The Cabinet will be asked to approve consultation on a draft pre-election budget LINK for 2022-23 at their meeting on Monday December 6th (10am). The budget includes a 3% increase in Council Tax for the Brent segment with an as yet unspecified amount for the GLA precept to be added, and an average 4.1% increase in Council rents, an increase which is expected to be repeated in the next controlled 3 year period. The budget gap of £2.7m will be reduced through cuts and savings already agreed of £2.7m. LINK
In discussing the background to the Medium Term Financial Strategy (MTFS) officers note:
It should be recognised, however, that forecasting over the medium term has been, and continues to be, extremely difficult. There is a high level of uncertainty over the medium term due to the delays in funding reforms, the continuing impacts of COVID-19 on residents and businesses in the borough and the impact of BREXIT. The significance of the financial challenge cannot be underestimated, however the measures outlined in this report aim to ensure that the Council continues to operate in a financially sustainable and resilient way.
If unforseen demands are made on the budget, further cuts are likely.
Key features of draft budget are:
- A council tax increase of 3%, making a Band D council tax of £1,419.48 (for Brent element). The GLA precept, which typically makes up 20% of the overall bill, is currently unknown and is subject to their own decision making. (Removing the funding for the social care reforms, the increase is actually 1.8% compared to 3.3% for the average government department. Nevertheless, while the additional funding announced for Local Government is welcome, the precise outcome for individual authorities will not be known until the Provisional Local Government Finance Settlement, usually announced in mid-December.)
- Budget savings proposals (all of which were considered by Council in February 2021) with an aggregate value of £2.7m, as summarised in Appendix A
- Consultation on a rent increase of 4.1% (CPI + 1%) for the 2022/23 Housing Revenue Account budget.
The report notes:
Although growth has been built into the MTFS to help alleviate some of these pressures, they continue to present a significant budget risk, particularly in respect of the demographic and contractual pressures.
- The impact of COVID-19 is not fully known or how the pandemic will play out for the remainder of the year. Therefore, there is a level of risk when setting the budget that the Council may be exposed to unfunded financial pressures in-year.
- The new income loss compensation scheme announced for Council Tax and Business Rates does not fully cover the losses the Council is estimating and only applies to losses incurred in 2020/21. The ending of the furlough scheme in September, the tapering of business rates reliefs and the ending of business support grants are likely to have a continuing impact on business rates income. Other income losses will be dependent on the pace at which the economy recovers. Overall, income losses can pose a considerable budget pressure.
- The level of ‘scarring’ that has occurred, for example pent up demand in children’s social care, long Covid and the mental health impact on adult social care. In addition, the extent to which current circumstances will become the ‘new normal’, for example greater domestic waste if more people continue to work from home and a larger role for Public Health.
If these were to transpire, without any further government support, they could expose the Council to a liability that may require it to put in place further savings and/or expenditure reductions in order to balance the overall budget and MTFS.
COUNCIL TAX SUPPORT
Nationally, there has been a significant increase in the number working age people claiming Council Tax Support. In Brent, this number has increased by 4.9% bringing the total number of working age people claiming CTS to 19,338.
The total cost of providing CTS has increased from £28.4m at the start of the pandemic to £30.7m as at November 2021, an increase of £2.3m. This is important because an increase in CTS expenditure reduces the amount of Council Tax that is able to be collected.
SCHOOL FUNDING AND DEDICATED SCHOOLS GRANT
School budgets are under considerable strain from a number of factors that include reduced pupil numbers (particularly in some primary schools - funding is per pupil), increased national insurance costs, covid, and lack of funding for special needs pupils in the mainstream. Brent's overall education funding will be reduced as we move to the National Funding Formula and the Schools Forum has agreed a gradual move to the NFF that will mean a 10% reduction in 2022-23 only part of which will be made up by some short-term funding. The Report discuss the issues:
The Council will continue to set a local funding formula for mainstream schools in 2022/23, although the total funding available will be determined by the National Funding Formula (NFF). The provisional Dedicated Schools Grant (DSG) block allocations announced show that the Council will receive a minimal increase in mainstream pupil funding of £1.8 million which represents an overall 0.71% increase. This is lower than the national percentage increase of 2.9% and lower than the average of 1.7% for Local Authorities in London. The lower overall increase is due to factors such as: varying per-pupil funding levels across local authorities in London which are higher than the NFF 2022/23 minimum per pupil rate, and the impact of decreases in primary pupil numbers.
