Draft Budget 2019/20 MTFS to 2023/24 2
Headlines What am I going to cover in summary? • Projected financial position has worsen Government Funding • Local Authority Funding Model changes from 2020/21 Council Tax • Greater uncertainty = higher risk Business Rates • Longer report New Homes Bonus • More unknowns, particularly from 2020/21 Draft Budget 2019/20 onwards Funding Horizon • Savings need to be found in order to bring budgets back into balance Financial Strategy Assumptions & Risks 3
Report & Presentation What am I going to cover in summary? • Pick out / highlight key points Government Funding • Questions as go along Council Tax • Sum up and conclusions Business Rates • Recommendations at end / debate & discussions New Homes Bonus Draft Budget 2019/20 • Provide reasons and rationale to support why we reached the recommendations Funding Horizon Financial Strategy Assumptions & Risks 4
Provisional Settlement 2019/20 • The “calm before the storm” • Last year of 4 year settlement so few surprises • Rural Delivery Grant – additional funding for 2019/20 - £94k for Torridge • No change to New Homes Bonus Rules • Release of £180m Surplus Business Rate Levy monies – Torridge share £35k payable in 2018/19 • Additional Social care monies £650m, no impact for Torridge being a lower tier authority • Referendum limits • Special Referendum Limit for • Shire Districts - £5 for Band D or 3% Northamptonshire County Council – whichever is the greater additional 2%....reflects financial • Counties – 3% plus 2% for Social Care issues partly explained by not Precept raising Council Tax in previous • Fire Authorities – 3% years • Police & Crime Commissioners - £24 for a Band D (increase from £12) • Town & Parish Council – No referendum 5 limits
2019-20 MTFS Projected Deficit • Deficit is projected to grow significantly • Ignores potential impact of Fair Funding Review & 75% Business Rate Retention 2020- 21 – discussed later! • Without corrective action the 2020-21 budgets cannot be balanced as the Transition in Government Funding Reserve will be exhausted. 6
Why has the projected deficit moved adversely? LGA pay award created new pay points, other pay • points were deleted or combined - after consultation with Unions new Torridge pay scales were approved. Referenced to National Living Wage. Increased the salary bill for the Council • Job Evaluation for Council HGV drivers = increased • salary costs • Revised Refuse Collection Service from June 2018 • Resulted greater than anticipated recycling tonnage = additional staff resource (and income) • Operational / H&S issues have also resulted in increased staffing resource • Agency staff terms and conditions are required to mirror TDC employed staff costs and therefore costs have risen by more than inflation. The LGA pay award was weighted towards the lower pay grades applicable within the Operations Team • Shortage of HGV drivers; therefore it is difficult and expensive to recruit Agency 7 HGV drivers
Why has the projected deficit moved adversely? • Homeless Reduction Act 2017 increased local authorities’ responsibilities for clients who are homeless or threatened with homelessness from 28 days to 56 days • Lack of privately rented accommodation at LHA (Local Housing Allowance) rates – difficult to find sustainable tenancies for clients leading to increases stays in B&B. • The Council suffers a funding shortfall for B&B placements, for example the Council can claim £92.05 per week from Housing Benefits for single person in B&B; however the weekly costs to the Council can often exceed £400 per week…..the Council bearing the difference 8
Summary of major movements in Funding & Expenditure 2019-20 2020-21 2021-22 2022-23 Funding Movement - (favourable) / adverse £'000 £'000 £'000 £'000 Rural Delivery Grant (93) 0 0 0 Prior Year Council Tax and Business Rate Surplus (325) 0 0 0 Business Rate Income (include S31 Grant & contribution to Business Rate Pool) 1 (60) (126) (198) Council Tax Income 19 (18) (53) (88) New Homes Bonus Income 94 66 32 (7) Contribution to Reserve (Economic Development) (190) 0 0 0 TOTAL (495) (12) (147) (292) 9
Current State of Local Authority Funding Council Tax • Councils increasingly dependant upon their own resources rather Grant Business than Central Government Grant Funding Rates Funding Fees & • Increasingly reliance of Councils Charges on Council Tax to fund services • ** SFA = Settlement Funding Assessment • ** = Comprehensive Spending Power 10
Importance of Council Tax Funding • Expectation from Central Government when allocating Grant Funding that Councils will increase Council Tax up to Referendum limits • Long term impact from increasing (not increasing) Council Tax • Council Tax income is an increasing proportion of local authority funding and is more predictable and reliable than Central Government Grant Funding • Torridge has forgone £1.8m in income over the period 2011/12 – 2018/19 by not increasing Council Tax in line with Referendum Limits. • The annual recurrent income forgone as at 2018/19 is £366k, which is circa 50% of the current projected deficit at 2023/24 (£752k). 11
So what could £1.8m have purchased ? • One Burrows Centre • Four Artificial Sports Pitches • 11 Recycling Vehicles 12
Impact of Torridge Council Tax increases to Taxpayers Torridge collects less than • 9% of the total council tax charged The percentage has declined • over time as other preceptors referendum limits have exceed that for Shire Districts Additionally other • preceptors have increased their charge whilst in some prior years Torridge did not increase its Council Tax. Actual 2018/19 Additional Equates 2018/19 Council Tax (if charge to Council to Council increased by Council Tax Tax Band weekly Tax Referendum payers increase Charged Limits) forgone A £105.77 £116.13 £10.37 £0.20 B £123.39 £135.49 £12.09 £0.23 • If Council Tax had been increased by C £141.02 £154.84 £13.82 £0.27 Referendum limits since 2011/12 the D £158.65 £174.20 £15.55 £0.30 increased charge to a Band D Council Tax E £193.91 £212.91 £19.01 £0.37 payer would be £15.55 per year more (or F £229.16 £251.62 £22.46 £0.43 30p per week) G £264.42 £290.33 £25.92 £0.50 H £317.30 £348.40 £31.10 £0.60 13
Business Rates - Complexities • Pre – 2013 easy and risk free • Reliefs – changed at Government • 50% BRRS 2013 – reward for growth discretion • Business rates pilot for 2018/19 • Rateable Value - VOA • Revaluation – 2017 • Rate in £ = Government • 75% BRRS 2020/21? • RPI increases - Government • Back to Pool – 1st April 2019 • Appeals - VOA • New Retail Relief for 2019/20 & 2020/21 14
Business Rates – benefits & risks Benefits Risks • Business rates pool - £0.3m • Appeals – 61 at £5.5m RV (against 2010 rating list) • Renewable energy - £0.775m (2019/20) • Appeals provision - £0.867m • SBRR – 100% collection • New scheme – 2020/21? • Business rates pilot - £0.374m • No formal appeals against the 2017 list (2018/19) received to date • Court Cases – ATMs etc • Significant source of funding 15
New Homes Bonus • How is it currently allocated / spent – 50% Capital – 25% Community and Members Grants – 25% Support to Revenue budgets • No changes for 2019/20 – deadweight 0.4% – Circa 100 Band D properties before any gain to Torridge • Reduction in cumulative bonus – 6 yrs to 5yrs – 4yrs in 2018/19 • 2019/20 = £1.189m was £2.028m in 2016/17 • 2019/20 – Last year of current New Homes Bonus Scheme 16
So what's on the Funding Horizon ? • Fair Funding Review 2020/21 • 75% Business Rate Retention • Business Rate Revaluation 2021/22 • Change to New Homes Bonus Scheme • Little detail currently available 17
Fair Funding Review – Needs & Resources Last review undertaken in 2013/14 with the • introduction of Business Rate Retention Ties in with Comprehensive Spending Review • (CSR) which determines the overall funding envelope for local government Assesses the relative needs of local authorities • based upon various factors Population (by far the largest driver) • Rurality • Responsibilities • Social Services • Education • Gap Highways etc. • Funding Also assesses the resources available to local • Provided Funding authorities. Provided Council Tax rises at Referendum limits • Assessed Need Assumes growth in Council Tax Base • - Population, Income from Business Rates • Assumed Actual Rurality, Resources - Resources - Responsibilties In very simple terms the Fair Funding Review Council Tax Council Tax etc determines how big the funding cake will be increases at not Referendum increased to for the local authority sector and what will Limits Referendum Torridge’s share be. Limits 18
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