The report of the Deputy Chief Executive and City Treasurer was to follow and is now enclosed.

In January a report had been considered on the budget implications of the Provisional Local Government Finance Settlement 2021/22 (Minute Exe/21/5). That had given an early assessment of the Council’s financial position in the next year. The Deputy Chief Executive and City Treasurer now presented a report on the Council’s overall financial strategy for 2021/22 which brought together the various components of the proposed 2021/22 budget: the Revenue Budget, the Capital Strategy, and the Housing Revenue Account, showing how these would jointly continue to reflect the Our Manchester Strategy and Corporate Plan priorities.

The report explained that the Council's net revenue budget is funded from five main sources: business rates, Council Tax, government grants, dividends, and use of reserves. In recent years the on-going reductions in central government funding had increased the importance of growing and maintaining local income and local funding sources, which was now integral to the Council’s financial planning. Between 2010/11 and 2021/22 the Council’s spending power (as defined by government) had reduced by £129m (21%), the average council reduction in England for the same period was 7%. For 2021/22 the situation was especially difficult: as well as the need to continue to deal with and plan for the chronic withdrawal of government funding to the Council, the Council had to address the more acute financial impacts of the COVID-19 pandemic on the Council’s finances in 2021/22. The funding announced by the government in the Local Government Finance Settlement had been for a single year only, so the proposals were for the Council to adopt a one-year budget. Previously the Council had normally budgeted using a three-year financial plan.

The report presented in more detail the main elements that had been part of the Local Government Finance Settlement, which had been outlined in the January report. The assumption on the Council Tax remained as had been reported in January: that the Council would apply a 1.99% Council Tax increase in general, and a further 3% increase to provide extra funding for Adult Social Care, so a 4.99% Council Tax increase overall. In January the expected impact of the settlement on the council's 2021/22 budget was estimated at £58.87m. Since then the collection Fund position had been finalised and the estimated receipt for the Local Tax income guarantee scheme updated. The total impact on budget was now estimated at £58.7m. The summary of the being:

The report explained that in bringing forward the final proposals for the 2021/22 budget, that shortfall had been addressed through a prudent approach to investment income, the use of fortuitous or one-off grants and income received, and through the proposed cuts that had been identified and considered over the past few months. The overall proposed revenue budget was:

The report examined the future funding uncertainties facing the Council. The City Treasurer had examined the major assumptions used within the budget calculations and had carried out sensitivity analysis to ascertain the levels of potential risk in the assumptions being used. The key risks identified to the delivery of a balanced budget and their mitigation were set out in the report.

It was the opinion of the Chief Finance Officer that any significant budget risks to the General Fund and the Housing Revenue Account had been identified and that suitable proposals were in place to mitigate against these risks where possible. The Council’s budget monitoring procedures were effective and designed to monitor high-level risks and volatile budgets. An assessment of anticipated business rates income had been carried out based on the information available and provision had been made for outstanding appeals. This was considered to be a prudent provision.

The Chief Finance Officer considered that the assumptions on which the budget has been proposed, whilst challenging, are manageable within the flexibility allowed by the General Fund balance. This, and the fact that the Council holds other reserves that could be called on if necessary, meant the Chief Finance Officer was confident that the overall budget position of the Council could be sustained within the overall level of resources available. However, to the degree that the budget savings were not achieved in a timely manner and reserves were called on to achieve a balanced position, further savings would need to be identified and implemented in order to ensure the Council’s future financial stability was maintained.

Decision

To note the report and the context it provided for the detailed budget reports also being considered at the meeting.