Issue details

Money Matters 2020/21 Position - Quarter 3

This report provides an update to Cabinet on the county council's 2020/21 revenue and capital financial position, as at the end of December 2020 and an updated Medium Term Financial Strategy 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.

 

Whilst a multi-year Spending Review was originally expected, the Chancellor and the Prime Minister decided to conduct a one-year Spending Review, setting department’s resource and capital budgets for 2021/22 only in order to prioritise the response to COVID-19 and focus on supporting jobs. The Medium Term Financial Strategy at quarter 3 reflects the provisional financial settlement which was announced on 17 December 2020. This provided confirmation of funding announcements made by the Chancellor as part of the Spending Review 2020, however these are subject to consultation and could change as part of the final financial settlement. This included the ability to raise additional council tax through a social care precept and additional funding to support the costs of the COVID-19 pandemic. These changes have had a significant impact on the forecast gap in 2021/22, however it must be noted that many of these changes are non-recurrent and it is likely that there will be longer term pressures within the budget due to the impact of COVID-19 which are difficult to quantify at this stage in the pandemic.

 

The settlement is for one year only and the figures are expected to be confirmed in late January/early February 2021 within the final settlement announcement.

 

Whilst the quarter 3 forecast presents anunderspend of £7.951m 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 £1.7m per annum, into the next three years.

 

Any latent impact on price or demand for our services also remains unclear.

 

The current Medium Term Financial Strategy indicates an aggregated funding gap of £53.956m by 2023/24, a decrease of £24.835m from the previously reported position.

 

In summary:

 

(i)  The 2020/21 revenue forecast outturn is £836.900m, representing a projected underspend of £7.951m (0.94%) of the agreed budget.

 

(ii)  The Medium Term Financial Strategy has been updated for our current expectations of levels of funding, savings delivery, demand and inflation.

 

(iii)At Cabinet in November 2020 the Medium Term Financial Strategy showed a deficit of £78.791m in 2023/24. The forecast now indicates a financial deficit of £53.956m 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 £159.420m of uncommitted transitional reserve at the end of the financial year. This is sufficient to meet the forecast gap for all of the years covered by the Medium Term Financial Strategy, 2021/22 to 2023/24.

Decision type: Non-key

Decision status: Recommendations Approved

Divisions affected: (All Divisions);

Notice of proposed decision first published: 14/01/2021

Anticipated restriction: Part I  -

Decision due: 14 Jan 2021 by Cabinet

Lead member: Leader of the County Council

Contact: Neil Kissock Email: neil.kissock@lancashire.gov.uk Tel: 01772 534286, Kate Lee Email: kate.lee@lancashire.gov.uk Tel: 01772 531733.

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