Agenda item

2022/23 Budget and Three-Year Medium Term Financial Strategy

Meeting of Cabinet, Monday, 6th December, 2021 6.30 pm (Item 167/21)

Cabinet Member: Leader of the Council, Councillor Hamida Ali, Cabinet Member for Croydon Renewal, Councillor Stuart King and Cabinet Member for Resources & Financial Governance, Councillor Callton Young

Officer: Interim Corporate Director of Resources (Section 151 Officer), Richard Ennis

Key decision: no

Decision:

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To

1. Note the significant progress towards delivering a balanced budget for 2022/23 and future years and the current budget gaps still to close;

2. Consider the contents of paragraph 3.24 of the report in respect of the identified risks to the budget process and make any recommendations in respect of the risks to the budget process;

3. Request that Cabinet request the Corporate Director of Housing to bring a report to the February 7^th Cabinet setting out how a reduction to the in-year and future year pressures against the existing Temporary Accommodation budget will be managed and achieved;

4. Request officers to continue to work on reducing growth pressures and report back any changes to the 24 January 2022 Cabinet;

5. Support the growth and savings schedules included at appendix 1 of the report, and

6. In principle, to recommend these to Full Council as part of the budget approval process. To note that officers will commence planning for the implementation from April 2022 where appropriate where appropriate, but that any such proposals are subject to approval at February Council;

7. Ask the Corporate Management Team to continue work to identify further invest-to-save opportunities that improve the efficiency and effectiveness of the Authority, and minimise any service reductions;

8. Request the Corporate Management Team to ensure that there are sufficient resources to deliver the MTFS and report back in this respect in the January and February Cabinet reports;

9. Make any recommendations and comments that will further the ability for the Improvement Panel to make a positive recommendation to the Secretary of State for the Department of Levelling Up, Housing and Communities [DLUHC] in respect of the Council’s progress and specifically confirming this year’s £50m capitalisation direction and also next year’s £25m (2022/23) capitalisation respectively in order to give financial certainty to the Council (a further £5m capitalisation is budgeted for in 2023/24);

10. Note the Council is undertaking further work in respect of the potential to maximise its capital receipts and the potential use of these to reduce its borrowing requirements subject to Cabinet and Council agreement;

11. Note that the scrutiny sub committees will have had initial discussions prior to this December Cabinet meeting and they and the Scrutiny and Overview Committee will undertake their scrutiny and overview work on the budget proposals and feed recommendations and comments for consideration into the January and February Cabinets;

12. Note the intention to take a report to the General Purposes and Audit Committee [GPAC] about the reserves strategy and its relationship to the MTFS prior to Cabinet taking a decision to recommend a budget to Full Council

13. Note the significant financial implications, approved in the March 2021 Budget at Full Council, from any policy changes and operational enforcement and income modelling changes, in respect of Healthy Neighbourhoods (formally referred to as Low Traffic Neighbourhoods), that will require the Council to find alternative savings in this respect;

14. Note that at this report’s dispatch prior to the consideration of the Pensions Committee on 3^rd December of a report recommending an actuary supported reduction in employer contributions that are part of the savings in 2022/23 preceding a further triennial pension review that will consider employer contributions for 2023/24 onwards. The savings in this respect are £3.400m in 2021/22 and £2.760m in 2022/23 (reducing as a part saving was already included in existing proposals for 2022/23) should the Pensions Committee scheduled on 3^rd December agree to recommend these to Cabinet. An update will be provided at the actual Cabinet meeting;

15. Welcomes the additional ‘one off’ funding from the Home Office in 2021/22 and the temporary mandate of the national Transfer Scheme and request the Improvement Panel to support the cross party view of the Council in making further recommendations to the Secretary of State to fully fund the estimated circa. £4.5m of additional costs of Unaccompanied Asylum Seekers [UASC] that continue to fall disproportionately on the Croydon Council Tax payer; and

16. Note that officers continue to work on the closure of the draft accounts for 2019/20 and 2020/21 in response to dealing with the external auditors findings as reported to the General Purposes and Audit Committee [GPAC] and that this could have significant implications for the medium Term Financial Strategy and request officers to complete this work as soon as possible and at the latest ahead of the final February Cabinet.

