Agenda item

To consider and make any appropriate recommendations to Cabinet on the Draft Medium Term Financial Strategy, Draft General Fund Budget 2021/22 and Draft Capital Programme 2021-2024 for consultation.

Members considered the Draft Budget 2021/22 report presented by Councillor Boden. 

Councillor Boden added that Peter Catchpole, Mark Saunders, Neil Krajewski and the finance team have done a tremendous job to produce this report and he thanked them for they work they have done. They have done the best that they can given the level of uncertainty due to the current situation.

Councillor Mason thanked Councillor Boden and acknowledged the hard work that had gone into the budget. He was sure the Panel members would all agree that it is a very difficult task for anyone currently to project a budget or business plan.

Members made comments, asked questions and received responses as follows:

1.    Councillor Miscandlon said that Freedom Leisure have several contracts with other local authorities and the panel would be interested to know how these authorities are responding to the continued impact of COVID-19 on the provider and would like to understand their proposed plans as an approach to influence FDC’s response.

2.    Councillor Boden said this is one of the largest areas of uncertainty that we have in the budget. He believes Freedom has contracts with 22 local authorities, managing just under 100 leisure centres. We are mindful of Freedom’s financial viability and most authorities have adopted the position that we led on in April where we reached agreement with Freedom that we will provide the contractual support that they are entitled to, but that support is overwhelmingly in the form of a loan which is potentially recoverable by better profit share when times return to normal. We have many years left on the contract to do that. We checked carefully our contractual obligations to support Freedom and it was clearly advantageous to FDC to continue this support; the alternative would have found us in breach of contract and resulting in financial loss through court action; also potentially one or more of our leisure centres would not have reopened, or not under our ownership or control. That decision was followed by the other authorities dealing with Freedom and we continue to be in touch with them, so we have knowledge of what is going on. We also contacted our auditor to consider the contractual state of Freedom before we put any financial support in place.  We have an open book policy so far as the costs it is incurring and lost income due to COVID-19. We have been receiving from Government 75% of 95% of the monies we would have been receiving under the contract, and this is in place currently until June 2021 but we have not been receiving any significant support in respect of the additional costs incurred to keep Freedom Leisure above water. We are currently applying for £210,000 to cover some of those costs from December 2020 to March 2021. No monies have been allocated to us for additional costs from April 2021 to November 2021 and therefore he has been in contact with Stephen Barclay MP for him to take this up on our behalf and for additional recompense. It should be noted that Freedom was performing well before the pandemic and has been well managed throughout and, given our long-term contract, will deliver benefits to our residents in the future and still provide financial savings.  He would like to remind the panel that savings from our current contract are about £400,000 per annum with more savings to be realised in the future. We also anticipate that when the leisure centres can be reopened, and less social distancing is required then pent-up demand will return and therefore we will no longer need to provide financial support to Freedom and we will start to receive monies that we are due to be paid on a monthly basis. Councillor Miscandlon thanked Councillor Boden for the comprehensive update.

3.    Councillor Booth referred to page 32 of the report pack which says we are looking to get some money from a leisure and open spaces management review and asked for more information regarding that. Councillor Boden said he had not seen the detail of that review and so could not currently provide an answer.

4.    Councillor Mason said the report discusses the option of council tax increases, stating in terms of ambition would be to freeze council tax over the forthcoming years and he asked Councillor Boden if this situation would rear itself sooner rather than later. Councillor Boden responded that we consider council tax increases every year. However, it is the ambition of this Council that we should not unnecessarily increase the burden on ordinary people in Fenland who have to pay more than enough. At this time given the financial situation faced by many individuals, it is important that we do our utmost to ensure we do not increase council tax, but we may be forced to. We have to wait until we are closer to budget setting day and we have settled at least a few of the uncertainties mentioned in the report settled before we are in a position to make a rational decision. It is his earnest desire not to increase council tax, but he has to be prudent and say at this time it cannot be ruled out. In the longer term, you cannot have a council tax freeze forever as that is unrealistic. However, we will look at every alternative possible first.

