The Executive Member for Finance submitted a report inviting the Corporate Business Scrutiny Committee to consider revisions to the Financial Strategy, including its policy on using reserves and the proposed planning assumptions to be used to update the Medium Term Financial Plan for 2015/16 to 2018/19.
The Director of Finance and Support Services introduced two officers, Alison Street (from the Accountancy team) and Shahida Nasim (currently co-ordinating a finance review at the Council) These officers were in attendance to evaluate how Members used the “modelled” information as presented. The Director of Finance and Support Service explained the importance of having a Financial Strategy and Medium Term Financial Plan covering a four year period. Key paragraphs within the report were explained.
In response to a query from Councillor M Pope regarding business rates and how significant the risk was, the Director of Finance and Support Services explained risk in terms of the extension of business rate relief, of the increase in the number of requests for relief and the fact that appeals for business relief could be backdated five and six years.
The Director of Finance and Support Services stated that the Council’s Policy on its level of reserves had been agreed by Members and that this was based on good practice. She added that external audit would not comment on how much the Council had in reserve, but it would comment if it felt that the level held was insufficient.
Councillor J Ranger commented on the level of reserves and that the Council should do something with some of its reserves but would be unhappy to see, three years ahead, that it had insufficient reserves.
The Committee Chairman stated that the Council had £8Million earmarked in general reserves and that it had exceeded this figure by a further £1.374 Million and that it was breaching its own policy in terms of its level of reserves. The Chairman stated that he “had a problem” with a MTFP which did not conform to its own policy.
Councillor J Wing suggested that some reserves be the subject of discussions with social housing providers and local housing associations.
Councillor T Page suggested that the reserves be protected in terms of its residents and in relation to Council Tax.
The Executive Member for Finance explained that the reserves policy was reviewed by Audit Committee and conformed with CIPFA guidelines. He explained the importance of having sufficient reserves. The Director of Finance and Support Services explained what the earmarked reserves would be used for including running local elections and funds for interest equalisation (i.e. interest rates dropping). She added that without these reserves, Council Taxpayers could be hit sharply if there were significant fluctuations in activity from year to year.
Following a question regarding interest on cash balances, the Director of Finance and Support Services referred to cash flows and the importance of understanding the day to day needs of the Council, keeping enough cash in hand to run its activities. She also explained the difficulties experienced with identifying opportunities to invest money appropriately.
In response to a query from Councillor J Wyllie regarding interest rates shown as low in the report for next year, the Director of Finance and Support Services explained the approach adopted.
Councillor J Ranger referred to staff salaries and the fact that these had been “down” for a long time adding that this was not sustainable.
Councillor M Pope expressed concern at using reserves to freeze Council Tax. Councillor J Wyllie was also concerned about freezing Council Tax and suggested a modest increase of 1% every year. Members supported this approach.
The issue of recycling, waste disposal and income generation was discussed. The Director of Finance and Support Services stated that consideration needed to not only be given to recycling costs, but also reducing the levels of residual waste given the increasing costs of disposal.
The Executive Member for Finance stated that recycling had now reached 50%. With regard to increases in Council Tax he felt that a 1% increase was very low and added that the Council should not increase Council Tax until such time as reserves had achieved a ceiling. Members agreed that there was a need to be prudent in relation to spending in order to protect the affordability of Council Tax in future years when shortfalls were already showing up in the MTFP. Members suggested that there be small increases in Council Tax rather than a single, large increase after a long period of freeze.
Councillor T Page referred to the income generated from fees and charges and especially in relation to planning. Councillor J Wing suggested that the Council should consider introducing some form of scaled approach in relation to pre-application discussion fees for community based organisations or charity organisations except in cases where full cost recovery was necessary or required. Members also felt that the current level of fees within planning was set too low for big commercial firms who, they felt, were making significant financial gains on larger development sites in the District.
The Committee received the report and asked that Members’ comments as now detailed, be referred to the Executive along with its recommendation to approve the proposed financial strategy.
RESOLVED – that (A)
Members’ comments as now detailed, be referred to the
Executive; and
(B) the proposed financial strategy be recommended for approval.