Showing posts with label borrowing. Show all posts
Showing posts with label borrowing. Show all posts

Thursday, 26 July 2018

Brent Council to approve 'biggest financial transaction for a generation'



The Brent Audit and Standards Committee LINK will tonight consider a paper going to Cabinet in September LINK which would give the go ahead for the Council to borrow c£230,000,000 to fully meet its commitments on its already approved£800m capital investment programme.

The paper sets out detailed  borrowing options that balance risk and cost of borrowing. The amount required in 2019-20 is £62.4m and 2020/21 £166.6m.

As indicated in the diagram above the Council can only meet day to day costs from its Revenue account so the investment programme is aimed at 'invest to save' by for example buying housing and using revenue from rents to meet day to day costs of providing services.

Sunday, 5 February 2017

Brent Council Tax to rise 3.99% in EACH of the next 3 years and borrowing to increase

In a report LINK going before Cabinet on February 13th Brent's Chief Finance Officer is recommending a Council Tax of 3.99% over eachof the next 3 financial years:
In October 2016, Cabinet agreed to consult on a 3.99% increase in Council Tax (2% Adult Social Care precept plus 1.99% for general purpose). Some additional savings of £4.4m were also consulted upon. Following that, in December 2016, as part of the provisional local government finance settlement, central government recognised the immediate pressures in the care market. It has therefore allowed local authorities to bring forward up to 2% of the precept for 2019/20, by increasing 2017/18 and 2018/19 council tax by an additional 1%, in return for a corresponding reduction in the precept for 2019/20. Brent could therefore increase Council Tax by up to 4.99% in each of 2017/18 and 2018/19, but if it exercised this flexibility then the maximum allowable increase in 2019/20 would be 1.99%.

 After due consideration the recommendation of this report is that the budget should be constructed on the basis of a council tax increase of 3.99% in each of the next three years. This is what was consulted upon and so is clearer for residents. The additional flexibility announced in December 2016 is also of relatively minor financial benefit to the council, and has negligible long term impact from 2019/20 onwards. By increasing the council tax in this way the impact of stark and ongoing reductions to local government funding since 2010 will be partly mitigated.
The report has been issued before the budget consultation with the public has been completed and a report on the consultation will be tabled before the Cabinet meets.  Clearly this leaves little room for any change as a result of the consultation. 

In fact consultation responses have been low with 57 on line (with no clear pattern of responses) at the time the report was written and these attendances at Brent Connects meetings:

The report goes on:
Although demography, in this context, is typically discussed as a cost pressure it also results in additional income. As a consequence of this, and of the planning and regeneration policies adopted by the council, the council tax base (i.e. the number of properties on which council tax is paid) is growing significantly year on year. This increases the council tax payable to the council, and helps the council finance the various pressures caused by population growth.The council is required to balance its budget in this year as in all years. 

In order to balance its budget the council has developed an approach that will help it meet the goals of the Borough Plan and Brent 2020 Vision, comprising:
Increases in council tax to minimise the requirement to reduce services; 
Innovative capital investment to reduce costs in key services, such as temporary accommodation;
Planning for growth in services facing major demographic pressure for example adult social care;
and Investing in key services for the Brent community, e.g. community safety.

The  report states that if the 3% Adult Social Care Council Tax increase is not approved Adult Social Care in 2017-18 will have to be cut by £2.1m.  This is in addition to further cuts in the overall council budget required of £2.3m in 2017-18 and £2.1m in 2018-19.

The Council hopes to achieve  £5.6m through a civic enterprise project to increase income from Council assets (you have probably see the posters encouraging people to get married at the Civic Centre) and £8m from improving commissioning and procurement services. The Council is hoping to sell its procurement services to schools.

It is clear that increasing the number of properties in the borough is seen as one way of increasing Council Tax income, even if they are not affordable for ordinary Brent residents on an average income. Population growth increases income for charged services such as parking.

The Council has a big capital investment programme and it is planned to increase borrowing to finance the projects. Expenditure was £111.7m less than expected this year due to a variety of delivery delays and the balance will be carried forward. The Council is planning to increase the amount it raises and increase the authorised limit:
It is important to stress that the authorised limit – the maximum amount that the council may borrow – has for a number of years been several hundred millions pounds above the level of actual borrowing – last year it was set at £400m above the level of actual borrowing. It is proposed to increase that by £100m to £500m, in light of the Council’s investment strategy, while recognising that the Council has been prudent with its estimate of the additional resources that may finance capital spend. Potentially, the additional growth would cost up to an additional £3m to service annually, should the borrowing become necessary, and if this was not offset by additional income or savings. The calculation noted above merely follows from the strength of the council’s balance sheet, as it is largely prescribed by statute and regulation. 





