum were submitted for Cabinet’s consideration.

Supporting documents: