The report of the City Treasurer is now enclosed

The report of the Chief Executive and City Treasurer set out the revenue budget proposals for 2019/20 based on the outcome of the Provisional Local Government Finance Settlement and the issues which needed to be taken into account prior to the Council finalising the budget and setting the Council Tax for 2019/20.

 

In March 2018, as part of setting the 2018/19 budget, an initial budget for 2019/20 had been approved by the Council. That had anticipated a total funding requirement of £588.379m, and a funding shortfall of £8.967m. The report described all the subsequent changes that had been made to that indicative budget. New budget pressures had arisen, revised savings and cost recovery proposals had been developed, and further sources of money had been identified or grants provided. The total saving target for 2019/20 was £14.798m. The 2019/20 budget now being put forward had a total funding requirement of £610.350m and now anticipated a small budget surplus of £65,000, rather than a funding deficit. The comparison of the two proposals being:

 

Table 1 - Comparison of 201/20 Budgets	March 2018 £000	February 2019 £000	Change
Resources Available
Business Rates related funding	320,195	314,653	(5,542)
Council Tax	161,723	166,507	4,784
Other non-ring fenced Grants / Contributions	39,662	54,426	14,764
Dividends and Use of Airport Reserve	53,342	62,390	9,048
Use of Reserves to support the budget	4,490	12,439	7,949
Total Resources Available	579,412	610,415	31,003
Resources Required
Corporate Costs:
Levies/Charges	68,862	70,090	1,228
Contingency	2,100	1,600	(500)
Capital Financing	44,582	44,507	(75)
Transfer to Reserves	3,409	6,902	3,493
Sub Total Corporate Costs	118,953	123,099	4,146
Directorate Costs:
Additional allowances & other pension costs	10,183	10,030	(153)
Insurance Costs	2,004	2,004	0
Directorate Budgets	423,111	465,272	42,161
Inflation Pressures / budgets to be allocated	34,128	9,945	(24,183)
Total Directorate Costs	469,426	487,251	17,825
Total Resources Required	588,379	610,350	21,971
Surplus (Deficit)	(8,967)	65

 

These budgets were based on the assumption that the Council’s element of Council Tax would increase by 1.99% along with a further 1.5% specifically to care for vulnerable adults. Whilst the 2019/20 Local Government Provisional Finance Settlement had again given the Council the flexibility to raise the council tax by a further 1% to cover the cost of core services, the assumption in the budget was to keep council tax in 2019/20 at the level as committed to in 2017-20 budget strategy, and not implement that further 1% increase. When the Greater Manchester Council Tax precept increases were added to the Council’s own the total increase for Manchester’s Council Tax Payers was anticipated as being 5.06%.

 

The assumption for the council tax collection rate was 96.5%. This was based on historic trends in collection as council tax due in the current year will continue to be collected over a number of years.

 

The report provided a breakdown of the other non-ringfenced grants and contributions included in the budget and the issues around the most significant grants and contributions were dscribed.

 

Table 2 - Other Non-Ringfenced Grants and Contributions	2019/20 £000
Better Care Fund (Improved)	24,374
Additional Better Care Fund (Improved)	3,775
New Homes Bonus	8,202
Adult Social Care Winter Pressures Grant	2,666
Contribution from MHCC	4,000
Children and Adults Social Care Grant	4,555
Education Services Grant	1,260
Bus Reform - GMCA contribution	1,618
Brexit Preparation funding	105
Housing Benefit Administration Subsidy	2,514
Universal Credit Funding	314
Council Tax Support Administration. Subsidy	881
Care Act Grants	162
Total Non Ring-fenced Grants	54,426

 

The report then considered the expenditure proposals. The forecast of levy payments the Council would have to make to other authorities in 2019/20 was

 

Table 3 - Levies	2019/20 £000
Transport Levy	38,157
GMCA Waste Services	31,614
Environment Agency	217
Probation (Residual Debt)	22
Magistrates Court (Residual Debt)	9
Port Health Authority	71
Net Cost of Levies	70,090

 

Although included within the table of levies, the Waste Levy was administered by the Neighbourhoods Directorate and would be included within the Directorate’s published budget (Minute Exe/19/15).

 

The contingency provision of £1.6m was £1m in relation to risks around the waste levy and collection and £0.6m as an unallocated contingency to meet future unforeseen expenses.

 

The proposed Insurance costs of £2.004m related to the cost of external insurance policies as well as contributions to the insurance fund reserve for self-insured risks.

 

The capital financing budget of £44.507m supports the costs of borrowing including interest costs and the minimum revenue provision, plus contributions to the capital financing reserve for revenue funding of the programme. Of this £25.637m would be funded by interest received on loans made by the Council to Manchester Airport Group and other partner organisations.

