Approval of Revenue and Capital Budgets 2018-2019 Portfolio: Resources and Leader Report From: Director of Finance Wards: All Wards OPEN PUBLIC ITEM 1 Purpose
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Report No: F14/18 Eden District Council Council 15 February 2018 Approval of Revenue and Capital Budgets 2018-2019 Portfolio: Resources and Leader Report from: Director of Finance Wards: All Wards OPEN PUBLIC ITEM 1 Purpose 1.1 To set out the revised revenue budget for 2017-2018, the proposed revenue budget for 2018-2019 (the ‘Budget Requirement’) and the proposed capital budget (2017-2022 Capital Programme) for the approval of Council. These are based on the recommendations to Council by the Executive at its meeting on 23 January 2018, plus changes required for priority actions and, where appropriate, changes agreed at the Executive meetings on 23 January 2018 and 6 February 2018 and elsewhere on this agenda. In addition to consider the formal advice of its Chief Financial Officer on the robustness of the estimates included in the budget and the adequacy of the reserves. 2 Recommendation 1 The Council’s revenue budget in 2017-2018 be a net cost of services of £7,968,142, with a deficit of £677,947 (paragraph 3.8.1). 2 The Council’s revenue budget in 2018-2019 be a net cost of services of £8,144,306, with a deficit of £760,080 made up as follows (paragraph 3.9.1): £ Budgeted Expenditure 7,941,056 Growth 203,250 (See Appendix B) 8,144,306 Less: Council Tax -3,884,746 Based on Band D Council Tax of £190.75: no increase on the 2017-2018 level Less: Surplus on Collection Fund -32,000 Less: Revenue Support Grant -87,296 Less: Rural Services Delivery Grant -677,638 Less: Business Rates Retention Scheme -2,079,000 Less: New Homes Bonus -615,546 Deficit 760,080 3 The Council’s Budget Requirement (inclusive of local precepts) be £8,393,388 in 2018-2019 (paragraph 3.9.5). 4 The Council’s Council Tax Requirement (inclusive of local precepts be £4,901,908 (paragraph 3.9.6). 1 5 The Council’s capital budget for 2017-2022 be £9,531,000 (paragraph 3.10.1). 6 It is noted that the bid to be a 100% Business Rates Retention Scheme pilot to the Department for Communities and Local Government has been rejected. 7 Delegated authority be granted to the Director of Finance to enter in to an agreement with Cumbria County Council and the other Cumbrian District Councils to secure Second Homes funding from Cumbria County Council for ten years commencing 1 April 2019, provided the agreement gives the current benefit to the Council. 3 Report Details 3.1 Revenue Budget 2018-2019 3.1.1 The Council is required, by Section 32 of the Local Government Finance Act 1992, to calculate its Budget Requirement for each financial year. The Council is doing this as part of the consideration of this report. In effect, this is when the Council sets its own Council Tax. 3.1.2 At the Accounts and Governance Committee meeting on 22 February 2018, the Council’s own Council Tax (including local precepts) will be added to the Council Tax set by the County Council and the Police and Crime Commissioner to produce the total amount that Eden’s residents will pay for Council Tax in 2018-2019. Council has previously delegated Council Tax setting to the Accounts and Governance Committee. 3.1.3 For this Council, the Budget Requirement is the sum of: 1 The net expenditure on the General Fund revenue account which the Council will incur in performing its functions during the coming year; 2 Any amounts which the Council estimates that it would be appropriate to transfer to, or from, balances during the year; and 3 The amount of any precept issued to it for the year by a local precepting authority (town council, parish council, or parish meeting). 3.1.4 Once the Budget Requirement has been determined, the amount of Government funding, and any surplus or deficit on the Collection Fund, is deducted to produce the demand on the Council Tax payers (the Council Tax Requirement). For this purpose, Government funding is taken as Revenue Support Grant (RSG), Rural Services Delivery Grant (RSDG), New Homes Bonus (NHB) and the estimated income from the Business Rates Retention Scheme (BRRS). 