Money Matters 2020/21 Position - Quarter 1
Decision Maker: Cabinet
Decision status: Recommendations Approved
Is Key decision?: No
This report provides an update to Cabinet on the county council's 2020/21 revenue and capital financial position, as at the end of June 2020 and an updated medium term financial strategy (MTFS) covering the period 2021/22 to 2023/24.
There is ongoing and unprecedented uncertainty in relation to future local government funding and the financial impact of the Covid-19 emergency has exacerbated the problem.
Accordingly significant assumptions are required to underpin our forecasts. While these can be made with a level of confidence in the current year, over the medium term, with limited information, we rely heavily on advice from national bodies, benchmarking and discussion with peers.
The Chancellor launched the 2020 Comprehensive Spending Review (CSR) in July 2020. This is due to be published in the autumn and will set out the Government’s revenue spending plans for 2021/22 to 2023/24.
The Chancellor has not set a 'spending envelope' because of the uncertainty caused by COVID19, and has asked Departments to identify opportunities to reprioritise and deliver savings, however he did confirm that departmental spending will grow in real terms across the CSR period.
The outcome of the CSR will be fundamental to the future financial position of the council. To address our forecast pressures officers, working with our national organisations, particularly in adults and children's services which are the most significant areas of financial pressure due to the increasing demand and cost of services going forward, will develop an evidence base and narrative to influence the review.
Whilst the Q1 forecast is for a relatively small overspend of £3.737m for the current financial year, there remains a level of uncertainty about the longer term impacts of the ongoing pandemic. There will certainly be ongoing impacts relating to the collection fund that force a pressure, currently estimated at £10m per annum, into at least the next three years.
The wider impacts on economic activity remain uncertain at present and as a result we have assumed no growth in our tax base and share of non-domestic rates for 2021/22 the effects of which impact significantly upon our MTFS.
Any latent impact on price or demand for our services also remains unclear.
The current MTFS indicates an aggregated funding gap of £79.306m by 2023/24, an increase of £40.904m from the previously reported position. This is due primarily to the impacts of Covid-19 on our collection fund deficit and tax base, increased pay costs and service demand and inflationary pressures.
(i) The 2020/21 revenue forecast outturn is £848.588m, representing a projected overspend of £3.737m (0.44%) of the agreed budget.
(ii) The MTFS has been updated for our current expectations of increased demand and volume. The revised forecast position has deteriorated in the light of our expectations of future funding levels, the impact of a higher than forecasted increase on the cost of our commissioned adult social care and an updated forecast on pay and pensions following the rejection of the latest pay proposals.
(iii)At Full Council in February 2020 the MTFS showed a deficit of £38.401m in 2023/24. The forecast now indicates a financial deficit of £79.306m by 2023/24.
(iv)The council is forecast to hold a General Reserve against unforeseen issues of £23.437m representing circa 3% of net budget, which is unchanged from the previously reported position.
(v) The council is forecast to hold £150.295 of uncommitted transitional reserve at the end of the financial year. This is sufficient to meet the forecast gap for financial years 2021/22 and 2022/23 only.
The Cabinet approved the recommendation(s) as set out in the report.
Date of decision: 03/09/2020
Effective from: 09/09/2020