 

Specific transfers to reserves of £6.902m in 2019/20 were being proposed:

·         Minimum Revenue Provision (MRP) £2.4m saving transferred to the Town Hall Reserve

·         Transfer of £105k to reserves following the BREXIT preparation funding announcement.

·         Transfer to Social Care Reserve of £2.904m including expected transport rebate from GMCA and additional Small Business Rates Relief grant

·         Transfer to Adult Social Care Reserve £1.493m in 2019/20 from the element of Social Care grant to be used in 2020/21

 

Allowances of £10.030m had also been made for retired staff and teachers’ pensions to meet the cost of added-years payments awarded to former employees.

 

The report explained the main assumptions that had been made when calculating provision to be made for inflation and other anticipated costs. These could not, at this point in time, be allocated to Directorate or other budgets. They would instead be allocated throughout the coming year. The total provision being proposed was £9.945m, broken down into:

 

Table 4 - Inflationary pressures and budgets to be allocated	2019 /20 £000
Non-pay inflation	3,539
Pay inflation at 2%	4,323
Employee costs of Minimum Wage	775
Apprenticeship Levy 0.5%	900
Carbon Reduction Tax / Climate Change Levy	368
Contribution to Cemeteries Reserve	40
Total	9,945

 

The inflation and pressures allocations that related to the health and social care pooled budget were not included in Table 3 as they had been included within Adult Social Care cash-limit budget, being:

 

Table 5 - Inflationary pressures and budgets to be allocated in the Pooled Budget	2019 /20 £000
National Living Wage	4,258
Pay inflation	1,002
Non-pay inflation	2,684

 

The proposals for the Directorates’ cash limit budgets were detailed in the Business Plan reports that were also being considered at the meeting. The overall position was:

 

Table 6 - Cash Limit Budgets	2019/20 £000
Children’s Services	120,434
Adults Services	198,263
Homelessness	13,375
Corporate Core	67,838
Neighbourhood Directorate	59,847
Strategic Development	5,515
Total	465,272

 

The figures in the table for the Neighbourhood Directorate did not include the waste levy of £31.614m as that is shown above in Table 3.

 

The report explained that the Council holds a number of reserves, all of which, aside from the General Fund Reserve, had been set aside to meet specific future expenditure or risks. A fundamental review of all the reserves held had been carried out as part of the budget setting process. The reserves include:

·         statutory reserves – such as the Bus Lane and Parking Reserves, where the use of these monies was defined in statute

·         PFI Reserves – held to meet costs across the life of the PFI schemes

·         Reserves to offset risk and manage volatility – such as the Insurance Fund Reserve, and reserves to smooth volatility in for example adult social care placements due to winter pressures

·         Schools reserves – schools funding which the council cannot utilise

·         Reserves held to support capital schemes

·         Reserves to support economic growth and public sector reform

·         Grants and contributions which fall across more than one year – under accountancy standards these are held in a reserve.

 

The report set out the planned use of reserves in 2019/20 to support revenue expenditure. It also explained the statutory requirement to place income generated from on-street parking and bus lane enforcement into separate reserves. These reserves could only be used to fund certain types of highway and environmental improvements, and provided there was no requirement for the Council to provide additional off street parking or for financial support to existing off street parking. The expected balance on these reserves at the 1 April 2019 was £11.936m. It was estimated that £9.049m will be added to these reserves during 2019/20 and £8.596m used in accordance with the statutory requirements to fund spend in the Neighbourhoods Directorate as well as part of the transport levy. The total planned use of reserves was:

 

Table 7 - Use of Reserves	2019/20 £'000
Statutory Reserves:
Bus Lane and Parking reserves	5,504
Other Statutory Reserves	85
Balances Held for PFI's	500
Reserves directly supporting the revenue budget:
Budget smoothing reserve	2,500
Business Rates Reserve	490
Bus Lane (Supporting Transport Levy)	3,092
Social Care Reserve	6,357
Service Reserves:
Adult Social Care	3,643
Social Care Reserve	1,320
Small Specific Reserves	124
Reserves held to smooth risk / assurance:
Airport Dividend Reserve	45,413
Business Rates Reserve	2,000
Other reserves held to smooth risk / assurance	1,730
Reserves held to support capital schemes:
Capital Fund	10,237
Other reserves held to support capital schemes	10,408
Reserves held to support growth and reform:
Clean City Reserve	412
Better Care Reserve	1,955
Town Hall Reserve	2,867
Our Manchester Reserve	2,584
Other Reserves to support growth and reform	164
Grants and Contributions used to meet commitments over more than one year	686
Total	102,071

