"As we all know, we are facing extraordinarily difficult times as a Council, as a result of the pandemic and the fact that support from Government has fallen far short of the extra costs and drop in income we are experiencing in our endeavours to help defeat the COVID 19 virus.
We estimate the shortfall we will have to deal with is around £5.5 million, roughly a quarter of our annual Net Expenditure Budget and that is after taking into account the funding we expect to receive from Government.
So these comments will give listeners a sense of the approach we are taking to balance our desire to support our residents and the local economy and employment, while also progressively making the savings we need to make to bring us back to a budget that is balanced without recourse to reserves in the medium term. It is not a formal strategic document, but more an insight into the principles that guide us in the decision making process.
By way of background, it is now some 8 months since the initial lockdown decisions were made in response to the COVID 19 pandemic, and the way forward for the management of the pandemic, as much as the economy, is as unpredictable as ever.
As the Leader said in his public statement on 21st October, in connection with the announcement of the news that Elmbridge was being moved into the High Risk category of authorities, “we are all in this together, and I have no doubt that we can pull together to come out the other side of this pandemic.”
This vision of our key priorities then forms the background to our approach to financial planning. The other key driver is the uncertain economic climate and our dependency on Central Government for financial support, both of which, together, severely limit our ability to plan in detail for the longer term. The same uncertainties that caused the Chancellor last month to limit the Comprehensive Spending Review to a single year, rather than a three year look ahead, also affects our approach. Our key focus, therefore, will be on setting a Budget for 2021/2022 that maintains our capacity to deliver the key services we provide, while also taking account of the medium to long-term need to “balance the books”.
Some key principles follow on from this
Against this background, the Council’s Officers and Cabinet Members have worked together to look into each of our 13 Departments to see what savings and / or incremental income can be achieved. After a number of reviews, we have agreed to support the proposals set out in Appendix A which consists of 41 proposals seen as having minimal impact on services. These proposals add up to total savings of £890,000 a year.
We also support the proposals set out in Appendix B which cover 17 proposals that are likely to have some impact on service delivery. These 17 proposals add up to likely savings of £644,000 a year. The spread of savings between the various Departments is set out in the table on Page 238, and you will note that there are savings being made in each Department – no-one has ducked out.
In all, the savings are expected to amount to £1.534 million a year. You will also be pleased to hear that I do not propose to go through all 58 proposals with a detailed analysis of what is in the proposals, and why the risk of adverse impact on some services is considered acceptable. Suffice it to say that there is a recognition that we have had to make some difficult decisions, and some activities that were nice to be able to put on for our residents, but not core activities in themselves, are being terminated, so that we have a chance, over the medium term, of achieving our target of balancing income against expenditure without use of reserves, and have enough left over in due course to replenish the reserves we will have used in the process.
Coming back to the overall financial picture, our Medium Term Financial Plan presented in the February 2020 Budget papers showed an Estimated Budget Requirement of £19.476 million, which required support of just over £800,000 from the Business Rates Equalisation Reserve to make the Budget balance. By the time we produced the MTFS – Budget Strategy 2021/22 and Current Year budget Update) for the Cabinet meeting on 16th September, the Estimated Budget Requirement, after estimated Government contributions of £3.56 million, came to £24.951 million, an increase of £5.475 million. Estimated “in-year” savings of £750,000 and a saving on the pension contribution of £100,000 combined to reduce the increase in Estimated Budget Requirement to £4.625 million.
Turning now to the November Revenue Budget update, for the 20/21 Budget, there are a number of positive and negative variances, for example a deterioration in expected Car Parking income of £300,000, which net out to an improvement of £150,000. In addition, there have been further Operational Budget Savings of £500,000. The impact is that the net increase in the Estimated Budget Requirement figure is reduced to £3.975 million. This results in a reduction in the need for drawing on reserves in the current financial year to £5.2 million, of which £2 million is to be taken from the General Fund and the balance from other revenue reserves, as shown in the tables on Pages 237 and 240.
Looking ahead to 21/22, further spending pressures have been identified in respect of car parking income (£150,000), interest on balances (£150,000) and Council Tax receipts (£50,000) The remarks on Page 235 explain how these cost pressures have come about in more detail. These offset the Budget Savings of £1.5 million presented earlier. The result, shown in the final column of the MTFS table on Page 239, is that, as matters currently stand, use of reserves in 21/22 would still amount to approximately £4.5 million. While this is lower than the expected outturn in the current financial year, we need to keep on working at reducing it to a lower, more sustainable level.
Some of the recommendations arising from other papers on today’s Agenda, if approved at full Council on 2nd December, will help in this respect. There are also several key assumptions used in drawing up the Strategy papers on a prudent basis where the outturn may prove to be better than expected. The next few weeks will see a number of key decisions made that affect our budgets for next year, such as the determination of our first Sales, Fees and Charges Compensation claim, the Chancellor’s Comprehensive Spending Review, ( due on November 25th), the setting of the Council Tax base at the 2nd December Council meeting, and the Government’s Provisional Settlement announcement which is expected shortly before Christmas, which, as well as setting out grants such as the New Homes Bonus to individual authorities, will also have details of the limits for setting Council Tax precepts for 21/22 without having to hold a referendum.
The outcome on these decisions, which are largely outside our control, will inform how we approach the next stage of the lengthy process of identifying and agreeing the savings / additional income proposals needed to move the budget back into balance without recourse to reserves.
Looking back at these remarks, I recognise that there are a lot of figures to absorb. To help visualise our situation, I would suggest a couple of pictures. First, our savings proposals cover the whole of the £800,000 recourse to reserves that we agreed for the current year’s Revenue Budget back in February and about one fifth of the net cost of the COVID 19 pandemic. Unlike some authorities, we do not have a fundamental problem with our finances that goes back for years, but we do have a major task to manage the costs of the pandemic.
Secondly, the last 8 years have been like trying to walk up a down escalator. Back in 2011/12 our Government support amounted to £5.2 million. Over the next few years that was steadily whittled away to the current level of £2.3 million, a reduction of almost £3 million. Now it is as if someone has pressed the “fast” button on the escalator, as we see ourselves asked to absorb an additional £5.5 million of costs arising from the pandemic. We are now having to sprint up the escalator to make any real progress.
On that happy note, I trust that you will support the two formal recommendations on Page 227."
Cllr. Chris Sadler
18/10/2020
For appendices referred to in this statement see linked document: