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Councillor David King, Leader of the Council, explained that whilst this was a hard time for all local authorities, there were positives for Colchester, such as the Town Deal projects, and work with the County Council on funding bids, led by City Council officers. Choices made within the Budget were difficult, dealing with questions as to what to cut and what to preserve, or whether to cut outgoings or increase the use of reserves. Gratitude was expressed for the constructive, cross-party response made to the challenges of the Budget setting.
Councillor Mark Cory, Portfolio Holder for Resources, agreed that this was the most challenging situation that he had seen in over fifteen years of Council service, with the necessity of accepting that the Council would need to do less whilst attempting to preserve or increase its income. The Budget process was as open as possible, and Governance and Audit Committee had already contributed good input. Strategic decisions had been made, but smaller-scale adjustments could be considered. Assurance was given to the Scrutiny Panel that decisions had been taken to give the necessary confidence to the Council’s Section 151 Officer. Whilst the Budget did include service reductions, it also included service boosts where necessary, such a widening of the Local Council Tax Support Scheme, to increase the maximum award, from 80% of Council Tax up to 85%, with a small discretionary budget for those hardest hit. A Panel member noted his approval of this approach, providing necessary support instead of pursuing arrears from those who could not afford to pay.
The Panel noted the year-on-year savings which had been made, alongside reductions in costs. Confidence was expressed in the ability of the Council to continue providing services whilst making savings.
A member of the Panel complained that he had not been provided with the figures or balance sheet which he considered to be necessary. The Panel discussed this and the Chairman underlined the Panel’s need to identify and then see figures which it considered to be necessary. A reasonable balance between of detail was needed, to ensure appropriate information was provided, but in an understandable way. The Leader of the Council agreed and emphasised the Administration’s wish to be transparent, having already scheduled time to go through specific details with the Panel member who had voiced concerns. Any data requested would be provided, if it were possible to do so.
The Panel discussed concerns regarding the reductions to Neighbourhood Services and members’ wishes to have more details on these, including plans to charge for garden waste collection.
Paul Cook, Head of Finance and Section 151 Officer, explained how the Budget report had been laid out, giving a balance between necessary details and clarity for the public. Any extra information requested could be given at this meeting or in a later briefing note, to cover the requests. A summary of Council funding was given, but more detail could be provided. The report covered the macroeconomic situation, budget strategy and its principles for seeking long-term sustainability. The report covered a projected increase in core spending power of 3%.
The appendices were explained. Appendix A summarised the Medium Term Financial Forecast situation and it was explained that progress had been made in balancing the expected Budget for 2024-25. Appendix B provided a robustness statement, including assessment of the factors which needed to be kept under consideration and monitored. The Treasury Management Strategy Statement in Appendix C gave information on investments and loans, as well as showing the minimum income strategy. Appendix D gave a technical reconciliation for the Budget figures in the main report, with more General Fun information in Appendix F. Appendix G provided a statement of reserves and balances, avoiding use of New Homes Bonus money to support the main Budget. Risks associated with the decisions in the Budget were laid out in the Equality Impact Assessments [EQIAs].
The Chairman summarised the Scrutiny Panel’s role, according to the Council’s constitution, including scrutiny to ensure clarity of aims and outcomes, openness and due weight being given to all material considerations.
The Panel discussed the transformative and non-transformative savings listed. Appendix J showed £3m in transformation savings, and more information was requested to explain the figures contained within it, as well as to show how transformative and non-transformative savings gelled together. The Head of Finance agreed to produce a briefing note to explain the requested information, including the items listed in tables D4 and D5.
The Panel discussed the challenges presented in the Budget, where an increase in income had been dwarfed by inflationary costs, and the only way to cope was to reduce service provision in order to protect core services. Concern was raised by one member that the choices as to where cuts had been made did not seem to tie in with the priorities within the draft Strategic Plan. An example were cuts proposed to Neighbourhood and Environmental Services, though those services worked on areas which had been identified as priorities for the Council. More information was requested on the choices which were being put forward, to fully show their effects and alternative options. A Panel member argued that it was hard to assess the choices without those details.
Issues were raised with the EQIAs, including on environment and waste sections. The EQIAs said there would be no implications on ethnicity, but a Panel member raised concern that plans such as to impose flat fees on garden waste collection would hardest hit the least affluent areas, which were those parts of Colchester with greatest ethnic diversity. Honesty and clarity were important, including a need to lay out where negative impacts could not be fully minimised. The Leader of the Council agreed that the EQIAs needed to reflect the issues at play.
Concerns over the plans to charge for garden waste collection were discussed, including the intention to commence this service in Winter, when demand would be at its lowest, rather than when demand was high and less elastic. The Scrutiny Panel considered impacts on recycling rates. The local rate had dropped to 52% and it was a concern that some garden waste might be put in black bags, to save collection costs, and recycling might decrease. Free compost bins were raised as a suggestion. The Leader of the Council highlighted that over half the country already had to pay for garden waste removal and, whilst it was uncomfortable to contemplate, the Council would need to ensure that it was done well, and Cabinet would be happy to consider ways to bring in a concessionary scheme if possible. Richard Block, Chief Operating Officer, informed the Panel that the two local authorities with the highest rates of recycling both charged for collection of garden waste and clarified that, if agreed in principle, the introduction of such charges in Colchester would need to come back to Cabinet for detail and debate before charging could occur. It was further clarified that the projected uptake was around 5% at the start of the scheme, this was expected to rise to around 21% uptake over the whole year. Any extra income gained would assist in improving the budget position, once start-up and running costs were covered.
A request was made for the figures from the first year of operations by other local authorities who commenced a charging scheme. Panel members also asked if charges could be dependent on Council Tax banding. More information in general was requested on uptake rates and income expected. The Leader of the Council reiterated that the expected take-up rate over the first year was 21% and underlined that the full considerations could be revisited when Cabinet came to decide upon the scheme’s details. The Chairman confirmed that he would expect the details proposed, along with alternatives, to come to Scrutiny Panel for consideration. The Panel would not look for microdetail but would seek overall assurance that Neighbourhood Services would continue to be able to provide their services and deal with fly tipping or burning of waste. Councillor Adam Fox, Deputy Leader of the Council and Portfolio Holder for Local Economy and Transformation, confirmed that he expected to bring the matter back for the Panel to consider the different schemes and proposed changes, before a decision would be made. More detail than usual had been brought with this Budget paper, due to the savings having to be identified. The Chairman noted that technical papers would be expected later in the year and reminded the Panel that its duty at this meeting was to ensure that budget plans were joined up and that considerations had been assessed appropriately and impacts mitigated.
Expected cuts to staffing were discussed and concerns raised that officers such as Zone Wardens should not be lost. Panel members asked for more information as to which jobs would be lost, especially in Neighbourhood Services. It was also noted that response rates in the customer service team were marked to be improved, but this was queried, given that restrictions were being imposed on overtime hours. Suggestions were made by Panel members that workplace levies and leasing of private car parks might be options which could save the Council money. The Leader of the Council agreed that it was important to have officers where they were needed and gave assurance that improvements in customer service response times would be possible with new best practice and improved technology. More information would be provided when possible. In Neighbourhood Services, the proposition was for ten posts to go, although not necessarily through forced redundancies. Richard Block, Chief Operating Officer, underlined how hard decisions had been, needing to look at all options for cutting costs. £13.8m expenditure was still planned for Neighbourhood Services and cuts in other areas would be even more extreme if the Council were to ringfence spending on Neighbourhood Services.
The Scrutiny Panel considered the proposed £50k savings from cuts to Environmental Health and asked if there were any ways to increase income to avoid a need to reduce services. Mel Rundle, Safety and Protection Manager, explained the situation and gave assurances regarding the teams functions, which included private sector housing, food safety and environmental protection. It did not include licensing matters. The Team could not charge for work such as food safety and environmental protection, and savings were being sought by not replacing certain outgoing officers.
Regarding the proposed recruitment freeze, a Panel member noted that a vacancy factor assumption had already been made, and sometimes caused issues. The members of Cabinet were asked if the recruitment freeze would compound problems. The Chief Operating Officer answered that the vacancy factor allowance was a reflection of gaps between outgoing and incoming officers in roles. The freeze would mean that all vacancies would be reviewed as to whether replacement officers are needed. There would be a full assessment on each post affected. Based on a turnover rate of 15%, it was expected that this freeze would save around £500k. The Panel queried what effect this would have on morale. The Portfolio Holder for Resources explained that staff understood the severity of the budget position and wished to preserve or increase their salaries as far as possible. Officers clarified that recruitment would continue to roles where corporate risk would be increased if vacancies were maintained, or where roles are self-funded or funded from external sources.
A Panel member noted that the Council would be asking staff to take pay cuts, banning overtime and reducing fixed-term positions whilst increasing work pressures on officers, and expressed a preference for reducing the number of services provided, whilst maintaining staff conditions and improving the remaining services provided. The Portfolio Holder for Resources agreed that the Council was having to make the decision to do less, and explain the need for that decision to be made. The Leader explained that the changes to staffing followed the changes and reduction to the management team.
A Panel member requested assurances regarding item 6 on table D4 [CCHL Management fee reduction to reflect additional project management fees] and whether the situation at the Council’s commercial companies was expected to improve. The Deputy Leader of the Council clarified that the current review was being held to clarify the division of work between Colchester Commercial Holdings Ltd and the Council itself. Another Panel member noted that smaller CCHL profits would mean less liability for Corporation Tax, expressing confidence that this would not therefore be an issue.
A Panel member asked for more information regarding item 10 [Turnstone income] within Table D4 [Technical reconciliation of 2023/24 savings]. The Portfolio Holder for Resources acknowledged the increased risk regarding the Council’s work with Turnstone, due to the Cineworld situation, but gave assurances that the Council had guarantees in place to protect itself.
Paul Cook, Head of Finance and Section 151 Officer, explained that the assumptions made and used in formulating the Council’s work with Turnstone on Northern Gateway could be provided in the briefing note to be circulated to Panel members following the meeting. The Leader of the Council expressed his view that the Council had sufficient assurances in place, and agreed that more information could be provided to better inform members of the Panel.
Regarding table D5, item 1 [General Inflation (pay, contractual etc)], A Panel member asked if it would be reasonable to assume there would be a fall in inflation, in line with expectations, and especially with regard to expected upward pay/salary pressures. It was also queried if there were implications for following years. The Portfolio Holder for Resources explained that some macroeconomic projections had to be taken from the Officer of Budget Responsibility [OBR] and that the Council had responded strongly to the OBR’s projections, in comparison to some other local authorities. The Head of Finance elaborated on this to say that, with the difficulties of fluctuating inflation, the Council had to monitor pay in local government to pick up any variations from projections and would continue to work hard on modelling and monitoring in the future.
Officers and Cabinet members were asked if there were different contingencies in place for different potential rates of inflation. Related to this, questions were asked as to whether a prudent level of reserves were being maintained to, for example, cope with increased pay costs should industrial action lead to increased pay awards. The Leader gave assurance that the Council’s band of assumptions did not need to be so wide as previously it was, due to more information now being known, such as details of the funding settlement from central government.
Regarding item 3 from Table D5 [Support for transformation & future budget savings], a request was made by the Panel for more information in the briefing notes to be circulated.