 

The meeting was addressed by Councillor Flanagan, a Ward Councillor for the Miles Platting and Newton Heath Ward. Councillor Flanagan spoke of the way that Council had, as part of the 2018/19 budget process, made changes to the mechanisms for providing grants to support community organisations. He explained that as a consequence of those changes some smaller community groups had lost their funding from the Council, impacting on the work they had been doing in their local community. He explained that since the change had been implemented a number of such groups had undertaken development to strengthen their governance arrangements and so were now in a better position to once again obtain Council support. He asked the Executive to consider a change to the budget to be proposed to Council to allocate from the existing Our Manchester Budget a fund of £300,000 to support community groups not currently in receipt of Council support under the VCS Grants Scheme but who have now made sufficient progress in their development to be able to receive support from the Council; and also that a £100,000 be set aside to support new and existing groups, particularly where there is a need for support to help reduce demand on Council services.

 

Councillor Flanagan’s request was supported by the Leader and the Deputy Leader and agreed by the meeting, becoming part of the budget proposals that the Executive was to be put to the Council.

 

Decisions

 

1.         To note that the financial position has been based on the Final Local Government Finance Settlement confirmed on 29 January 2019.

 

2.         To note that there has been a review of how the resources available are utilised to support the financial position to best effect, including use of reserves and dividends, consideration of the updated Council Tax and Business Rates position, the financing of capital investment and the availability and application of grants.

 

3.         To agree to take into account, as part of the consideration of the budget proposals, the Directorate Business Plans and the proposals for service and expenditure changes.

 

4.         To note the anticipated financial position for the Authority for the period 2018/19 to 2019/20.

 

5.         To note that the Capital Strategy for 2019/20 had also been presented to this meeting (Minute Exe/19/13).

 

6.         To note the City Treasurer’s review of the robustness of the estimates and the adequacy of the reserves as set out in the Revenue Budget report also considered at the meeting (Minute Exe/19/11).

 

7.         To recommend that the Council:

 

a.   approve for 2019/20 an increase in the basic amount of Council Tax (i.e. the City’s element of council tax) by 3.49% (including 1.5% for adult social care);

 

b.   approve for 2019/20 the contingency sum of £1.6m;

 

c.   delegate authority to the City Treasurer, in consultation with the Executive Member for Finance and Human Resources to make allocations from the inflationary pressures and budgets to be allocated sum of £9.945m (as shown above in Table 4). In doing so it was noted that the MHCC elements of those costs (Table 5) had been included in the Pooled Budget and were subject to draw-down in consultation with MHCC Finance Committee, and consultation with the Executive Member for Finance and Human Resources.

 

d.   approve for 2019/20 the corporate budget requirements to cover levies / charges of £70.090m, capital financing costs of £44.507m, additional allowances and other pension costs of £10.030m and insurance costs of £2.004m;

 

e.   approve for 2019/20 the estimated utilisation of £8.596m in 2019/20 of the surplus from the on street parking and bus lane enforcement reserves; after determining that any surplus from these reserves is not required to provide additional off street parking in the authority; and

 

f.    approve for 2019/20 the position on reserves as identified in the report, noting that the position is subject to any further calls on reserves that arise before the meeting of the Council.

 

g.   allocate from the existing Our Manchester Budget a fund of £300,000 to support community groups not currently in receipt of Council support under the VCS Grants Scheme but who have now made sufficient progress in their development to be able to receive support from the Council; and also that a £100,000 be set aside to support new and existing groups, particularly where there is a need for support to help reduce demand on Council services.

 

8.         To delegate authority to the City Treasurer and Chief Executive to agree the use of the Adult Social Care Reserve, Social Care Reserve and Our Manchester Reserve, in consultation with Executive Members for Finance and Human Resources, Children's Services, and Adult Health and Wellbeing.

 

9.         To approve the Directorate cash limits as set out in Table 6 above.

 

10.       To approve the in principle contribution to the MHCC Section 75 (S75) Pooled Budget subject to the approval of the S75 agreement at a future meeting.

 

11.       To delegate authority to the City Treasurer and Chief Executive in consultation with the Executive Member for Finance and Human Resources and the Leader of the Council to draft the recommended budget resolution for Council in accordance with the legal requirements outlined in this report and to take into account the decisions of the Executive and any final changes and other technical adjustments.

 

12.       To note that there is a requirement to provide an itemised council tax bill to inform Council Tax payers when part of any increase in council tax is being used to fund adult social care, and to provide specific information about the purpose of the council tax increase in the information supplied with demand notices.