Showing posts with label reserves. Show all posts
Showing posts with label reserves. Show all posts

Wednesday 8 November 2023

Cllr Tatler on the 'perfect storm' facing Brent Council finances

 Cllr Tatler made no bones about it at Brent Scrutiny last night: Brent Council is facing a 'perfect storm' regarding its finances:

 

 

As already reported by Wembley Matters the combination of increased homelessness (150 families a week seeking help from Brent Council), inflation, rising interest rates, rising private sector rents and reduced private sector rental properties as a result of landlords exiting the market; combined has led to a £13m overspend by the Council.

The Resources and Public Realm Scrutiny Committee delved deeper into the repercussions and possible mitigations last night.  

One focus was the 600 plus empty properties that could easily house the 500 families and single people (858 people in all) currently in expensive bed and breakfast accommodation.  The challenge was how to contact the owners so that the Council could lease the property.  Some councillors there were more than 600 empty properties and asked how the  Council collected the figures. A councillor asked if this coudl be checked against the most recent census. In response Cllr Tatler said that the Council could reactivate the campaign to ask residents to report empty properties.

Contact Empty Property Team

Opening hours: Monday to Friday from 9am to 5pm

Thursday 3 September 2020

Auditor: Brent better placed than most London councils to survive the financial challenges of the Covid-19 pandemic

The Audit Findings for the London Borough of Brent, to be considered by the Audit and Standards Committee on Tuesday September 8th are rather better than might be expected. LINK

The report by Grant Thornton  states:

 

.....To put this in further context, Brent Council could receive no RSG, council tax or business rates in 2020/21 and still balance the books using reserves. This is a much stronger position than virtually all other councils, however it must be noted that the reserves are earmarked to support strategic projects outlined in the Council’s capital programme and many of these reserves cannot be used to support revenue costs.

 

The report looks forward to 2020/21 and the impact of the Covid19 measures taken by the Council during lockdown and the impact on income.  Having had shaky reserves in the past the Council has been reluctant to eat into reserves but may have to as a consquence of a £29m funding gap, as well as reducing demand for services and 'efficiency'  cuts:

If there is a shortfall the Council has contingency plans to keep it on a sound financial footing. The Council will use the full range of options available, including (but not limited to) taking steps to reduce demand for services, implementing further efficiency savings, streamlining processes, and as a last resort re-diverting earmarked cash reserves as a one-off measure. The Council holds general reserves of £15.1m and £146m in earmarked reserves (excluding Community Infrastructure Levy funds and other ring-fenced reserves) which are held to meet specific identified purposes or future expenditure commitments, a large proportion of which are for financing the capital programme.

A review of the capital expenditure plan seems inevitable. Budget planning and consultation will take place soon.  One of the key issues will be what happens to Council Taxat a time when many residents will be strapped for cash as a result of unemployment resulting from the economic downturn.

 

EXTRACT FROM THE AUDITOR'S REPORT

2019/20 Financial Return

 

In a year where March saw the outbreak of the Covid-19 pandemic, the Council has performed well to achieve a breakeven position for its service area budgets. The Council responded to the pandemic situation quickly, making critical decisions in response to constantly moving government guidance. With only 2 weeks remaining of the 2019/20 financial year with the outbreak of the pandemic, impact on the financial outturn was minimised for 2019/20 but will be a larger impact on 2020/21.

 

The outturn for 2019/20 highlights the effective management action taken to address the pressures throughout the year. The £1.5m overspend in Children and Young Persons (CYP) (in part offset by contingency funds within CYP reserves) and £0.6m overspend in Community Well Being were offset by underspends within Regeneration and Environment.

 

The use of CYP earmarked reserves illustrates that the Council does have ongoing financial pressures which need to be addressed. However, this needs to be put in the context of income growth opportunities the Council’s reserves position. Brent has over £134.8m of usable reserves, excluding capital reserves, which can ultimately be deployed to address in-year shortfall. To put this in further context, Brent Council could receive no RSG, council tax or business rates in 2020/21 and still balance the books using reserves. This is a much stronger position than virtually all other councils, however it must be noted that the reserves are earmarked to support strategic projects outlined in the Council’s capital programme and many of these reserves cannot be used to support revenue costs. It is also worth noting that the Council is very clear about finding solutions in CYP going forwards.

 

The Council’s MTFS set in 2019/20 identified £11.4m savings required for 2020/21 and a best estimate budget gap of £20m for 2021/22-2022/23. In the November 2019 MTFS update a comprehensive review of technical budget assumptions took place, including a review of the 2020/21 savings plans and estimated savings of £4.28m to be delivered in 2021/22 and £1.77m to be delivered in 2022/23.

 

As a result of the pandemic it is expected that service departments will experience income and expenditure pressures in 2020/21. The magnitude of the pressures will depend on the severity and length of the pandemic. The Council has modelled the financial impact based on lockdown periods of 3 and 6 months and has a cost tracker to estimate and record the additional pressures relating to additional expenditure, loss of income, impact on savings and capital programmes, and treasury management issues. The Council estimates the 2019/20 impact to be £0.4m while for 2020/21, a 3-month lockdown period has an estimated lost income impact of £19.8m, with another £14.9m on top of that for a 6-month lockdown. The Council reports these figures to MHCLG fortnightly.

 

The net cost of Covid-19 to the Council is expected to be £47.6m (£42.7m of additional income and expenditure pressures and £4.9m of slippage in savings plans), which is far in excess of the £21.2m funding to be received from central government. The cost estimates are considerable, and the Council has been working to the assumption that costs will be fully reimbursed. Central government recently announced a new package of support which includes provision for some income losses to be reimbursed where losses are more than 5% of a council’s planned income from sales, fees and charges, with central government covering up to 75% of the remainder. Also, any deficits on council tax and business rates income will be allowed to be spread over 3 years rather than 1 year. Detailed workings of the scheme will be confirmed as central government drafts the statutory instrument that will effect the changes. This leaves the Council with an estimated gap of £26.4m before support for income losses is taken into account. If there is a shortfall the Council has contingency plans to keep it on a sound financial footing. The Council will use the full range of options available, including (but not limited to) taking steps to reduce demand for services, implementing further efficiency savings, streamlining processes, and as a last resort re-diverting earmarked cash reserves as a one-off measure. The Council holds general reserves of £15.1m and £146m in earmarked reserves (excluding Community Infrastructure Levy funds and other ring-fenced reserves) which are held to meet specific identified purposes or future expenditure commitments, a large proportion of which are for financing the capital programme.

 

The Council has modelled indicative forecasts of the council tax base and business rates income going forward. Modelling is challenging for the Council given that the Council receives c£50m (approx. 40% of net rates payable) of additional relief from central government to further discount the bills of businesses in retail, leisure and hospitality sectors, as well as small businesses:

• the Council received c£64m from central government to provide grants (between £10k-£25k) to support the above businesses; and

• all other business rate payers having difficulty in paying were offered payment deferrals in line with central government guidance.

Due to the above, the amount of NDR income collected to date compared to budget has changed significantly, and forecasting future collection is dependent on how long different business sectors take to recover, if at all. The Council has modelled business rates collection forecast for 2020/21 for the amounts collected and to be collected over a revised collection profile, against a reduced collectible debit, to support future business rates income projections. However, the amount of business rates the Council is allowed to retain is largely dependent on the future business rates regime and the amount of section 31 grant for certain business sectors. Also, the Council is part of the London business rates pool in 2020/21. London Councils will be modelling the potential impact of a deficit on the pool and individual boroughs and the results are expected later in the year. This exercise along with other intelligence and data gathering exercises on collection rates will be critical to better understand the potential impact on the 2020/21 budget and future budget assumptions for business rates income.

 

Over the past 2 years, the Council has been addressing historic overspends and undertook a comprehensive review of demographic pressures and other expenditure pressures, ensuring the Council could move to a more sustainable financial position. Following the Covid-19 outbreak the Council’s financial position has changed significantly. The impact of the loss of fees and charges, and emergency costs have had an immediate effect on all local authorities. In the longer term there is likely to be further squeeze on public spending, which could impact future funding settlement allocations.

 

The 2020/21 budget agreed in February 2020 included savings of £7.4m to deliver a balanced budget. Analysis shows that £0.3m of the planned savings are at risk of not being delivered at all, £2.5m of the planned savings have already been delivered, and £4.6m of the planned savings will not be delivered in 2020/21 (the Council will look to make these savings in 2021/22 instead). The 2020/21 budget also agreed business plans which included savings of £4.3m. Along with review and tracking of Covid-19 cost pressures, the savings position is being monitored daily and monthly monitoring reports and forecasts are reported to the Departmental Management Team. At this stage, all indications are that the 2021/22 savings (including the £4.6m of planned savings for 2019/20) will be achieved. Looking ahead, the savings forecasts will be reported quarterly and challenged and CMT and Cabinet, as well as the Resources and Public Realm Scrutiny Committee. As well as reporting progress of savings delivery the update reports will include mitigating actions or other interventions if there are delays in implementation or risk of delivery.

 

Proposed budget setting for 2021/22

 

Based on information available to date, the Council estimates that ongoing and recurring pressures will be in the region of £11m to £29m from 2021/22 across all service areas and council tax collection. At this stage, the estimates excludes future losses on business rates whilst further modelling is undertaken. Therefore, without additional funding or relives from central government the budget gap is likely to increase further. The Council’s estimates will be refined over the summer and are a major factor in the construction of the 2021/22 budget. Robust and credible plans will need to be developed and agreed in February 2021 to deliver a legally required balanced budget. At this stage, it is not clear when the Spending Review will be announced, or what the LG Finance Settlement for Brent in 2021/22 will be. The lack of clarity means that the Council will need to continue to plan with little or no funding certainty over the medium term. The Council expects to need to take difficult decisions about which services to prioritise and protect, and which to reduce in order to continue to deliver affordable and sustainable budgets.

 

To close a gap of this magnitude and in a relatively short space of time there are 3 main options:

 

• Further savings – options are limited given the current savings programme already includes a significant number of efficiencies and new income generation options are likely to be limited.

• Reduce growth assumptions – the current MTFS includes £13m of annual growth but there is a risk that reducing growth assumptions will store up pressures in future years.

• Scale back the capital programme – pausing or stopping specific capital schemes funded by borrowing would free up corporate revenue budgets set aside to provide capital financing.

 

A further consideration is if central government introduces new interventions specifically for long term Covid-19 related pressures, such as a multi-year minimum funding guarantee to compensate local authorities for income losses beyond their control. Another option may be to allow the capitalisation of losses, which would ultimately be funded by increased borrowing. The options will be further examined to ensure their consequences are properly understood and set out for members and the outcome of the review will be presented to Cabinet as part of the draft 2021/22 budget in October 2020.

 

The Council continues to maintain reserve levels much above those of its peers, but it is recognised that of the £398.4m total usable reserves and capital receipts reserve, £249.3m relates to reserves built up to help to finance the Council’s £1bn capital expenditure plans. 

 

Excluding the capital reserves, HRA and schools’ reserves leaves general fund reserves of £134.8m, which is close to the average level of reserves for London boroughs. However, the Council must carefully consider the use of its reserves to support revenue shortfalls as it is a non-recurrent source of funding, and use of reserves on a large-scale risks creating structural overspends if the Council’s finances do not recover quickly and income is reduced long term. 

 

From an audit point of view, the Council has managed its revenue reserves in a way that makes it better placed than most London councils to survive the challenges of the Covid-19 pandemic from a financial perspective. This prudent approach to reserves must be continued to address the risk of future pandemics, recessions and other issues or events that may impact on the Council’s financial sustainability.

 

 

Sunday 1 January 2017

Brent Council Tax rise of 4.99% in each of the next 2 years and no raid on reserves, recommended by Scrutiny Panel

Two main measures come up every year in the budget discussions in Brent when trying to mitigate the impact of lower government funding of local government.  One is the raising of Council Tax and the other is using some of the Council's reserves.

The Budget Scrutiny Panel has come out in favour of raising Council Tax and against using reserves to help fund services.

COUNCIL TAX

The government has give local authorties the power to bring forward the permitted Council Tax rise for social care so that the total amount is spent over the next two years (3% for 2 years then none in the third year) rather than 3 years. In addition there is the permitted, without a referendum, increase of 1.99% for other services.

The table above shows that this creates the need for almost £14m cuts in 2019-20. The next local elections are in 2018 so the incoming adminstration will have to administer those cuts.

The Panel argue:

Increasing Brent’s Council Tax by 4.99 per cent in the next couple of years could have a significant impact on the Council’s ability to continue to deliver these services as clearly demonstrated in the table above.
Of course, the Budget Scrutiny Panel was also acutely aware that it would be the ordinary residents of Brent who would have to pick up this tab.
The median income for residents of Brent is £33,482, significantly lower than both the outer London (£37,366) and inner London (£41,428) medians. We therefore have a special responsibility to ensure that the level of our Council Tax is not punitive.
Fortunately, it seems that Brent has so far met this obligation as our Council Tax is at the lower end of the spectrum in comparison to other London boroughs.
We recommend that over the long-term Brent keeps a close watch on its position in this table to ensure that our Council Tax level does not rise out of kilter with the rest of London.
However, in the short term we believe that a Council tax rise would be affordable for most of our local residents, particularly with Council Tax Support which ensures those on eligible benefits only pay 20 per cent of the tax.
To put into context:
·      A typical Band D property will currently be charged £1101.24 a year in 2016/17 (this is the Brent charge and excludes the GLA precept)
A rise of 4.99 per cent would add £55.07 to this bill
This would cost the tax pay a little over a pound per week
This appears to presume no change in the Council Tax Support  Scheme.

RESERVES

The Panel argue:
The Council currently has unallocated reserves of around £12m. The Panel are comfortable with this level and do not propose taking money out of reserves to make up for losses in the Council’s grant.
The Council still faces many financial risks, from global factors in an uncertain political world, to local issues such as the increasing demand generated by the ageing population of Brent and the potential increase in demand for social care.
Should all of these risks to come to fruition the Council would only have reserves to cover the attendant costs for a couple of years. This is of course unlikely but reserves exist to cover the unlikely and we believe it would be imprudent to reduce them.
The Panel make a series of recommendations that will be discussed at Resources and Public Realm Sccutiny on Tuesday 10th January 7pm Civic Centre.  There is much more background discussion in the Full Report which can be found HERE

RECOMMENDATIONS

This report has presented the Budget Scrutiny Panel’s views on a wide range of topic attending to the budget. The report should be read as a whole with suggestions and ideas to be pulled out of almost every section. However, the key recommendations for reform which we would like to highlight are as follows:
1.     In future, any further proposals to reduce spending in Council budgets should be thoroughly evidence-based, with research into the likely impact on service users from any such change. The Council will need to be flexible and open-minded in looking at the most effective ways to deliver better services to Brent residents for the lowest possible cost. 

2.     The current demand-led review of Brent’s CPZ should be expanded with the aim of delivering a settlement for the whole of Brent which will be sustainable over the next twenty years to give further financial certainty to the authority. As part of this, the idea of day time visitor windows should be particularly investigated. 

3.     A report outlining all large-scale developments in the recent and upcoming years should be brought to the appropriate Scrutiny Committee in three months’ time. This would emphasise how mixed used each development was and allow scrutiny members to take a view on whether the balance is currently correct. 

4.     The Council should be forceful when dealing with TFL and seek to maximise business space in tube stations and use every development of a tube station as a potential to attract a new business to Brent. 

5.     A single “Business Attraction Manager” post, perhaps accompanied by a small team, should be set up in Brent. This would be a none-departmental role with the responsibility of attracting business to the borough and incentivised financially to achieve this without become a new financial burden to the Council. 

6.     Brent should seek to coordinate all local public sector bodies to develop a standard set of pre-qualification tests for procurement opportunities to make it easier for local firms to bid for work. 

7.     We believe that Cabinet should reconsider proceeding with proposal 1718BUD6 which would introduce charges (for) a more rapid collection of bulky waste, due to the reputational risk to Brent. Specifically, officers should model whether better signposting to other local services, including those within the authority, could deliver similar savings.

Saturday 2 February 2013

Headline figures from the Brent Budget paint a dismal picture

If you are going to either of the public meetings about the 2013-14 Brent budget next week you may want to have a look at the documentation that is available on the Council website.  It is available on the Agenda for the February 11th Executive HERE and is item 21 of a 28 item agenda.

I will try and highlight the main points here.  As previously mentioned the Council Tax is unchanged despite a rise being built into earlier assumption and the Council intends to keep reserves at the current level.

Adult Social Care continues to be one of the main pressures on the budget. Here is a summary of the changes between 2012-13 and 2013-14:

Click on image to enlarge
The forecast of savings required until 2017, which now assume no rise in Council Tax, are:

Click on image to enlarge
One of the main clues to where the cuts will actually fall is on this grid LINK with an assumption of  substantial cuts in costs in 2014-15 through the out-sourcing of integrated health and the huge Public Realm contract which covers waste, recycling, street cleansing. parks maintenance and Brent Housing Partnership. The move to the Civic Centre is expected to yield net savings of  £500,000 in 2014-15 although I seem to remembers a figure of £4m being stated when the £100,000,000 cost of the Centre was queried. (Annual savings of £4m over 25 years was cl;aimed to mean that the Centre would pay for itself).

