The report of the Deputy Chief Executive and City Treasurer was to follow and is now enclosed, Appendix 3 added which was omitted from the version first published.

The previous item of business had set out the financial strategy and the approach that had been taken to develop the proposed budget for 2021/22. This joint report from the Chief Executive, and Deputy Chief Executive and City Treasurer set out the Revenue Budget proposal in more detail.

 

Prior to COVID-19 there had been a forecast of a £22m funding shortfall for the Council in for 2021/22. That had been forecast to rise to £80m by 2024/25. The intention had been to address those in the Medium-Term Financial Planning process. However, the significant financial impact from the COVID-19 pandemic now had to be added to those original forecasts, giving an underlying gross budget pressure of £166m for 2021/22.

 

Prior to the spending review mitigations and corporate measures of £57m had already been identified. In addition, it was proposed that £12m of airport dividends be re-profiled from 2020/21 to support the 2021/22 budget. This had resulted in pre-Spending Review budget gap of £97m. That was to be balanced through the additional funding announced in the Finance Settlement, other budget cuts and the proposed use of the 3% Adult Social Care precept. A breakdown of the budget cuts to be made was included in the report:

 

Table 1 –   savings proposals	2021/22 £’000	2022/23 £’000	2023/24 £’000	2024/25 £’000	Total £’000	Indicative FTE reduction
Adults Services	11,597	3,326	3,477	0	18,400	0.0
Children Services	12,359	(152)	(1,309)	100	10,998	14.0
Homelessness	2,335	0	0	0	2,335	7.0
Neighbourhoods (Incl. Highways)	6,683	493	100	100	7,376	2.0
Growth and Development	2,024	591	604	(905)	2,314	22.4
Corporate Core	5,719	562	0	0	6,281	115.6
Total Savings Options	40,717	4,820	2,872	(705)	47,704	161.0

 

The budget being put forward had a total funding requirement of £637.304m, compared to the funding requirement in 2020/21 of £661.125m. The revised budget for 2020/21 now stood at a total of £859.289. The comparison of the budgets being

 

Table 2 – Budget Comparisons	Original Budget 2020/21 £'000	Revised Budget 2020/21 £'000	Proposed 2021/22 £'000
Resources Available
Business Rates Related Funding	339,547	514,696	155,537
Council Tax	174,465	174,465	176,857
Grants and other External Funding	66,642	131,823	120,243
Dividends	15,810	900	0
Use of Reserves	69,661	37,405	184,667
Total Resources Available	666,125	859,289	637,304
Resources Required
Corporate Costs:
Levies / Statutory Charge	71,327	67,851	66,580
Contingency	860	300	4,719
Capital Financing	44,507	44,507	39,507
Transfer to Reserves	18,263	199,474	1,557
Sub Total Corporate Costs	134,957	312,132	112,363
Directorate Costs:
Additional Allowances and other pension costs	9,580	9,066	9,066
Insurance Costs	2,004	2,004	2,004
Inflationary Pressures and budgets to be allocated	10,271	970	3,230
Directorate Budgets	509,313	535,117	510,641
Subtotal Directorate Costs	531,168	547,157	524,941
Total Resources Required	666,125	859,289	637,304
Shortfall / (surplus)	0	0	0

 

This budget was based on the assumption that the Council’s element of Council Tax would increase by 1.99% along with a further 3% specifically for adult social care. 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 4.7%.

 

The assumption for the council tax collection rate was 94.5%. This was reduced from 2020/21 as a result of the reduced collection being experienced due to the pandemic.

 

The details of the business rate calculations, forecasts and assumptions were set out in the report, as well as the financial changes arising from the business rate related grants and funding the government had provided to support businesses, and the reliefs provide to business badly affected by the measures to control the COVID-19 pandemic.

 

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

 

Table 3 - Other Non-Ringfenced Grants and Contributions	2021/22 £'000
Better Care Fund (Improved)	30,815
Children's and Adult's Social Care Grant	23,877
Lower Tier Services Grant	1,236
New Homes Bonus	8,330
Contribution from MHCC	4,000
GMCA Rebate	0
Education Services Grant	1,200
Housing Benefit Admin Subsidy	2,514
Fortuitous Income (one off)	0
R&B additional grants (New Burdens)	0
Council Tax Support Admin Subsidy	856
Care Act Grants	95
Business Rates Returned Levy
COVID 19 Emergency funding	22,229
Local Council Tax Support grant	5,709
COVID grant for Sales, fees and charges losses	4,481
Loan Income from Airport	14,901
Total Non Ring-fenced Grants	120,243

 

Use of reserves to support the corporate revenue budget was £34.461m in 2020/21 and was proposed to be £187.141m in 2021/22. The report noted that the 2021/22 amount included £139.075m relating to Business Rates Section 31 grant for Extended Retail relief.

 

No new Airport Dividend from the Manchester Airport Group was being budgeted for in 2021/22. Likewise, no dividend income was being budgeted for Manchester Central, NCP Manchester Central, and Manchester Piccadilly. The report explained the plan to utilise the 2020/21 closing balance of the Airport Dividend Reserve over the next three years.

 

The report then went on to examine the use of resources and the proposed revenue expenditure by the Council in 2021/22. The forecast of levy payments the Council would have to make to other authorities in 2021/22 was:

 

Table 4 – Levy Payments to other Bodies	Proposed 2021/22 £'000
Transport Levy	37,525
GM Waste Disposal Authority	28,731
Environment Agency	230
Probation (Residual Debt)	7
Magistrates Court (Residual Debt)	9
Port Health Authority	78
Statutory Charge to GMCA	0
Net Cost of Levies	66,580

 

Although included within the table of levies, the Waste Levy was administered by the Neighbourhoods Directorate and would be included within the Directorate’s budget.

 

A contingency provision of £4.719m was being proposed, including:

·         £1.254m in relation to risks around the waste levy and collection;

·         a £2.8m contingency until the pay negotiations for local government employees had been concluded; 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 £39.507m was to cover the costs of borrowing. In 2021/22 that was forecast to include:

·         interest costs of £22.8m;

·         interest receivable of £43.9m;

·         Minimum Revenue Provision (MRP) of £31.1m, being the provision for the repayment of debt incurred to fund an asset, spread over the useful economic life of the asset;

·         Debt Management Expenses of £3.5m; and

·         contributions to the Capital Fund Reserve of £26.0m.

 

Specific transfers to reserves of £1.557m were being proposed in 202/22, and those were explained in the report.

 

Allowances of £9.066m 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 £3.23m, broken down into:

 

Table 5 – Inflationary Pressures to be Allocated	2021/22 £'000
Non-Pay Inflation	1,981
Pay Inflation	0
Pension Contribution	0
Apprenticeship Levy 0.5%	999
Further pressures including Domestic Violence Prevention	0
Digital City work	250
Electricity and gas savings
Contribution to Cemeteries Reserve	0
Total	3,230

 

Not included in these figures was the allocation relating to the Health and Social Care pooled budget as they had been included within Adult Social Care cash-limit budget: £1.9m for the National Living Wage and £1.6m for non-pay inflation.

 

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:

·         Reserves that have been identified to directly support the proposed budget position as part of the Council’s risk management approach or where it is appropriate to meet corporate costs.

·         Statutory reserves – such as the Bus Lane and Parking Reserves, where the use of these monies is 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

·         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 – following local authority accounting standards these are held in a reserve

·         Schools reserves – direct schools funding which the Council cannot utilise

 

The report set out the planned use of reserves in 2021/22 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 2021 was £11.573m. It was estimated that £10.174m would be added to these reserves during 2021/22 and £5.092m used to support the transport levy and £4.694m to fund eligible spend with the Neighbourhoods directorate. This would leave a balance of £11.961m at the year-end.

 

The total planned use of reserves was:

 

Table 6 – Planned use of Reserves	2021/22 £'000
Reserves directly supporting the revenue budget:
COVID-19 Emergency Funding tranche 1
Business Rates Reserve	155,633
Budget smoothing reserve	11,266
Bus Lane (supporting Transport Levy)	5,092
Capital Fund - Supporting the revenue budget	7,763
Airport Dividend Reserve	4,913
Sub Total reserves directly supporting the revenue budget	184,667
Smoothing prior to mainstreaming in 2022/23
Anti Social Behaviour Team	540
Social care Reserve – to fund investment into Children’s Social Care	7,446
Adult Social Care - to fund investment into the Improvement Plan	6,150
Our Manchester Reserve	2,802
Sub Total to be mainstreamed	16,938
Bus Lane and Parking reserves	4,694
Other Statutory Reserves	308
Balances Held for PFI's	349
Reserves held to smooth risk / assurance:
Transformation Reserve	333
Other Reserves held to smooth risk / assurance	6,717
Reserves held to support capital schemes:
Capital Fund	13,137
Investment Reserve	1,819
Manchester International Festival Reserve	1,060
Eastlands Reserve	5,248
Enterprise zone reserve	1,061
Other reserves held to support capital schemes	0
Reserves held to support growth and reform:
Clean City Reserve	0
Better Care Reserve	3,375
Town Hall Reserve	3,075
Other Reserves to support growth and reform	1,150
Direct grants for Grants COVID-19 responsibilities	12,588
Grants and Contributions used to meet commitments over more than one year	1,958
Small Specific Reserves	671
School Reserves	0
	259,149

 

The report set out the purpose of these and Appendix 3 of the report showed the annual movement and projected balances to April 2025. Earmarked reserves were forecast to reduce from £349m to £98m.

 

The proposals for the Directorates’ cash limit budgets were detailed in the Directorate Budgets 2021/22 reports that were also being considered at the meeting (Minute Exe/21/22 to 21/27 below). The overall position was:

 

Table 7 – Directorate Budgets	Gross Budget 2021/22 £'000	Net Budget 2021/22 £'000
Children's	509,879	118,761
Health and Social Care Pooled Budget contribution for ASC	273,383	218,911
Adult Social Care - services out of scope of Pooled Budget	7,781	4,856
Homelessness	56,087	27,495
Corporate Core	323,773	65,501
Neighbourhoods	168,588	64,535
Growth and Development	58,508	10,582
Total	1,397,999	510,641

 

The report explained that the budget proposals would have a direct workforce impact. In order to support the delivery of the required budget there was a need to deliver savings of £5.442m from the workforce. This required an indicative FTE reduction of 161 positions, split between vacant and occupied posts. This was an indicative FTE reduction and the exact number and split between vacant and occupied posts was to be determined as the workforce savings proposals were implemented. The detailed proposals were set out within the individual Directorate Budget Reports elsewhere on the agenda for this meeting.

 

To support the achievement of the workforce savings an Efficiency Early Release Scheme (comprising Efficiency Severance and Early Retirement) had been approved by Personnel Committee in November 2020 (Minute PE/20/22). The scheme had now closed. The success of that scheme would be dependent on the numbers of staff accepting their severance offers and the ability of the organisation to facilitate workforce movement where required.

 

The summary of the workforce implications and staff reductions was:

 

Table 8 – Workforce Implications	2020/21 Posts	2020/21 Saving Proposals Gross FTE Impact (Indicative)
		Vacant Posts		Occupied Posts		Total
	FTE	FTE	£’000	FTE	£’000	FTE	£’000
MHCC Pooled Budget	1,529.11	0.0	0	0.0	0	0.0	0
Adult Social Care – Services out of scope of Pooled Budget	52.50	0.0	0	0.0	0	0.0	0
Homelessness	276.00	3.0	89	4.0	159	7.0	248
Children and Education Services	1,316.00	8.5	191	5.5	247	14.0	438
Corporate Core	1,733.25	53.8	1,978	61.8	2,015	115.6	3,993
Neighbourhoods (including Highways)	1,470.00	0.0	0	2.0	64	2.0	64
Growth and Development	650.40	22.4	699	0.0	0	22.4	699
Total	7,027.26	87.7	2,957	73.3	2,485	161.0	5,442

 

Decisions

 

1.         To note that the financial position has been based on the Final Local Government Finance Settlement announced on 4 February together with any further announcements at that date.

 

2.         That the resources available to the Council 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 (including Covid-19 allocations).

 

3.         To note the anticipated financial position for the Authority for the period of 2020/21 to 2021/22 which is based on all proposals being agreed.

 

4.         Note that the Capital Strategy and Budget 2020/21 to 2024/25 have been presented alongside this report (Minute Exe/21/xxx below).

 

6.         To note the Deputy Chief Executive and City Treasurer’s review of the robustness of the estimates and the adequacy of the reserves. This is covered in the previous report (Minute Exe/21/xx above).

 

7.         To recommend that the Council approve, as elements of the budget for 2021/22:

a.         an increase in the basic amount of Council Tax (i.e., the Council’s element of Council Tax) by 1.99%. The Council has consulted on the 3% Adult Social Care precept increase. If agreed, it is proposed to prioritise this resource to support care budget pressures and notably the impact of COVID-19 on care for residents both to support new and increased needs and complexity.

 

b.         the contingency sum of £1.854m.

 

c.         corporate budget requirements to cover levies/charges of £66.731m, capital financing costs of £39.507m, additional allowances and other pension costs of £9.066m and insurance costs of £2.004m.

 

d.         the inflationary pressures and budgets to be allocated sum of £3.671m; and delegate the final allocations to the Deputy Chief Executive and City Treasurer in consultation with the Executive Member for Finance and Human Resources. The health and social care elements of these costs have already been included in the Pooled Budget. The use of these budgets will be agreed with the Manchester Partnership Board, which has representation from all key partners, along with identifying whether any more formal approvals are required in line with the Council’s key decision thresholds.

 

e.         the estimated utilisation of £9.786m in 2021/22 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.

 

f.          the planned use of, and movement in, reserves as identified in the report, subject to the final call on reserves after any changes are required to account for final levies etc.

 

8.         To delegate authority to the Deputy Chief Executive and City Treasurer and Chief Executive to agree the use of the Adult Social Care Reserve in consultation with the Executive Members for Finance and Human Resources and Adult, Health and Wellbeing and the Chief Executive of the MLCO.

 

9.         To delegate authority to the Deputy Chief Executive and City Treasurer and Chief Executive to agree the use of the Social Care Reserve in consultation with Executive Members for Finance and Human Resources and Children's Services

 

10.       To approve the gross and net Directorate cash limits as set out in Table 7 above.

 

11.       To approve the in-principal contribution to the Health and Social Care Pooled Budget, and subject to the future approval of a new S75 Agreement.

 

12.       To delegate authority to the Deputy Chief Executive and 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 budget setting 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.

 

13.       To note that there is a requirement on the authority to provide an itemised council tax bill which, on the face of the bill, informs taxpayers of that part of any increase in council tax which 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,

 

14.       To approve, in principle, implementation of any new business rate reliefs in 2021/22 or changes as announced by Government in the Chancellor’s Spring Budget on 3 March, which will increase the relief offering to businesses, noting that the business rates bills will not be issued until after the Spring Budget announcement and any changes have been actioned.

 

15.       To recommend that the Council approve and adopt the budget for 2021/22.