Agenda item

To note the financial position and approve the updated Capital Programme.

Consideration was given to the report which explained that the Cabinet had considered a report detailing the proposals to update the Capital Programme for 2021/22 and the recommendation to note the Financial Outturn for 2021/22. On 11th July, 2022, the Cabinet had recommended that the report be presented to Council and that Council note the updated financial position as detailed in Appendix A to the report and approve the updated Capital Programme.

The report presented to Cabinet (Appendix A to the Council report) explained that the Revenue Budget 2021/22 was approved by Council on 3rd March, 2021. A budget of £235.7m was set for General Fund services; this excluded schools’ budgets and the Housing Revenue Account (HRA). The 2021/22 Budget was supported by the use of £7.5m from the Budget and Financial Strategy Reserve. However, given the availability of the £14m of Covid Funding covering the majority of the Council’s Covid related costs, the use of this reserve had not been required. The Council had also been able to deliver a final outturn position of a £2.4m underspend, not through delivering fewer services but by being able to apply more Government funding to the outturn position than had originally been planned.

This was a helpful outturn position that included a positive trend of necessary cost reduction within some of the Council’s key services including an increase of £2.4m into the Budget and Financial Strategy Reserve along with some planned savings for 2022/23 already being achieved. It placed the Council in a more robust position heading into the 2022/23 financial year, more able to mitigate against cost pressures and the financial challenges that were not evident at the time of setting the 2022/23 Budget such as the war in Ukraine, the significant rise in energy prices and inflation and to be more able to manage the impact rather than needing to consider making cuts in services.

The budgeted transfer from HRA reserves was reduced by £2.1m following the revenue and capital outturn positions. Cabinet also noted the carry forward of the combined schools balance of £3.794m in accordance with the Department for Education regulations as well as the reduced DSG deficit following receipt of Safety Valve funding.

The total of Corporate Reserves balances at the Financial Outturn 2021/22 was £65.8m, which was £6.1m more than the £59.7m estimated in the Budget and Council Tax 2022/23 report. The Budget Report 2022/23 planned for £7.1m use of reserves in 2022/23. Based on the 2021/22 Outturn position, that would leave a total of £58.7m Corporate Reserves at the end of the new financial year.

The Capital Programme 2021/22 totalled £144.347m split between the General Fund (£92.171m) and (HRA) £52.176m. As at the financial year end 31st March, 2022, the Capital Programme had expenditure of £104.9m, with underspend and slippage of £39.4m.

The Capital Programme 2022/23 had been reset at £285.283m split between the General Fund (£211.221m) and HRA (£74.062m). These programmes were higher than previous programmes due in the main to the following:

-      Significantly increased government and external funding to support Town Centre redevelopment and Infrastructure programmes. Such as the Town Centre Fund, Future High Streets Fund and Transforming Cities Fund. Whilst this is positive, these resources are heavily time restricted and present a significant challenge for the Council to deliver.

-      Slippage into the 2022/23 financial year from 2021/22 due to delays caused in part to the pandemic, inflation impacts and challenges from demand on suppliers in the sector, adding greater pressure on delivery to 2022/23.

-      The Housing Growth Programme within the HRA programme, presents the ambition of the Council to expand and improve housing supply but also represents a sizeable challenge for delivery.

The 2022/23 programme had increased overall by £40.509m from the position reported to Cabinet in February 2022. The movement was based on the latest profiles of expenditure against schemes following the 2021/22 outturn position, factoring in slippage from 2021/22 of £36.930m and new grant funding of £3.579m. The total slippage from 2021/22 was £38.983m, £36.930m moving into 2022/23 and a further £2.053m re-profiled across 2023/24 to 2025/26. Additional information on the Capital Programme was contained in Appendices 1 to 4 of the report submitted.

In introducing the report, the Leader confirmed that the Financial Outturn was slightly better than expected as more money had been received from the Government than expected. It was reported that Capital projects were under pressure nationally and the Capital Programme had been adjusted to reflect that. However, there were no fundamental changes.

Councillor Z. Collingham asked if it was possible for the data in relation to the percentage of Capital Programme expenditure that had been delivered against the budget could be provided for previous years (prior to 2020/21?) The Leader confirmed that he would speak to officers and provide a written response.

Councillor T. Collingham highlighted that Regeneration and Environment were particularly behind in delivering planned capital expenditure due largely to delays with the Parkway, Ickles Lock Project and Pothole Funding Allocation. Councillor T. Collingham appreciated that costs went up and that could result in financing deals but asked if there were any lessons to learn about the project management and planning ahead for the timely use of Pothole Grant Funding?

The Leader explained that the challenges with the Parkway Widening Scheme were mainly due to the size of the project. The Leader understood that there had been some slippages due to delays in different phases of the Scheme which moved the numbers around but the expectation was that it would be completed broadly on schedule. In relation to the Pothole Funding Allocation, the Leader explained that it was a late allocation from Government which took several months to get through the system to Rotherham, hence it was difficult to spend in the allocated time. This was because there were only so many employees working on potholes based on the agreed budget and it was then difficult to put into effect an immediate expansion of works. It was expected that this would smooth out over the next year. The challenge across all projects was having enough project management capacity; some was bought from the private sector and the rest was provided in-house.

