Agenda item

Ms Z Cooke (Corporate Director of Finance), Mr D Shipton (Head of Finance - Planning, Policy & Strategy) and Ms C Head (Head of Finance Operations) were in attendance for this item

(1)      Ms Cooke and Mr Shipton provided an update on the financial impact of the COVID-19 outbreak and subsequent economic fallout, including the additional funding provided by central Government (including a further 3^rd tranche of un-ring-fenced Emergency Grant), the Council’s estimated costs for the emergency response, and the potential loss of income and delays to savings plans. It was explained that forecast costs and income losses covered the period from March 2020 until the end of 2020-21, and thus span two financial years. It was also explained that the forecasts included some potential financial risks later in the year and did not include any underspends achieved during lockdown. These factors explained the difference with the forecasts reported in 2020-21 financial monitoring report. The overall assessment was that there was still a significant forecast shortfall in the emergency grant received to date resulting in a substantial projected overspend. The magnitude of the variances is such that it was proposed to undertake a review of both the revenue budget and capital programme which would require an amendment to the budget to be put to County Council in September 2020.

(2)      The report also sets out some potential scenarios for subsequent years based on spending projections and the impact of recession on tax receipts. It was emphasised these are modelling scenarios and cannot be confirmed until the Council received the outcome of Spending Review later in the Autumn and confirmation of the impact on tax receipts from more month’s collections.

Officers then responded to a number of comments and questions from Members, which included the following: -

a)    Mr Shipton referred to discussions that were taking place between Kent County Council and district councils in relation to council tax collection losses and stated that for district councils, it would be more of a cashflow issue and for the Council, it would be long-term losses on revenue budget.

b)    In relation to business rates, Mr Shipton stated that Kent County Council only keeps 9% of the total business rates collected in the county. Business rates losses would arise from those business that had seen significant decline in trading activity but do not benefit from the additional reliefs granted to retail/leisure/hospitality premises and nurseries.

c)    In relation to capital, Mr Shipton confirmed that Kent County Council’s total accumulated debt was just under £1b. He added that approximately half of the accumulated debt was debt that had been accrued under the supported borrowing regime and stated that Kent would continue to press for the legacy debt to be recognised in the fair funding arrangements as and when the fair funding review was implemented. Mr Oakford (Deputy Leader and Cabinet Member for Finance, Corporate and Traded Services) confirmed that he continued to work closely with Finance officers in relation to the Council’s capital and revenue budget, focusing on what could be deferred and removed from the capital budget.

d)    In relation the Kent County Council’s debt, Mr Shipton said that nearly all of the debt was maturity debt and there would be penalties if Kent wished to change the terms of loans.

e)    Ms Head confirmed that by statute, Kent County Council had to set aside a minimum revenue provision based on the life of each asset that they had spent capital on and had to set aside each year a proportion of revenue to cover the cost of borrowing. The cost of borrowing was modelled at approximately 4%, based on an asset life of 25 years, but the cost differed based on the life of the asset.

f)     Mr Shipton stated that the Collection Fund was borne by both district councils deemed to be collection authorities and major precepting authorities, therefore, authorities would have a respective share of losses shared out between them. He added that district council’s carried parish council’s share of collection losses because parish councils did not receive grant money from government or any share of the retained business rates.

g)    Mr Shipton confirmed that Kent County Council were not allowed to fund the revenue budget from borrowing and were only allowed to borrow to fund the capital programme.

h)    In relation to savings and efficiencies, Mr Oakford said that he continued to work very closely with colleagues in Finance and had met with all of Kent County Council’s Corporate Directors and Cabinet Members to find effective ways to make savings. He confirmed that a Cabinet meeting would take place in the evening to further discuss the savings that could be made and the way in which the Council sought to operate in the future. He stated that all Members would be briefed in the near future.

i)     Mr Oakford confirmed that preparations would be put in place in relation to a potential second wave of COVID-19, led by Public Health.

j)     Mr Oakford stated that a Council Tax Referendum would have to take place if Kent County Council wished to raise Council Tax.

k)    Mr Oakford referred to Kent County Council’s reserves and confirmed that there were approximately £40m of un-ring-fenced reserves.

l)     Mr Oakford stated that Finance officers were working closely with the HoldCo Board to review current structures and income streams and confirmed that a report would be submitted to a future meeting of the Cabinet Committee on the matter.

m)  Ms Cooke said that Kent County Council were in the process of responding to a government consultation in relation to borrowing monies and had been informed that the government were keen to restrain further the council’s ability to borrow and for what purpose. She added that she would provide further information to Committee Members outside of the meeting in relation to the consultation.

(3)      Committee Members thanked the Finance officers for their hard work and effort during these unprecedented times.