The Spending Review 2021 confirms a £4.7 billion growth by 2024/25 for the core schools budget in England. This growth includes: funding to cover the cost of a temporary increase in National Insurance Contributions (NIC) of 1.25% for 2022/23 from April 2023 to be replaced by the Health and Social Care Levy. The funding would also be used to increase teacher starting salaries to £30,000.
The Spending Review also confirms a £1 billion Recovery Premium for the next two academic years for schools. This funding is based on pupil premium eligibility. Primary schools will continue to benefit from an additional £145 per eligible pupil, but it is expected that the funding for secondary schools will nearly double which may be close to the £290 rate for pupils in Special Schools, Alternative Provision & Pupil Referral units. Additional funding was also announced of £324 million in 2024/25 for additional learning hours for 16-19 year olds. This funding increases the average hours funded in 16-19 education by 40 hours. Further details are expected in the coming weeks detailing how the funding will be allocated.
The High Needs block (HNB) of the DSG for 2022/23 will increase by £5.3 million representing an 8% increase in the HNB income. This is below the London average of 8.21% and the national average of 8.84% due to London experiencing the lowest increase in the funding floor factor as a result of reduction in pupil numbers, and the lowest increase in 3 out of the 6 Income Deprivation Affecting Children Index (IDACI) bandings.
There are pressures against the HNB block due to increased demand for Education Health and Care Plans (EHCPs) and this is a national issue. Despite the additional funds, the demand pressures continue to grow and to set a balanced DSG budget in 2022/23 the Council will request via the Schools Forum a 0.5% transfer from the Schools Block. The pressure in the HNB has led to the DSG being in a £10.5 million deficit carried forward from 2020/21 and further forecast pressures of £4.4 million in 2021/22 will increase the deficit position to £14.9 million.
The DfE require local authorities with an overall DSG deficit to have management plan to recover the deficit over a number of financial years. The Schools Forum have been presented with actions being taken to manage demand, improve sufficiency of places and financial management to recover the deficit in the medium to long term. These include: establishing more SEND provision in the borough as part of the School Place Planning Strategy 2019-23 Refresh paper including developing new Additionally Resourced Provisions (ARPs); ensuring there is full cost recovery from other local authorities that place pupils in Brent special schools including administration and other specific costs; a review of the DSG funded SEN support services; continued central government lobbying. The Deputy Leader of the Council is actively part of the lobbying process.
The key principle of allocating the funding for the Early Years Block remains the same i.e. 95% of funding received is allocated directly to providers with the remaining 5% or £1m retained for central services. Funding arrangements for the Early Years Block have not yet been published but following the Spending Review 2021, the DfE confirmed that nationally, the block will receive additional funding worth £160 million in 2022/23, £180 million in 2023/24 and £170 million by 2024/25 to enable local authorities to increase hourly rates paid to providers for childcare entitlement offers which reflects the costs of inflation and national living wage increases. An Early Years funding report for 2022/23 will be presented at the Schools Forum in January 2022 detailing the revised funding rates.
HOUSING REVENUE ACCOUNT
The Report sets out the arguments for a rent increase:
The Housing Revenue Account budget setting from 2016/17 to 2019/20 was principally directed by the Welfare Reform Act 2016, which imposed a 1% rent reduction for four years. This has resulted in a reduction of rental income and bottom line surpluses previously assumed in the business plan. The resulting £23m loss of income, along with increased capital expenditure on major works, has led to the full utilisation of the major repairs reserve to finance investment in the existing housing stock.
Efficiency savings targets are incorporated into the budget setting process. From 2021/22 onwards, this is a 2% target across management and repairs costs, which equates to £0.5m per annum.
From 2020/21, the Council has the power to increase rents annually up to a maximum of CPI plus 1% for a period of five years. For 2022/23, CPI plus 1% equates to 4.1%, allowing the potential to increase rental income by £2m, and up to £6m over the remaining three-year rent control period.
The average rent in 2021/22 is £118.74 per week. A 4.1% increase would equate to an average rent of £123.61 per week in 2022/23, an increase of £4.87 per week when compared to the current rent levels. The increase is required for inflation led growth and to ensure sufficient continued capital investment in the Council’s existing housing stock.
Alternative scenarios of a 3.1% increase or a rent freeze were considered and rejected as leaving the account in deficit:
Therefore, Brent, and all local authorities, who had similar agreements with regional water companies, will need to reimburse all social housing tenants for any overcharged amounts. Brent had two such water collection agreements in respect of water charges, one with Thames Water and another with Affinity Water (formerly Three Valleys).
As these sums were received into each authorities’ Housing Revenue Account, the money for these reimbursements will need to come out of local authorities’ Housing Revenue Accounts as well. For Brent, the cost of refund is estimated to be £7.2m. Brent have set aside provisions for this in the accounts.
Some South Kilburn residents are concerned about an apparent slow down of activity on regeneration in 2024-25 that means demolitions and rehousing will be delayed.
A South Kilburn resident told me earlier this week that a South Kilburn housing were informed that apart from the sites already under construction, there would be nothing else available for at least 4 years. He said, 'This explains why they are not able to rehouse the Granville New Homes residents, as there is nowhere for them to move to in South Kilburn. My block, William Dunbar House will now not be decanted until 2028 or even later.'
I have highlighted in bold a section of the report referring to South Kilburn which seems to suggest the possibility of selling some council land and property but I stand to be corrected.
As set out in the table, the Council is planning to borrow externally up to £339m over the three year MTFS period. The prudential borrowing equates to around 61% of the total funding, followed by external grant and contributions at 25%.
Internal funding from earmarked reserves and capital receipts make up a further 7% and these will be mainly generated from the sale of council land and property that will be constructed as part of regeneration schemes such as South Kilburn.
The remainder comes from Strategic Community Infrastructure Levy (SCIL) and S106 contributions.
A low-rise fire safety programme was developed by Brent Housing Management to address risks in 1,208 converted and purpose built blocks. With regard to high-rise blocks, it was decided to go over and above regulatory standards by carrying out Type 4 Fire Risk Assessments across all tower blocks over 12 storeys, the outcome of which found no fundamental issues or safety concerns. The Council is currently in the process of developing a robust major works programme, as outlined in the Asset Management Strategy, to deliver the highest standards of compliance, providing ongoing peace of mind and reassurance to residents when it comes to fire safety in tenant homes.
As part of the South Kilburn regeneration programme, the Gloucester House & Durham Court site is being redeveloped to provide 235 new affordable homes to assured social tenants. These are expected to be fully occupied by Brent’s residents in 2021/22. Brent Council owns the freehold and the Council’s housing team, together with the Council’s energy team, will provide the billing for heat to the residents. The associated costs will be funded by service charges and through the HRA asset management strategy, in line with other communal heating networks
BUDGET SETTING TIMETABLE
together with any changes made by Cabinet, to form the basis of consultation between December 2021
and February 2022
with local residents, businesses and other key stakeholders;
Resources & Public Realm Scrutiny Committee to review the budget proposals and report accordingly;
General Purposes Committee, in December 2021, will review the calculation of the Council Tax base; and
After consultation, a budget report will be presented for Cabinet to recommend a final budget and Council Tax to the February 2022 Council meeting.