A fuller account of service costs pressures to 2017 can be found HERE . They include the transition of children with disabilities to adult social care, 'transitional clients (with learning disabilities) living longer into adult age', increased numbers of older people with dementia, increase in demand for children's social care placements, price increases from the West London Waste Authority and largest of all at £2.45m in 2013-14 for an increase in homeless demand as a result of the Local Housing Allowance changes. £0.3m is lost as a result of the Coalition's 28% reduction of the DWP grant for administering Housing Benefit and Council Tax benefit. There is an increased cost of £0.75m for youth offending services with a rather hopeful suggestion that this might be reduced in future. I rather doubt that unemployment, benefit cuts,  homelessness and continuing austerity will enable that hope to be fulfilled.

All in all a dismal picture and which once again raises the issue of when will the Council decide 'enough is enough;' and go on the offensive against the Coalition and refuse to deliver their cuts.





Monday 16 January 2012

Audit Commission warns Brent Council of 'significant risks'

A year ago I reported that Brent Council's reserves were the lowest of the London boroughs. LINK As the Council implemented cuts last year they also, controversially, began to build up the reserves. The Audit Commission's Annual Audit Letter 2010-11 on Brent Council's financial position, which is tabled for tonight's Executive, gives the Council only an amber rating based on their 'traffic light' system. The level of Council's reserves continues to give the Audit Commission cause for concern as well as the Council's capacity to deliver the planned savings. The Council is likely to use this Letter as justification for not using reserves to mitigate some of the most damaging cuts.

Andrea White, District Auditor. in a key passage states:
My overall conclusion is that the Council has adequate arrangements to secure, economy, efficiency and effectiveness in its use of resources.
 
My value for money conclusion is based on evidence that confirms the Council has sound financial planning and monitoring arrangements in place, and it has the leadership and governance structures to enable it to deliver its plans. 

However, there are significant risks to achieving the scale of savings required. The Council's medium term financial strategy has identified the need for a further £65 million savings over the next three years. These substantial savings will have to be delivered against a background of increasing demand for council services and reduced management capacity. Clear focus on delivering operational and financial priorities will be needed to ensure financial plans are delivered and the effectiveness of services is maintained. 

The Council’s general reserves are low and earmarked reserves are falling while pressure on the Council’s resources in the coming years is significant and unprecedented. The maintenance of strong financial control will be essential if the Council is to achieve its plans. When setting its budget for 2012/13, the Council must continue to have regard to the increasing level of risk in setting its reserves.
In unguarded moments councillors lament the 'almost impossible' position they have put in by the level of cuts demanded by the Coalition's reduction in their budget.  They are now contemplating a massive reduction in the role of local government, and a consequent withdrawal from some service provision and the privatisation of others. As the Auditor says "These substantial savings will have to be delivered against a background of increasing demand for council services and reduced management capacity." Cuts in provision will occur as demand for provision is increasing.

In shrinking the role of the Council they are in a way contributing to their own demise. A very real question is now being asked about exactly how many people will be left to move into the Civic Centre in 2013.


Monday 6 December 2010

Brent Reserves the Lowest in London

Figures released last week show that Brent Council's reserves (as a proportion of revenue expenditure) are the lowest  in London, although Harrow's are only slightly higher. The reserves are used for contingencies and also put aside for major projects. They are a necessary part of good financial management. Brent will be in trouble if sudden unexpected expenditure is required but at the same time the Borough faces damaging cuts.

Eric Pickles, Communities Secretary, used the large reserves held by some councils as a stick with which to beat them while anti-cuts campaigner cited excessive reserves as a reason why some councils need not  make drastic reductions in services.

Brent's low reserves show why the council was trawling through the carry forwards of individual schools with a view to clawing back non-earmarked surpluses.

These are the figures for Brent and neighbouring councils.

Borough
Non-school reserves £m
Revenue Expenditure £m
Non-school reserves as % of revenue expenditure
Barnet
43.9
538.9
8.1
Brent
13.3
548.8
2.4
Camden
96.8
474.5
20.4
Ealing
53.4
589.9
9.1
Hammersmith & F
28.3
331.7
8.5
Harrow
10.5
359.1
2.9
Westminster
37.0
418.2
8.9