Issue - meetings

A report by the Deputy Chief Executive Officer.

RESOLVED that the Executive approves:

(a)    the Covid-19 Finance Recovery Plan and actions contained therein (as set out from paragraph 55 of the report); and

(b)    recommends that the Council approves the following revised budgets:

                       i.   the Emergency General Fund Revised Revenue budget for 2020/21;

                      ii.   the use of £1,143,700 from the General Fund Revenue Reserve to balance the 2020/21 Revised Budget;

                     iii.   the Emergency Housing Revenue Account Revised budget for 2020/21; and

                    iv.   the Revised Capital Programme for 2020/21.

The Executive Leader brought item 10(2) Emergency Revised 2020/21 Budget forward on the Agenda.

The Executive Leader introduced this item stating that the Council’s reserves as at 31 March 2020 totalled £155.3m, of which £45m (29%) are classed as useable reserves.  The £110m of unusable reserves relate to accounting adjustments for issues such as property revaluations, and as the name suggests is unusable.  Unusable reserves contain funds that cannot be used to provide services or used for day to day running costs.  They can be categorised as reserves that hold unrealised gains and losses.   Adjustment accounts that absorb the differences between applying proper accounting practices and the requirements of statutory arrangements for funding expenditure.

While £45m of usable reserves sounds very healthy, these funds relate to all aspects of the services that the Council provides, and the majority can only be used for certain purposes.  For example, nearly half (over £20m) can only be used for capital purposes (such as new construction projects, purchasing large assets, etc).  Another £11m, can only be used in relation to council housing.

That leaves £14m (9%) of the £155m, but two thirds of this (c.£9m) also has pre-existing commitments and restrictions about how it should be used.  For example, £2.4m is funding received from former development sites for the maintenance of open space maintenance, £1.6m relates to business rates due to be paid to Government and other precepting Councils.

So, what remains, is c.£5m (3%) of the £155m, that can be used to meet any income shortfall in day to day spending.  £1.1m of this will be used in 2020/21 to balance the budget in this year, and there is an expectation that £2.4m will be held at all times for unforeseen fluctuations in income or spending.  As previously stated, it is not wise to use reserves to meet shortfalls in revenue operations because, once spent, it cannot be used again.  A very valid point was raised about replenishing reserves once used and, to do this, we would require cost reductions (from service cuts), or new income.

With reference to the Council’s £290m of assets, £124m of these are Council houses, £83m relate to other land and buildings £64m relate to commercial/investment property, then there is a range of other assets (such as vehicles, plant, heritage assets, infrastructure, etc), that make up the balance.  It is true that some of these assets could be sold to generate cash, but their use would be limited to new capital investments only.  The cash raised could not be used to meet a shortfall in day to day funding.

The reality of the Council’s financial position is that our prudent approach in the past has allowed the immediate impact of the COVID pandemic to be met from reserves, while maintaining funding for vital public services and still being able to invest in the priorities for the borough.  However, the approach this year cannot be sustained as reserves are limited, as is the Council’s ability to raise taxes without holding an expensive referendum.  Difficult decisions do need to be taken to balance the budget for this, and future, years, if services to the public are to be protected.  Fareham Council’s services are delivered by levying a council tax of just £3 per week for the average home, almost the lowest in the country. 

At the invitation of the Chairman, Councillor L Keeble addressed the Executive on this item.

RESOLVED that the Executive approves:

(a)    the Covid-19 Finance Recovery Plan and actions contained therein (as set out from paragraph 55 of the report); and

(b)    recommends that the Council approves the following revised budgets:

                       i.   the Emergency General Fund Revised Revenue budget for 2020/21;

                      ii.   the use of £1,143,700 from the General Fund Revenue Reserve to balance the 2020/21 Revised Budget;

                     iii.   the Emergency Housing Revenue Account Revised budget for 2020/21; and

                    iv.   the Revised Capital Programme for 2020/21.