Financial Planning and Medium Term Strategy Report 2020/21 to 2024/25
Decision Maker: Cabinet
Decision status: Recommendations Approved
Is Key decision?: Yes
Is subject to call in?: Yes
The July Financial Planning and Medium Term
Strategy Report will provide an update on the economic outlook,
pressures, risk areas and set out the revenue funding deficit for
2020-25 as well as the timetable for setting the Council’s
budget in February 2021.
The Cabinet Member for Finance and Performance explained that since the coronavirus lockdown council income from sales, fees and charges had fallen while spending had increased, including on supporting care homes, providing personal protective equipment, supporting local businesses, making transport changes to aid social distancing and delivering food packages to vulnerable people. It was noted that this had led to a significant budget shortfall.
It was highlighted that, at the beginning of the pandemic, central government had stated councils would be fully recompensed. However, it was noted that reimbursements, to date, had covered less than half of the deficit. As a result, with the country facing recession and uncertainly, it was estimated that Lambeth could face a £27m budget shortfall – potentially raising as high as £50m. Despite this, Councillor Kay explained prudent financial management over recent years had meant that this could be covered by reserves. As a result, a Section 114 notice would not need to be issued.
The following points were noted:
- Local government had already been faced with a lack of financial clarity prior to the pandemic, due to uncertainty over the fair funding review, business rates and adult social care funding, leading to a series of one-year settlements. These issues, along with Brexit, were still firmly on the horizon.
- The Council had tried to do what was necessary during Covid-19 and would continue to work on a recovery which worked for everyone, including investing in jobs, affordable workspace, cultural facilities, digital infrastructure and tackling the climate emergency. However, the unprecedented financial gap would result in significant financial pressures on the delivery of council services if no further government funding was forthcoming.
It was highlighted that the Financial Planning and Medium Term Strategy Report 2020/21 to 2024/25 had been considered by Overview and Scrutiny on 16 July 2020. The Leader of the Council thanked the Committee for their contribution and invited Councillor Liz Atkins, Chair of the Overview and Scrutiny Committee, to summarise the Committee’s observations and recommendations which had been set out via a supplementary agenda paper.
Councillor Jonathan Bartley, Co-Leader of the Opposition, raised concerns which focused on identified pressures of £21.3m over the Medium Term Financial Strategy (MTFS) period, set out in section 2.20 of the report. Councillor Bartley also highlighted, in relation to irrecoverable loss of income, that the Council was expected to receive compensation with further details awaited from the Government.
In response to these questions the Director of Finance and Property, clarified that section 2.20 of the Financial Planning and Medium Term Strategy Report related to unavoidable growth, and highlighted:
- Some of those costs related to Covid-19, others were identified as part of the closure of the 2019/20 accounts. Temporary accommodation was a particular issue, which was expected to continue especially as Covid-19 had increased instances of homelessness and rough sleeping.
- There was an urgent need to consider financing alternative models of temporary accommodation provision in order to relieve budget pressures.
- The impact of lost income opportunities as a result of Covid-19, such as those in relation to reduced parking income and events.
- A number of issues in relation to the need for increased social care budgets for both adults and children and matters in relation to core central government funding and the wider economic forecast.
- The need for the MTFS to adapt and change in order to respond to changes in funding and to meet new unavoidable growth pressures.
Cabinet went on to discuss a wide range of issues including matters relating to: central government funding; the impact of Covid-19 on the council’s finances; the importance of capital investment including money for the development of a learning disability resource hub at Coburg Crescent; the Council’s reserves position; demand led pressures across adult social care and the portfolio for children and young people; the impact of suspending free travel for under 18s; the importance of refurbishing and developing community buildings; the need to build more homes to reduce reliance on temporary accommodation; and the importance of transport equity and delivering environmental improvements.
1. To note the key risks set out in paragraphs 2.8 to 2.57 of the report presented.
2. To re-affirm the Council’s commitment to delivering the agreed revenue savings planned for 2021/22 (£9.396m) and 2022/23 to 2023/24 (£8.806m), as set out in Table 3 of the report presented.
3. To approve the change to the funding deficit as set out in Table 3, of the report presented, and the consequent amendment to the Council’s Medium Term Financial Strategy.
4. To note the residual gaps identified under various scenarios as set out in Table 4 of the report presented.
5. To note the 2019/20 General Fund overspend of £12m as confirmed in Table 5 paragraph 2.58 of the report presented.
6. To note the 2019/20 Housing Revenue Account outturn was on budget as confirmed in Table 6 paragraph 2.63 of the report presented.
7. To note the capital investment outturn of £230.5m against the 2019/20 budget of £356.4m as detailed in paragraphs 3.1 to 3.2 and Appendix 1 of the report presented.
8. To approve the 5 year Capital Investment Programme for the period 2020/21 to 2024/25 as set out in paragraphs 3.6 to 3.16 and summarised in Appendix 2 of the report presented.
9. To note the Capital Strategy as set out in Appendix 3 of the report presented.
10.To note the recommendations from the Overview and Scrutiny Committee set out in the Supplementary Paper.
Report author: Amaris Wong
Publication date: 20/07/2020
Date of decision: 20/07/2020
Decided at meeting: 20/07/2020 - Cabinet
Effective from: 01/08/2020