Item 5 from Table D5 was raised, with a large growth noted in pension costs [an extra £836k]. A Panel member stated that there had been a pensions deficit of around £107m in accounts from 2021, compared to Appendix G which showed a surplus of a few million, asking how this could be reconciled and for additional information on the cause of the additional £836k costs as shown in Table D5. The Head of Finance directed attention to the evaluation from March 2021, which advised that the Council pay its pension contributions into the local government pension scheme up-front, rather than via annual payments over the three years shown. Scheme contributions had increased, due to life expectancy changes and investment performances. The deficit shown in 2021 was the long-term deficit, towards which the Council made payments in instalments. A payment was due each year, but the advice had been to pay off three-years-worth of payments at the start of that three-year period, rather than in annual instalments. The £836k was the up-front payment to Essex County Council [which oversaw the pension scheme], at a discounted rate. This had been paid out of a reserve which had been set aside for that purpose. The Head of Finance clarified that the pension deficit recorded in 2021 had been set out under different actuarial calculations. A fall in life expectancy and increase in investment performance had led to an improvement in the situation. A request was made by a Panel member for a balance sheet to show the current situation, with the member highlighting pension commitments as a large financial item which was likely to have been subject to changes since 2021. The Portfolio Holder for Resources underlined the Council’s commitment to making its payments efficiently, but reiterated that management of the pension scheme lay with ECC. The Head of Finance explained that the relevant information was covered in an actuarial report which could be shared with the Panel following the meeting. The Panel requested that an abridged summary of the content of that report would be welcomed. The Leader of the Council gave assurances that the Council was following protocol and due process, including in regard to the pension scheme, which was well-run and applied its rules to all of the organisations within it.
The Panel considered the proposed draw-down of £4m from the Business Rates Reserve and asked why this had been judged to be a safe option. The Head of Finance explained that business rates accounting was via the collection fund system, which meant that timing of this could differ between different years. A more detailed table would be provided on this in the future, using values as of March 31st.
A Panel member noted that members had been promised a reserves route map, given the importance of gaining better understanding of the subject, and suggested that councillors would benefit from training on how reserves worked and on how to maintain prudent levels. The Portfolio Holder for Resources described the reserve levels of the Council as being kept at a prudent level, meeting the local government standard which was set at around £2m. Many specific types of reserves were held, which were listed, and the Portfolio Holder agreed that it was important to explain their purpose and any restrictions placed on how they could be used. The Head of Finance offered to look at how training could best be provided, either separately or as part of wider treasury management training, but cautioned that it could be difficult to carry out direct comparisons with other local authorities’ approaches.
Scrutiny Panel discussed the Council’s draft Treasury Management Strategy [TMS] and TMS Statement. A Panel member expressed concern that the Section 151 Officer of the Council had the power to borrow up to the authorised limits set by the Council. The Panel member noted that in 2021 the Council had £131m borrowing from the Public Loan Board, and £40m borrowing from the money markets. The Panel member contrasted this with the £79.5m in short-term investments detailed in a treasury management report produced in November 2021 and asked for information as to the reasons behind the use of these loans and investments, especially given the interest charged on borrowing being significantly higher than the average percentage rate of return on investments. The Panel member asked whether it would be possible for the Council to reduce its borrowing from the money markets. The Portfolio Holder for Resources explained that longer-term loans were taken at interest rates considered to be advantageous to the Council, whilst the yield rates shown were for shorter-term investments. Cabinet would welcome suggested ideas from elected members for reducing borrowing costs or increase investment yields.
The Section 151 Officer and Head of Finance explained that the Section 151 Officer’s responsibilities and authority, including in regard of borrowing, were laid out in the Council’s constitution, after first being considered by Governance and Audit Committee. Reporting to Governance and Audit Committee had been improved over time, increasing the amount of information and detail provided. The importance of an update in 2023-24 was stressed, to follow the capital programme review and once the Council could produce a clearer expectation of capital expenditure, funding provided from borrowing and borrowing levels. Affordability calculations and loan maturity profile would be shown. More detail on treasury management calculations could be provided, but the reports had been designed to be user-friendly for members of the public to understand. The Panel were reminded that treasury management training had been scheduled for them in the near future. Interest earnings on three- and six-month deposits were currently at around four percent, with quarterly reports being made to Governance and Audit Committee.
The Leader of the Council gave assurance that the Council’s finances had repeatedly been shown to be solid, including by internal and external auditors. The Leader suggested that it would be more appropriate for a wider conversation on this to be carried out at Governance and Audit Committee’s meetings, and expressed concern at what he termed as an unusual degree of doubt being expressed by one member at this meeting. The Leader suggested that the Council could approach CIPFA [Chartered Institute for Public Finance and Accountancy] to request they examine the Council’s approach to treasury management and provide an independent assessment, reporting this back to Governance and Audit Committee. The Panel welcomed this offer. The Panel member who had voiced concern expressed his view that draft accounts could and should be published, even though these had not been externally audited. The Leader gave his assurance that nothing was being withheld.
The Chairman asked whether concern about the TMS Statement would stop the production of a balanced budget, or whether it was something which should be addressed, but would not stop the budget process from continuing. The Chairman suggested that the Panel could accept the assurances provided regarding the soundness of the proposed budget, with the proviso that additional consideration and review of the TMS and TMS Statement would be carried out in the future, with training on treasury management to increase councillors’ understanding.
The Panel queried the fluctuation in capital expenditure borrowing needs that was projected for the Housing Revenue Account [HRA] between 2025-26 and 2026-27 and sought assurance that this was not expected to cause problems with the management of capital expenditure. The Head of Finance gave assurance that no problems were expected and the change in expected capital expenditure between the two years was manageable within the Council’s treasury management system. It was explained that more information could be given as part of the following agenda item, which related to the HRA.
RESOLVED that: -
a)
The Scrutiny Panel and other elected members would be provided with a copy of the revised Capital Programme, and details of any related changes to the Budget, following completion of the fundamental review of the Capital Programme
b)
The Scrutiny Panel would be provided with briefing notes to cover: -
i.
An explanation to clarify the projected transformative and non-transformative savings, and details of where these savings are allocated, with greater detail on Appendix J of the Cabinet report;
ii.
Further information in support of the recommended Treasury Management prudential and treasury indicators
iii.
Additional information and detail relating to Item 3 on Table D5 [£1,400k in ‘Support for transformation & future budget savings’];
iv.
A summary of the content of the Actuarial Report for the Council, and other additional information regarding the Council’s pension liabilities and participation in the Local Government Pension Scheme as run by Essex County Council;
v.
The Medium Term Financial Forecast position on pay inflation, and the assumptions relating to it;
vi.
A statement of reserve movements to augment appendix H
c)
The Scrutiny Panel welcomes the offer by the Leader of the Council to commission an independent and external review, carried out by CIPFA, of the Council’s treasury management and its Treasury Management Strategy and Statement.
RECOMMENDED to CABINET that: -
a)
The Scrutiny Panel has confidence in the Budget report, as provided to it for consideration;
b)
Additional information and assurances be added to the equality impact assessments relating to the levying of flat fees for garden waste collection and the potential differing impact on different ethnic communities, and to address the concern that allowing any container to be used for putting out garden waste may have impacts on the collection of waste, and assurance provided that these will be considered by Cabinet;
c)
Training be provided to elected members, to cover the management of local authority reserves, either as a stand-alone course or as part of a wider treasury management training course;
d)
Greater information be provided to the Scrutiny Panel on the assumptions being made regarding the proposals to charge for garden waste collection, including assumptions relating to uptake of the scheme once it commences and over time, the likely effect this will have on the Council’s environmental agenda and policies, and assurance that the Council’s waste and neighbourhood services teams can manage the effects from the new service structure;
e)
The matter of pay inflation over the coming two years be given more prominence within the Council’s risk register.