3.1.5 The Council’s Medium Term Financial Plan (MTFP) is set out at Appendix A. It is based on the budget recommended by the Executive on 23 January 2018, as adjusted for the changes set out at Appendix E. After taking account of non-recurring growth and other one-off expenditure, this shows a deficit budget throughout the period of the MTFP. 2 3.2 Local Government Finance Settlement 3.2.1 The recommendations in this report were made by the Executive on the basis of the provisional Local Government Finance Settlement made in December 2017. The final Settlement has now been announced, and included in the figures. In a surprise announcement, the Secretary of State announced increased funding for RSDG in 2018- 2019. For Eden, this has increased government funding by £134,000 over the provisional settlement. This is clearly good news for the Council. 3.3 Other Funding 3.3.1 Members will recall that at Council on 12 October 2017 a report (F79/17) 100% Business Rate Retention Scheme Pilot Proposals was approved. This gave authority for the Council to enter in to a bid to be a pilot for 100% BRRS for 2018-2019 with the other Cumbrian Councils. The report contained a recommendation that Council be advised of the outcome of the bid. The Council was advised on 19 December 2017 that the bid had been rejected. As lead authority, the County Council is seeking clarification from government on the reasons for refusal. 3.3.2 As part of the process, a new pooling arrangement was required regardless of the outcome of the bid. Copeland Borough Council is currently excluded from the pool. From 1 April 2018, a new arrangement will be in place including all the District Councils and the County Council. Also, because of more up to date information being available for 2017-2018, a further analysis of BRRS income has been produced for the budget and MTFP. As previously reported to Members on a number of occasions, the system is volatile and significant changes in projected income are a regular occurrence. A comparison of the anticipated income in report F10/18 (Executive, 23 January 2018) and latest figures is below: 2017-18 2018-19 2019-20 2020-21 2021-22 £’000 £’000 £’000 £’000 £’000 Report F10/18 1,180 2,504 2,583 2,635 2,635 Revised Figures 1.476 2,079 2,623 2,645 2,645 Change +296 -425 +40 +10 +10 Note - + is increased income; - is decreased income. 3.3.3 The budget and MTFP has been updated to show the most up to date figures (Appendices A and E). 3.3.4 The Council is party to a ten year agreement with Cumbria County Council whereby the County Council grants this Council a proportion of the Council Tax income received from second homes in the District. The current agreement expires on 31 March 2019. This Council and the other District Councils are preparing an agreement to present to the County Council to secure this funding for a further ten years from 1 April 2019. Budgeted income for 2018-2019 from this is £219,000. Recommendation 7 requests delegated authority be granted to the Director of Finance to enter in to such an agreement provided the current level of funding is secured. If the level of funding is not secured a further report will be brought to a subsequent meeting Members will be asked to consider what action to take. 3 3.4 Capital Budget 3.4.1 Each year the Council sets a five year Capital Programme. This needs to be set at the same time as the revenue budget, as there is a linkage between the two: how the Capital Programme is financed impacts directly on the revenue budget. 3.5 Chief Financial Officer (CFO) Opinion on the Estimate Process and Reserve Levels 3.5.1 Section 25 of the Local Government Act 2003 requires the CFO to report to his/her Council when it is making the statutory calculations required to determine its Council Tax or precept. Government guidance states, ‘The authority is required to take the report into account when making the calculations. The report must deal with the robustness of the estimates included in the budget and the adequacy of the reserves for which the budget provides. What is required is the professional advice of the CFO on these two questions. Both are connected with matters of risk and uncertainty. They are interdependent and need to be considered together.’ 3.6 Section 25: Report of the CFO - Robustness of the Estimates 3.6.1 As Director of Finance, I am the Council’s Chief Financial Officer. In my opinion, the estimates are robust, though see paragraph 3.6.5 below. 3.6.2 Whilst relevant budget holders are responsible for individual budgets and their preparation, all estimates are scrutinised by Financial Services staff and Management Team prior to submission to Members. The Council has no history of budgetary problems. 3.6.3 The Council’s revenue and capital budgets are ‘joined up’, both for next year’s budget and for the longer term. This means that the full cost of the proposed Capital Programme is reflected in the revenue estimates. Both revenue and capital budgets include the funding needs of the Council’s Asset Management Plan.