The Panel considered and
commented on the Council’s 2022/23 Draft Budget / 5-year
Medium Term Financial Strategy (MTFS) 2022/23 – 2026/27
proposals relating to the Economy priority of the Borough Plan. The
papers were introduced by Kaycee Ikegwu – Head of Finance
& Principal Accountant as set out in the agenda pack at pages
11-84 of the agenda pack. Along with a cover report the budget
papers included the following appendices:
- Appendix A
– Key lines of enquiry for budget setting
- Appendix B – 2022/23
Draft Budget & 2021/26 Medium Term Financial Strategy Report
(presented to Cabinet 8th December 2020)
- Appendix C – 2022/23 New Revenue Budget
Proposals
- Appendix D - 2022/23 New
Capital Budget Proposals
- Appendix E –
Proposed 2022/23-2026/27 Capital Programme
- Appendix F –
Previously agreed MTFS savings.
The following arose as part of
the discussion of the Draft Budget
& 2021/26 Medium Term Financial Strategy:
- The Panel sought
clarification around the relationship between Appendix D and
Appendix E and whether the items in Appendix D were in Appendix E.
In response, officers advised that Appendix D contained new
proposals to add to the Capital Programme for 2022/23, whilst
Appendix E contained the entire 5 year capital
programme.
- The Chair sought
clarification around the capital bid for the Civic Centre annex and
how this scheme would be self-financing as set out in the papers,
particularly given the impact of borrowing costs on the revenue
budget from the scheme, which were estimated by the Chair to be
around £1.5m per year. Officers
advised that the revenue costs were broadly as the Chair outlined
them. There was a report going to Cabinet in January on the Civic
Centre that would validate the financial assumptions used in the
MTFS. Officers advised that through the investment in the Civic
Centre annex they were seeking to transform the existing office
accommodation estate, which required significant financial
investment. The proposal would be self-financing through a
combination of removing existing buildings from the revenue budget
and new buildings generating an income. The new build Civic Centre
would also contribute to the Council’s carbon reduction
targets, whereas refurbishing existing stock would not.
- The Panel sought
further clarification around the make-up of the Station Road estate
and how long it would take to recoup the costs attributed to the
Civic Centre. In response officers advised that the option to
refurbish existing stock contained within the accommodation
strategy, related to all of the buildings along Station Road,
including Alex House, 40 Cumberland Road and 40 Station Road but
excluded River Park House. Officers
also set out that when the Council borrowed money it did not do so
for individual schemes, but rather for the whole of its external
borrowing needs. Similarly, the debt repayment costs to the revenue
budget were calculated as a combined cost that was calculated using
the Minimum Revenue Position.
- In response to a
question, officers advised that there were two lines within the
capital budget relating to the Civic Centre. The first was the
refurbishment of existing building which was required due to its
listed status. The cost of this was £24m. The second line
related to the building of a new Civic Centre annex, which was
£30m. As part of its accommodation studies, the Council had
looked at repurposing the Station Road estate and the building of
an annex. The upshot of the analysis was that the Civic Centre
annex was the preferred option and offered the Council a number of
benefits it could not get from repurposing the existing
estate.
- The Panel queried the
respective amount of building space between the two options,
suggesting that even with an annex there would presumably be a lot
less office space compared to repurposing other buildings. The
Panel sought assurances around the studies undertaken and the
extent to which future office accommodation requirements had been
considered. In response, officers reiterated that the report to
Cabinet in January would set out in detail how the initial
financial assumptions had been validated and would provide Members
with the information they were looking for.
- The Panel sought
clarification around whether the Civic Centre would be the only
building which accommodated staff. In response, the Panel was
advised that the business case would be set out in the January
Cabinet report and that this would include how many staff would be
accommodated, under the new ways of working.
- The Panel sought
assurances around the overspend on Alex House and how that could be
justified in relation to any subsequent proposal to dispense with
the Station Road estate. In response, officers agreed to come back
with a written response. (Action: Jonathan
Kirby).
- The Panel sought
clarification around the Wards Corner regeneration scheme and where
in the capital budget contained the Council’s anticipated
contribution to this. In response, officers advised that no
decision had been taken on whether the Council would need to
contribute to the refurbishment, but that if a decision was taken
there was enough provision within the Council’s Strategic
Acquisition capital budget to cover the refurbishment of the market
and any CPO of the surrounding land.
- In response to a
follow up, officers advised that TfL were on public record as
stating that they would invest in the market site and then seek to
hand it over to a preferred bidder. The capital costs would
therefore be met by TfL and the GLA. Officers further clarified
that any capital bid on the site would exclude the market site but
there was an outstanding CPO of the Suffield Road site which had
not been implemented. If the Council took a subsequent decision to
purchase this site they would need to also purchase some of the
land that was owned by Grainger. The Cabinet Member for Finance
reiterated that no decision had been taken to do this and that the
Council would have to wait and see what TfL’s final plans
were before making a decision. The Cabinet Member advised that any
decision would be taken to a future Cabinet meeting.
- The Panel sought
assurances that the Council was entirely ruling out investing in
the refurbishment of the market site in one form or another. In
response, reiterated that TfL had publically committed to investing
in the site so there was no requirement for the Council to put
money into it.
- The Panel commented
that as far as they were aware TfL had committed enough to make the
site safe but whoever took on the lease would need to invest long
term funding for the refurbishment. In response, officers commented
that it was very difficult to understand exactly what TfL had
committed to in terms of funding for the site, as the process had not been finalised yet. As a
result, it was not possible to comment on how far TfL would go in
relation to funding. Officers advised that, as far as they
understood, the process would be managed through a partnership
board and that they would be taking the ultimate decision about the
future of the site.
- The Chair requested a
political commitment from the Cabinet Member for Finance and the
Cabinet Member for House Building, Place Making and Development
about whether the Council would be investing money into the market
site in future and the need for budgetary provision to facilitate
this. In response, the Cabinet Member for Finance advised that
there was a proposal from the Development Trust to put forward a
community plan for the site, which the Council was generally
supportive of. However, this was just a proposal at present. There
were a number of processes that would have to be gone through, and
the partnership board would be making the ultimate decision.
Officers advised that any future decision on Wards Corner Market
would come up in a future round of budget setting.
- The Panel requested a
written response from the Cabinet Member for Finance and the
Cabinet Member for House Building, Place Making and Development
about whether the Council would be investing money into the market
site and in what circumstances this would happen. Action: (Cllr Gordon & Cllr Diakides).
- The Panel requested a
breakdown of the £41.8m allocated to HRA expenditure in the
budget and sought clarification about the extent of potential
savings from brining HfH back in-house. In response, officers
advised that the breakdown was around £19m for the management
fee, include staff costs and other expenditure; £20m on
repairs, and the remainder went to the Housing Demand service. In
relation to potential savings, the Panel was advised that savings
were difficult to quantify at this stage as it was not clear how
any future in-house service would be structured. It was commented
that the next quarterly finance update to Cabinet should contain
more detail on this issue.
- The Panel questioned
a steep drop-off in projected capital expenditure in the HRA
towards the end of the 5 year MTFS period. In response, officers
advised that this was partly because of a frontloading of
investment in the earlier years of the HRA. It was also a
consequence of investment in existing stock would reduce
maintenance costs in subsequent years.
*Clerks
note: 20:20 – the meeting was adjourned for around seven
minutes at this point due, to the internet connection dropping out
in the meeting room.*
p.
In response to a request for further clarification,
officers advised that that the financial profiling of new home
building schemes was based around the schemes that were agreed and
where costings had been done. These schemes were due to be
completed by 2025. Any schemes that would potentially take place
after this had notional figures attached to them, as no assessment
had been undertaken to profile the costs involved. Officers advised
that Members would likely see costs beyond Year 5 fluctuate over
time, as different schemes came online.
q.
In response to a request for clarification around
whether there was a winding down of investment, officers advised
that there was no pulling back on the Council’s stated
commitments to build new homes and that over a ten year period the
Council would be building around 3000 new homes.
r.
In relation to a question around HRA income received
from grants, including the Building Homes for the Future fund,
officers advised that the HRA breakdown included a line for
external grant funding and that this included grant money already
agreed as well as a projection of the amount of future grant based,
on the known number of new homes at social rent that would be
built. In response to a follow-up, officers confirmed that the
figures did reflect an assumption that the level of grant funding
available over the next five years would be the same in future as
it was currently.
s.
In relation to the agreed saving HO1 –
Temporary Accommodation Reduction Plan, the Panel queried why
savings were only profiled in 2021/22 and whether, given the
investment in new houses, there was potential for further savings
from permanently housing TA residents in future years. In response,
finance officers set out that where the saving was shown in Year 1
and the other years were marked with a dash, this meant that the
savings would continue in future years. Officers also advised that
the impact of new homes was being factored into the saving in
question, however, the impact of building new homes was being
offset by a range of legislative changes, including Temporary
Accommodation support for domestic violence victims and changes to
the benefit regime. These changes would affect how these costs were
reclaimed in future. Therefore, it was not possible to commit to
increased savings in this area at present. Officers agreed to set
these reasons out in more detail in writing. (Action:
David Joyce).
t.
The Panel sought further clarification
about the respective costs in Year 4 onwards for
spending on new homes as opposed to new home acquisitions, with a
significant drop in funding for building new homes coinciding with
a significant increase in acquisitions in Year 4. In response, officers set out that this reflected
the cost profiling that had been undertaken at this stage for
schemes that were already in the process of being delivered.
Officers advised that over the five year period of the MTFS the
spend on building new homes was approximately double the spend on
acquisitions. Cllr Gordon advised the Panel that there was no
change to the manifesto commitments made around house building and
that the figures did not reflect a change in policy. The
year-on-year figures in the budget report merely reflected when
schemes that had already been identified were due to come
in.
u.
In relation to concerns about the ability for the
Council to meet its HRA borrowing costs, given the significant
level of borrowing that was due to take place. Officers advised
that the report included the Capital Finance Requirements and
borrowing limits for the Council which were set out in the Treasury
Management Strategy. This set out the borrowing costs and it
highlighted that all borrowing was within agreed limits. Officers
also advised that the Council undertook its borrowing all together,
rather than for individual schemes. Each borrowing would be
undertaken over a fifty year period and the Council would profile
the borrowing to achieve the most favourable terms. The Panel
requested a written response on this and incorporated it into their
recommendations set out below.
At this point in the meeting,
the members had finished their questions to officers and the
Cabinet Members, and then moved on to a discussion to agree the
recommendations that they would like to put to Cabinet, based on
the above discussions. The recommendations put forward by the Panel
were:
a.
That Cabinet provide further detail on
how the Civic Centre project fits into the Council’s wider
accommodation strategy, including the future use of the Station
Road estate.
b.
That Cabinet provide clarity around what provision
there was for any potential future contribution to the Wards Corner
scheme regarding investment in the long term future of this site,
following the withdrawal of Grainger. The Panel noted that this
site would require significant investment and that TfL have, to
date, only committed to invest enough funding to make the site
safe. Further investment would be required to make the market site
viable.
c.
The Panel recommended that if the funding earmarked
for the CPO were to remain in the capital budget, and if the
Council was minded to carry out the CPO without Grainger, then this
allocation should be used for maximum provision of council homes at
council rents. The Panel requested assurances from Cabinet that
outcome for the site would be fully considered going
forwards.
d.
Further information/written clarification is
requested around why borrowing constitutes such a significant
proportion of the HRA, particularly in Years 1, 2 & 5. The
Panel would like assurances that the borrowing costs are
sustainable and that the Council was not at risk of being unduly
impacted by any future rise in the cost of borrowing.
RESOLVED
That the Panel considered and provided
recommendations to Overview and
Scrutiny Committee (OSC), on the 2022/23 Draft
Budget/MTFS 2022/23-
2026/27 and proposals relating
to the Scrutiny Panel’s remit.