Minutes:

Cabinet considered a report which focussed on the General Fund with further General Fund budget reports, the capital budget report and the Housing Revenue Account being brought to the January 2022 and February 2022 Cabinet meetings. The Leader of the Council (Councillor Hamida Ali) provided Cabinet with an introduction which set out:

The report was the first in a series of reports which would be considered by Cabinet on the 2022/23 budget;
It was felt that the report evidenced the large amount of work which had been undertaken across the council, both politically and at an officer level;
It was clear that work remained as there was a budget gap to close;
The draft budget included £24 million of savings and a further £58 million were being brought forward to fill not only the budget gap but to also manage the significant financial pressures in the budget;
The council had been focussing on addressing the corporate failings which had led to the financial pressures faced by the council and there were £27 million in general reserves which was felt to be evidence of the focus on addressing those issues;
The context of the financial pressures included the reduction in government investment in councils, structural underfunding faced by the council and an 81% reduction in revenue support grant since 2010 which equated to £96 million reduction;
It was noted that there was significant concern within the community as to the impact of the savings on them, however it was highlighted that once the budget was balanced there would remain almost £280 million of controllable budget which was dedicated to meeting the needs of residents;
Members were committed to minimising the impact on residents and had focussed on where savings could be found; such as through contracts, making better use of office spaces and utilising technology;
The budget would enable all of the libraries and children centres to remain open, fortnightly bin collections to continue and services for vulnerable residents to be protected;
Risks and uncertainties remain which were set out within the report and work would continue over the following months to close the budget gap but it was felt that the report represented a solid foundation for that work;
The working of the voluntary and community sector during the pandemic was highlighted and the Leader informed Cabinet that she had asked officers to review options to delay the planned changes to voluntary sector funding so it was aligned to the commissioning round which was due to start in 2023/24 which was felt to have benefits for both the council and the borough;
That a paper would be taken to the Capital Board with a recommendation to approve the use of alternative funding streams to provide short term stability to the voluntary and community sector until the Community Fund funding round had come to a close. The aim was to provide support through the use of one off money that would not impact the budget gap for 2022/23; and
Affected community organisations would be written to over the following days with the final outcome.

The Leader of the Council invited the Interim Corporate Director Resources (Section 151 Officer) (Richard Ennis) to provide a professional view of the draft budget. He advised Members that:

He felt that significant progress had been made towards delivering a balanced budget, in particular for 2022/23 but work had also been undertaken to ensure future years were on a firmer financial footing;
There was more work to be completed, as outlined in the report, including the risks which were being worked through to ensure that a balanced budget was delivered;
An unbalanced budget in December was not uncommon as there was normally work still to be done;
The council would not know the grant settlement until later in the month, as set out in the report;
He felt the report was an open report which set out the current position and that all the savings and pressures were included and mitigations were being developed;
Reserves were continuing to be built and this would be brought together in a report in February 2021; and
The draft proposals would be considered by the General Purposes & Audit Committee and Scrutiny Committees.

During the consideration of the recommendations, the following points were made:

The Cabinet Member for Croydon Renewal (Councillor Stuart King) thanked all those who had been involved in the development of the draft budget and acknowledged how robust and constructive the challenge had been throughout the Star Chamber process which he felt had contributed to the progress which had been made. It was felt by the Cabinet Member that the budget process had shown the council’s preparedness to take difficult decisions;
The Cabinet Member highlighted some key assumptions and risks, including an assumption of a council tax increase of 1.99%, a 1% adult social care levy, contract inflation of 3% and pay inflation of 2%. Additionally there was a provision in the budget for a New Homes Bonus which itself included risks in relation to a government review which was underway. The Cabinet Member further highlighted that negotiations were ongoing with the NHS to ensure the current level of service remained in place. Finally it was noted that the capitalisation direction of £50 million and £25 million were still to be formally confirmed;
The Cabinet Member proposed that recommendation 1.4 in the report be amended that the report be taken to the Cabinet meeting on 24 January 2022 to ensure that Cabinet had time to respond to findings of the work to reduce growth pressures;
The Cabinet Member for Sustainable Croydon (Councillor Muhammad Ali) noted that some of the decisions within the draft budget were not easy decisions but noted that the discussions had been robust. It was felt that the budget protected frontline services and focussed on transforming the way the council operated by reducing spending on contracts and back office functions whilst ensuring service delivery was sustainable and efficient. It was noted that there were growth items within the budget; including £360,000 for grass cutting;
The Cabinet Member for Families, Health & Social Care (Councillor Janet Campbell) stated that she felt the work within adult social care was transformational, with reduced demand and a robust front door. It was felt that this could only be achieved with staff who were committed to change. Cabinet were informed that provider services option appraisal was underway and the outcome would be fed back to Members. Whilst savings of £14million had been identified, the Cabinet Member stressed that the council was continuing to safely review care packages;
The Cabinet Member for Homes (Councillor Patricia Hay-Justice) noted that as of November 2021 temporary accommodation had been provided to 2020 households in the borough and over 200 people at risk of homelessness had been supported each month. Furthermore she stated that the council was recognising the issues within housing and were addressing them. She concluded by querying whether the council was making the most of grants which were available to ensure benefits for residents were being maximised
- In response, the Cabinet Member for Croydon Renewal noted the benefit of grant money and that it was important to utilise pots of external funding, where available, however cautioned that it was important that the right balance was struck so as to not put additional pressure on staff. As such it was noted that it was important to ensure the council targeted funding where there was a good prospect of being successful
The Cabinet Member for Communities, Safety & Business Recovery (Councillor Manju Shahul-Hameed) noted the Leader’s request to review and delay the reduction to the Community Fund. She highlighted that Croydon were one of a few boroughs which continued to provide rent subsidy and discretionary business rate relief to the VCS organisations. Additionally, it was noted, that voluntary and community sector organisations were approached when asset disposals were considered and support was offered to help them acquire assets;
The Cabinet Member for Children, Young People & Learning (Councillor Alisa Flemming) highlighted that over 3,500 young people were in care in the borough and it had been important to ensure that support was provided to some of the most vulnerable in Croydon. The Cabinet Member stated that the council had received over 2,522 referrals, 769 early help assessments had been completed since May 2021, over 3000 children in need had been supported and 663 care leavers had received care services. It was noted that the borough continued to support more per head of unaccompanied asylum seeker children (UASC) than anywhere else in the country and, that despite intervention, there remained a £1million shortfall in funding which was expected to increase and so the Cabinet Member called for a more sustainable long term solution which meant all parts of the country took their fair share to support the most vulnerable young people in the country;
The Cabinet Member for Culture & Regeneration (Councillor Oliver Lewis) welcomed the news in terms of the voluntary and community sector funding as it was recognised that the sector played an important part in society. Whilst it was recognised that the council was having to make difficult decisions, the Cabinet Member felt that it was important to consider the root causes such as the historic underfunding for UASC, underfunding for the impact of the pandemic and an 81% reduction in government grant. Furthermore, the Cabinet Member highlighted that Croydon was not as well funded as neighbouring boroughs and queried what the impact would have been on the General Fund had Croydon been funded to the same level as Lambeth
- In response, the Cabinet Member for Croydon Renewal stated that Lambeth received £463 per resident as opposed to Croydon who received £247 per resident. It was stated that Croydon faced the same demographic challenges as Lambeth.
The Shadow Cabinet Member for Croydon Renewal (Councillor Jason Cummings) noted the large amount of work which had been undertaken by officers. It was noted that in the non-statutory rapid review there were comments in relation to reserves and the possibility that should budget pressures continue the contributions to reserves may reduce. Additionally the Shadow Cabinet Member highlighted table 7 of the report which outlined the history of the reserve levels and stated the recent increase in reserve levels was only as a result of borrowing from the previous year’s budget. Given the concerns raised, the Shadow Cabinet Member queried how at risk the reserves were.
- In response the Interim Corporate Director of Resources advised that there were two types of reserves – general reserves and earmarked reserves. It was noted that the general reserves in April 2021 were at £27.5 million which was one of the highest levels at that point in London due to the challenges which the council was facing. The report noted that the earmarked reserves of £4 million were too low and so it was the intention to build those reserves with £10 million budgeted in the report. The Interim Corporate Director advised Members that at period 7 the council was broadly balanced and, should it remain so, the £7 million could be used to rebuild the earmarked reserves.
- The Cabinet Member for Croydon Renewal felt that the argument to refocus attention from general fund reserves to earmarked reserves was persuasive but that it was important to see the detail, including how earmarked reserves could be drawn upon. In response to the Shadow Cabinet Member’s statement that the current position was only as a result of borrowing, the Cabinet Member countered by stating that it was also as a result of the savings which had been achieved.

The Cabinet Member for Croydon Renewal proposed that recommendation 1.4 be amended to read “Request officers to continue to work on reducing growth pressures and report back any changes to the January 24th Cabinet” to enable Members to review the outcome of the work.

The Cabinet Member for Homes seconded the amendment.

Cabinet agreed the amendment.