Agenda item

Committee consideration based on the draft budget issued on 6 January 2020.

Peter Oakford (Deputy Leader), Dave Shipton (Head of Finance – Policy, Planning and Strategy), Zena Cooke (Corporate Director Finance) and Simon Pleace (Revenue and Tax Strategy Manager) were present for this item.   

1.  Mr Oakford introduced this item, highlighting that it had been a challenging decade, with over £600million being taken out of the budget over that period.  So the increase, of about 6%, in the Government’s settlement this year was very welcomed.  The £100million of pressures in this years’ budget had been addressed by the increase in grant from the Government, the Council Tax increase and Adult Social Care increase and from further savings (£34million) this year.  The increased settlement would result in the  most generous staff pay settlement for a decade.  In addition, following reductions in Member grants these had been returned to previous level.  The Capital budget was still concerning, 10% of the budget was financing the current debt.  It was clear that highways were a priority and were deteriorating, however while it was easy to borrow now to pay for the necessary works, this would still be challenging to pay for as debt later.  Finance were looking at alternative funding options to help manage the capital budget as the current approach was not sustainable. 

2. Simon Pleace gave a presentation to the Committee.  This was available online via this link.  The presentation focussed on the changes since the initial draft budget book was published and there were no significant changes to the assumptions made in the draft budget. 

3. The following questions were asked:

-       There was not as much concern about the revenue budget compared to the capital budget which was pleasing.  There was concern about the underfunding of Highways.  As the Member had specific enquiries it was suggested that this be followed up outside of the Committee meeting.  Mr Oakford spoke about the extra money for highways, through the capital programme of £105million over the next 3 years.

-       A Member asked about the link between the payroll budget increase of 3.6% with average earnings – did this uplift including the pressures arising from the living wage increase? 

-       What was the prudent thing for members to do with regards to managing the debt/spend issue and reserve management?  Considering an additional £121million borrowing over the next few years, this was an annual cost of 8%.  Why was this such a high level of interest/cost?

-       KCC needed to be mindful of the sustainability around borrowing and it would be preferable for KCC to be further away from the worse debt/reserve ratio.  There was also a concern about the income received from the Council’s Trading Companies. 

-       Members thanked Simon Pleace for an excellent presentation and officers were thanks for the briefings they gave the groups. 

-       Caution was urged in a transitional year; it was considered that there were some very fundamental issues that central government needed to resolve.  One of the biggest pressures was adult social care – KCC could not keep waiting on the Government to develop a new formula for financing this.

-       There was a question about the anticipated unallocated savings, was it possible to see a schedule of these savings along with any more details of where these savings would be made. 

4. The following answers were provided:

-       On borrowing – Local Government borrowing was very different to the commercial market.  8% was not the interest rate – the interest rates for borrowing were much lower, around half of total borrowing costs are to pay interest on accumulated debt (at varying rates of interest depending when loans were taken out) and other half was set aside provision to repay loans over the lifetime of the assets (known as minimum revenue provision).  New loans could currently be secured at much lower interest but KCC still needed to budget for the interest costs for entire loan portfolio

-       On national living wage increase - Dave Shipton explained no KCC staff were affected by this increase as all KCC staff were already paid more than the current level.  This was because it had been previously agreed that KCC would pay the equivalent of the living wage foundation’s real living wage of £9 per hour.  

-       High needs funding was currently the biggest risk to KCC.  KCC was monitoring this closely and all other upper tier authorities were facing the same challenge.

-       Comments on the Social Care green paper had not been forgotten by KCC’s Executive. 

-       Referring to the Trading Companies, the £3.9m increase in income, was mostly from the existing charging policy.  £6.5million was budgeted to be  received next year from Traded Companies, including the additional  £340k anticipated increase.

-       More and more spending pressures and savings were unallocated because the details had not been fully assessed in time for the February budget process but this would be covered in the County Council report.   

5.  A Member asked what the difference was between the S151 officer view and Executive opinion around the use of council reserves.  Zena Cooke confirmed that both the original figures and the updated figures met the County Council’s requirements in terms of being prudent.  There was always a debate about what should be in reserves vs what must be spent but the executive was clear that prudence was a priority.  It was hoped that the right outcome from the fair funding review would help.  The challenge going forward was how to manage the capital budget particularly with statutory obligations for spend around health and safety etc.

6.  Zena Cooke confirmed that all accounting was in line with local government regulations.  She offered to provide a written explanation to the Committee in due course.

7.  A Member commented that historically budget amendments at County Council often failed because of there was not sufficient explanation of how the money would be spent, therefore could a timeframe be provided setting out how the £1million set aside for the environment, and £3.5m for the Strategic Statement would be spent.  Mr Oakford explained that the final decision on the £3.5million put aside for the Strategic Statement would not be made until the results of the consultation were known.  However, one priority was Community Wardens. 

8.  The Chairman invited Ms Carey to respond to the money allocated for the environment.  She stressed that it was not just £1million being spent on the environment, a commitment had been made to report on the £1million in May with longer term plans as part of the Kent Environment Strategy group (cross party group).

RESOLVED that;

a)    the draft budget and associated reports be noted;

b)    the ongoing lobbying of government for fairer funding be welcomed and noted; and

c)    the Executive be recommended to continue to make particular efforts in lobbying for sufficient Higher Needs funding.