(Bracketed red offsets borrowing requirement)

One area of interest is the school budget where the report notes that:

As at 31 March 2016, Brent’s maintained schools held £24.8m in balances, a relatively high figure, prudently held in view of upcoming school funding reforms. [Cllr Warren attacked the level of school balances at the last Full Council Meeting]
Overall DSG (Dedicated Schools Grant)  funding has increased for 2017/18 due to growing pupil numbers, however on a per pupil level it remains a cash flat settlement, with the main schools block funded on 41,879 pupils at £5,522 per pupil totalling £231.3m. The other blocks support early years provision, funded at £23.4m, and high needs provision which includes all special schools, funded at £52.7m. Total DSG funding for 2017/18 is £307.4m.  

A number of schools are expanding and as a result overall pupil numbers have increased by over 500 in Brent. The two secondary schools experiencing rapid growth of 58 and 116 pupils have gained £238K and £675K, whilst 26 primary schools experienced growth in pupil numbers with an average gain of £125K. Reductions in funding are also in line with decreasing pupil numbers, for example two secondary schools have significant drops of 25 and 54, which results in funding reductions of £260K and £441K respectively. In the primary phase, 30 schools had a fall in pupil numbers resulting in an average reduction of £44k.
After the expansions of recent years a reduction in pupil numbers in a number of schools is significant, particular when the potential impact of Brexit on immigration numbers is taken into account.  The major factor affecting school budgets is of course the reductions involved when the government introduces a new National Funding Formula.

Conrad Hall, Chief Finance Officer, commenting on the overall Brent budget states:
In considering the budget report, the following key considerations should be highlighted in particular.:

The extent to which the overspends in 2016/17 are structural, that is, that they will or may recur in 2017/18, is a particular risk. Any element of these overspends that may be structural will, if not addressed during 2017/18, require further savings to be agreed next year to offset this. Whilst plans are in place to address this the scale of risk is significant.
Delivering the saving programme agreed in February 2016 will present substantial management challenges, particularly around procurement and civic enterprise savings. Again, considerable management attention has been and is being devoted to ensure that these can be delivered, but it is important to stress again the inherent risks in delivering such a large and complex programme. 
 
That said, the budget now proposed is realistic and affordable, albeit challenging. The increases in council tax set out, if agreed in this and subsequent years, will generate significant additional revenue over time, minimising the number of difficult new decisions about funding for specific services to be proposed. If agreed, this budget would provide for affordable services in 2017/18 and 2018/19, but a further gap of nearly £13m remains in 2019/20. Building on the outcome based reviews and other initiatives to start to close this gap quickly will be an important future consideration.


Wednesday, 18 September 2013

London needs a million new homes by 2021 research claims

This statement from London Councils shows the depth of London's housing crisis:

London's future prosperity is in doubt unless steps - such as lifting restrictions on councils borrowing against their assets - are taken to build nearly a million homes by 2021, a new analysis shows.

London Councils, which represents London’s 33 local authorities, has carried out a new analysis of Department for Communities and Local Government (DCLG) and Greater London Authority (GLA) official housing statistics. The research reveals that:
  • between 2011 and 2021, 526,000 new homes will need to be built in London just to keep up with new housing demand (London’s population is expected to increase by over one million in the next decade)
  • only 250,000 homes will be built on current projections
  • a further 283,000 homes will also need to be built to along with the 526,000 on current supply levels to meet both new demand and the backlog of housing need in London
  • in total, 809,000 homes are needed by 2021 to meet new housing need as well as the backlog of housing need.
Current housing supply levels suggest that there will be a deficit of 559,000 homes by 2021 – which even when excluding factors such as overcrowding still amounts to 329,000 fewer homes than London will require. This will put London’s future status as a global city at risk while adding huge pressures to government and individuals’ budgets.

Mayor Sir Steve Bullock, London Councils’ Executive Member for Housing, said: “The news that London needs almost a million homes by 2021 is a scandal - the last time we faced such an acute housing supply crisis was after the Second World War. This is a long time coming and the capital’s future prosperity is on the line.”