Councillor Burnett raised that Regeneration and Environment had overspent by £3.1m with over half of that funding Home to School Transport. The Outturn response mentioned improvements that were underway that would go someway to reducing those costs. Councillor Burnett asked what those improvements were and how big of an impact where they expected to make?

The Leader explained that additional money had been provided as it was acknowledged that it was inadequate last year. Further, a review had been ongoing for a number of years in the way that the service was delivered. The Policy had been changed 3 or 4 years ago with an emphasis on moving away from providing a door-to-door service (single use taxis or minibuses) which was an expensive way of providing the service and could be quite deskilling. This was because some of the children using the service would become independent travellers and need to know how to use public transport. This meant taxis and minibuses were not helping their development. However, it was acknowledged that it was a very reassuring service for families when a taxi turned up every morning. Moves were being made towards more independent travelling or grants to allow families to sort their own arrangements. There had been some learning about the cost implications and the Council were continuing to work through that process.

The other aspect of the increased cost of Home to School transport was the fact that around 10% more children were now eligible for the service each year which was a real challenge. Work was going on between Children and Young People’s Services, who were responsible for the assessment and making sure the child was catered for, and Regeneration and Environment who were responsible for providing the transport. The work included trying to match up those services in an efficient way. However, it was expected that the budget would have to continue to rise for the foreseeable future to address the demand.

Councillor Bacon stated that the outturn response acknowledged the principle of using the Council’s reserves to manage or mitigate difficult times yet the Cabinet continued to add to reserves during a budget surplus, a war and an international cost of living crisis. He asked how much more difficult did times need to get?

The Leader reiterated that the Council’s finances were in a stronger position at present than expected which was a good thing for the Council and Council Tax payers. However, the current in-year forecast was for an overspend of around £7.5m which would easily wipe out that, the money that the Conservative Group wanted to spend on Council Tax support during the budget setting process plus some. Further, the Cost of Care exercise was saying that, to continue the current provision of Adult Social Care, would cost an extra £4.5m in the next year. That totalled around £10m with nothing changing whatsoever and if that continued, the reserves position would be unsustainable within 3 years. If that happened, the Government could intervene which has been seen at councils across the country.

The Leader did not accept that everything was fine and, therefore, the money could just be spent. The Council would continue to take sensible decisions on behalf of the Council Tax payers of Rotherham, run a sustainable budget and it would not get into the financial difficulties other councils had. That included providing services to those that needed them the most and being on the side of social justice.

Councillor Tarmey stated that, unlike previous years, the picture presented was one of an underspend and increasing reserves. He asked if the Leader agreed that it was time to review spending plans as a result of the favourable position the Council found itself in? The Council had not managed to spend all of the funds on Capital Projects due to the pandemic but he asked if there was an opportunity to be doing more, modestly, for local communities as was suggested in the Liberal Democrat budget amendment earlier in the year?

The Leader stated that he did not think the Council were in a position to do that for the reasons outlined in the previous answer. However, the issues raised would be reviewed as part of the budget setting for 2023/24 when looking at what things cost, what resources were therefore available and the impact of that on Council Tax and the Council’s services. With inflation being 10% at the time of the question, the Leader could not give any guarantees.

Councillor A. Carter stated that he believed the outturn report showed that in the midst of a pandemic and cost of living crisis, the Council had not been able to help the residents who needed it the most or keep the capital projects moving forward. The report also showed in paragraph 2.1 that, despite the one year underspend surprise, after years of overspending, that the Council had not learnt its lesson in that an overspend of more than what was saved in the previous year was anticipated for the forthcoming year. Councillor A. Carter said it was very disappointing that he was worried about the state of the finances.

Councillor Wooding stated that, in light of the inflation crisis which he believed was not being covered sufficiently, every single day the Council was losing £25,000 of reserves in real value. With everything considered, he asked what steps were being taken to assess the real risk of inflation to the reserves and the fact that social value was being withheld from residents?

The Leader explained that the Council continued to undertake a robust treasury management position which had saved in excess of £7m a year, each year for the last 3 or 4 years. The officers had taken a responsible position as inflation rose and as interest rates rose to protect the Council’s financial position against that. If the Council were simply sitting on assets, the Leader stated that Councillor Wooding would have been right, the assets would be depreciating in value. However, because officers were being proactive, it protected against those risks.

Resolved:-

1.    That the updated financial position as detailed in the report be noted.

2.    That the updated Capital Programme as set out in paragraphs 2.83 to 2.86 of the report to Cabinet on 11th July, 2022, and Appendices 1 to 4 be approved.

Mover:- Councillor Read                         Seconder:- Councillor Allen