5.    Councillor Mason said two significant risks have been identified in the report, one relating to business rates which are difficult to collect currently and asked how this impacts future budget plans. Councillor Boden responded that it not the case that business rates are difficult to collect, because in 2020/21 there is such a significant amount of central government business rates support that we are still on track to get the collections that are due this year, allowing for that support which exists. We do not yet know that there will be any extension of that support going through into 2021/22. Once the furlough scheme finishes there will be pressure on many companies cash flow and profitability that government will have little choice but to continue providing continued support to many smaller companies to ensure their survival. If not, then business rate collection going forward will be more challenging and careful consideration has been given by Mark Saunders as to what the appropriate provision will be for us to make against non-collection of business rates in 2021/22. Councillor Mason said much of the shortfall may come from businesses that do not survive the pandemic, but he thanked Councillor Boden for his response.

6.    Councillor Mason also asked for clarification on the New Homes’ Bonus Scheme. Councillor Boden said everyone requires clarification on this because we do not know what is going to happen. We have been told the system will finish as Government said the New Homes Bonus was failing to achieve its objectives. They said it would be replaced with something that would better achieve their objectives but what that will be and when, he does not know but we have been waiting for two years. However, understandably this year they have failed to advise on this due to the focus on the current pandemic. We do know however that the calculation for new homes bonuses based on the position as at 30 October each year has definitively led to a certain amount of money being credited to us in 2021/22 and that figure is included within the report.

7.    Councillor Booth said it would be useful if Councillor Boden could state in layman's terms the impact this would have on reserves as it seems that a deficit will be have to made up from there, and is it correct that we will have to use the equalisation reserve. Councillor Boden said this is potentially correct, but we do not know where we will stand. Ultimately if expenditure is increasing beyond income then either you will be taking money from reserves or will be seeking ways to increase your income or ways to decrease your expenditure, or a combination of all three. Looking at this on an individual year by year basis is never an appropriate way of doing it hence why looking at the medium-term financial strategy and looking forward is the most important thing for us to do. We need not to look at trimming our expenditure but to look at ways if increasing our income particularly through the commercial and investment process that we have in place which has the potential to make a significant difference to FDC's revenue account.

8.    Councillor Yeulett said he appreciates the challenges that are being faced and asked if Councillor Boden can confirm when we can expect a firmer budget. Furthermore he read in the press that councils are sitting on large amounts of COVID money and asked where FDC is in respect of this and finally the Chancellor has been intimating that interest rates will not stay low forever and we must be aware of this going forward. Councillor Boden responded that the budget presented this year will be more incorrect than any before as a direct result of the uncertainty we face now and will still face when setting the budget for 2021/22, so will be far less firm than any other budget produced before; this will be the same for lower tier councils across the country. Regarding the sitting on COVID money, government has been making announcements about the availability of money for councils and then either have not sent it to us for distribution, or when they have they have failed to send the detailed rules about how that money must be sent.  Without those detailed rules we cannot allocate the money to where it is needed; this has caused great frustration and he is pleased that Councillor Yeulett has given him the opportunity to express this. We have done our utmost to ensure we can get the money to those who need it urgently as quickly as we can whilst ensuring that we stay within the rules set by central Government. He would like to give an enormous of amount of credit to Neil Krajewski in the Finance team and to Mark Saunders and Peter Catchpole for pushing that forward and ensuring systems are in place to allow people to make claims which we will then pay as quickly as we can. Therefore, is not right to say councils have been sitting on vast amounts of money as explained. In terms of interest rates, given the amount of money that has been spent by central Government and governments worldwide over the last ten months, and which is likely to carry on being spent at least for the next six months, then inevitably there will be consequences. Basic economics means that there will be a pressure for higher taxation and there must eventually be pressure on inflation and interest rates will also rise above the long-term lows that we have experienced. No-one can predict what combination of these will happen and when.

9.    Councillor Yeulett asked if we have any areas within Fenland where people or businesses are suffering badly because of the circumstances mentioned by Councillor Boden, and if so, is there anything FDC can do ourselves to help. Councillor Boden confirmed there are people and businesses suffering which are entitled to grants but there are those who fall between the gaps who have no entitlement to grants at all and it would be remiss of us to forget them, but we are not in a financial position to help these.  Occasionally we have circumvented the normal payment system that may take several days to process and provide monies on the same day for extreme cases where monies were due but this follows a strict procedure and is signed off by the Section 151 officer.

Members AGREED the draft budget proposals for 2021/22 outlined in the report and the updated capital programme be forwarded to Cabinet.   

(Councillor Cornwell took no part in any debate relating to Freedom Leisure).