“Rising housing costs are not only a problem for those struggling to rent but for any Londoner wishing to buy their own home.  If the housing crisis is not solved, costs for the London economy will continue to spiral. More working families will struggle to rent and to buy, more people could be forced out of the capital and homelessness is very likely to go up.”

London Councils’ discussion paper, which was released ahead of the party conference season, sets out a range of policy solutions to boost housing supply. This includes lifting the “Housing Borrowing Cap” which prevents councils investing in housing – a move supported by the wider housing and property sector .
Other policies include increasing investment in the rental sector, supporting smaller scale builders, and promoting sustainable development near London’s tube and rail network. 

The report estimates 134,000 homes could be built if all these measures and others were taken forward.

Mayor Sir Steve Bullock added: “With London’s population expected to top nine million by 2021, we need to use the party conference season to explore the radical strategic steps needed to build almost a million homes - such as lifting unnecessary restrictions on councils borrowing to invest in new homes and helping small businesses win construction contracts.”

Sunday, 4 November 2012

What's happening with Brent's 2013-14 budget?

Brent Expenditure and Income 2012-13

The Council Budget for 2013-14 should be on the agenda for the Full Council Meeting on November 19th according to the Council's budgetary process:
There is a Full Council meeting (usually in November) where the budget is raised as an issue. All Councillors of all political groups are invited to submit ideas, plans and suggestions for inclusion in the next year's budget. These suggestions are then taken away and discussed by the Executive (usually in December).

The Executive will then issue their proposals for the budget.

At the same time Scrutiny's Budget Panel is sitting and they also come up with their proposals by February. The report is considered by the Executive and, if required, changes are made to the proposals.

Finally, the proposals go to another Full Council meeting where they are voted on, and, whatever is agreed, is implemented as the council's budget for the next year.
However, there are reports that the Council is behind with the process this year perhaps as a result of changes in the officer and councillors involved in Finance.  By the second week in November last year Cllr Ann John had issued a 'Bad News' budget report LINK.

Is is likely that we will receive an 'Even More Bad News' report from Muhammed Butt soon. There has been no word from Cllr Ruth Moher, now Lead Member for Finance and Resources who took over the post from Butt following the 'coup'.

Meanwhile the Budget Overview and Scrutiny Committee on Thursday 15th November may give us some clues. What is beyond doubt is that with government grants reduced and pressures on council spending from homelessness and social care of the elderly the situation will be dire. Apart from the potential revenue from a rise in Council Tax (a tiny proportion of the overall budget which is mainly made up of government grants) there are few options open to the Council apart from making more cuts which will impact on the vulnerable, or taking a stand against the Coalition and devising a campaigning needs led budget and a consequent deficit budget.  

This would involve a real dialogue with trades unions, voluntary organisations, community groups, campaigning groups and residents. Time is limited and such  process should begin as soon as possible.

Background is provided by the mid-year Brent Treasury Report by Mick Bowden, Deputy Director of Finance. The Director of Finance, Clive Heaphy remains suspended and there is no word on the financial settlement for Gareth Daniel, the former Chief Executive.

The Report outlines theCapital Finance Requirement (CFR) requirements for the years ahead with a significant  increase next year:
 

31/03/12
Actual
31/03/2013
Estimate
31/03/2014
Estimate
31/03/2015
Estimate
CFR
£537m
£598m
£594m
£591m


 At the same time there is a significant  forecast reduction in 'usable' reserves:



31/03/2012
Actual
31/03/2013
Estimate
31/03/2014
Estimate
31/03/2015
Estimate
Usable Reserves
£58m
£37m
£30m
£24m

There has been a shift from short-term to long-term borrowing which remains under the limits set out by the Department for Communities and Local Government. An additional £20m has been borrowed since April 2012 and a rise in the rate of interest:


Borrowing
Balance on
01/04/2012
Debt Repaid
New
Borrowing
Balance on
30/09/2012
Short-term
£26.3m
£44.3m
£18m
0
Long-Term
£405.5m
£1.2m
£20m
£424.3
Total
£431.8m
£45.5m
£38m
£424.3
Average Rate %
4.45%


4.71%

The Report states that the Council expects to recover £4m of the £5m inested in Icelandic domiciled banks and £9m of the £10m invested in non-Iceland domiciled banks. The Council's investment income this year is estimated at only £0.1m .

The full Mid Year Report is available HERE