Agenda item

(Cabinet Member with Special Responsibility Councillor Roger Mace)

 

Report of the Head of Financial Services (to follow).

(Cabinet Member with Special Responsibility Councillor Mace)

 

The Head of Financial Services submitted a report providing updated financial projections for future years based on information currently available, to allow Cabinet to review the appropriateness of existing targets for Council Tax increases and make recommendations on to Council as appropriate.

 

The options, options analysis, including risk assessment on the key aspects, were set out in the report as follows:

 

Council Tax Targets:

 

(a)          Option 1 -retain the existing Council Tax target increases for future years

Current forecasts indicate that this would require net savings of £1,822K and £2,479K to be identified for 2009/10 and 2010/11 respectively.

 

(b)          Recommend an alternative Council Tax target increase for future years.

The level of any net savings requirement (and the associated risks) would depend on the tax level proposed.

 

The main risks attached to either option follow on from the assumptions and information underlying the revision of the financial projections and the ability of the Council to take decisions on matching service levels with the money available to fund them.  In addition, the reputation and public perception of the Council may be affected. The key risks can be summarised as follows:

 

-          Actual savings targets prove to be substantially different from shown above, due to changes in financial projections.

-          Required savings targets can’t be met, without having an unacceptable impact on service delivery – either from the Council’s own viewpoint or from public perception.

-          Government / the public perceive the increase to be too high, resulting in capping action being taken against the Council and/or a negative impact on public relations and the Council’s reputation

-          Council tax targets are too low, resulting in them being unsustainable in the longer term, without having adverse effects on future service delivery and/or the Council’s financial standing and reputation.

 

The report highlights that there is significant scope for the projections to change, as a result of both internal and external factors. To counter this, there will be further opportunities to review target increases during the forthcoming budget as more definite information becomes available on forecast spending.

 

With regard to capping, the report provides information on Government’s actions this year and its commitment to using its capping powers in future.  Should Cabinet wish to support spending levels that result in a Council Tax increase much higher that the current MTFS target, then there are strong indications that the Government is likely to challenge this course of action.  This may well result in the Council’s budget being capped – in such a situation it would be forced to cut spending / services in an unplanned way and it would incur rebilling costs.  Alternatively, if Cabinet wish to support a much lower increase, then future sustainability may become an issue.  At present the financial projections for 2009/10 appear much worse than previously reported but they could change significantly, though on balance it is felt they are likely to get worse, rather than better.

 

In terms of options, the impact on Council Tax payers is key.  Members should consider the balance between providing services that the local community needs and wants, against how much it is prepared to pay.  There will be reputational, operational and financial risks, opportunities and trade-offs attached to whichever option Cabinet chooses.

 

Officer Preferred Option and Comments

 

There is no specific officer preferred option with regard to Council Tax levels.  That said, the Head of Financial Services would advise against planning for a Council Tax increase of 5% or above at this time as it would in all likelihood be subject to capping, although the Council must also be in a position to set a robust, achievable budget in line with its priorities.  Conversely, the Head of Financial Services would advise against aiming for too low a Council Tax level at this time if Members aim to continue to provide a wide range of services to the public and wish to avoid more potential for major service cuts in future years. 

 

Whatever Council Tax targets are in place, Members need to have supporting plans in place to achieve a balanced budget.

 

(The meeting adjourned at 10.50am to allow those present to join the Mayor to observe a two minute silence in the Garden of Remembrance. The meeting reconvened at 11.10am.)

 

It was moved by Councillor Mace and seconded by Councillor Charles:-

 

“(1)      That Cabinet notes the revised financial projections at this stage and the assumptions underpinning them, and resolves that they be referred on to Council for information.

 

(2)               That, at this stage, Council be recommended in principle to retain the existing Council Tax target increase of no more than 4% for future years, but that this be reviewed at the budget develops.

 

(3)               That, in response to the deterioration in the financial outlook and in order to take forward the setting of a balanced revenue budget for future years, the following actions be taken forward as top priority:

 

·                     Progressing the sale of land at South Lancaster to ensure completion is not delayed

·                     Progressing current negotiations regarding Lancaster Market in order to reach a conclusion by 31^st December, so that other alternative options for the future use of the building and/or the Council’s interests can be appraised, if a satisfactory outcome is not forthcoming

·                     Bringing forward proposals for the future use of the Auction Mart site as an interceptor car park

·                     Progress Storey Institute Creative Industries Centre to a successful launch and a first year of operation that requires little of no revenue subsidy from the City Council.

 

(4)               That, in order to achieve item 3 above, and to avoid the Council taking on any further financial or other pressures at this time, Cabinet approves in principle that other initiatives be deferred, and that this be considered in detail by Star Chamber initially, in order that formal proposals can be considered at the next available meeting of Cabinet, for referral on to Council if appropriate.”

 

Members then voted as follows:-

 

Resolved unanimously:

 

(1)           That Cabinet notes the revised financial projections at this stage and the assumptions underpinning them, and resolves that they be referred on to Council for information.

 

(2)                     That, at this stage, Council be recommended in principle to retain the existing Council Tax target increase of no more than 4% for future years, but that this be reviewed at the budget develops.

 

Resolved:

 

(8 Members (Councillors Archer, Blamire, Bryning, Burns, Charles, Gilbert, Kerr and Mace) voted in favour, 2 Members (Councillors Barry and Fletcher) voted against)

 

(3)                     That, in response to the deterioration in the financial outlook and in order to take forward the setting of a balanced revenue budget for future years, the following actions be taken forward as top priority:

 

·         Progressing the sale of land at South Lancaster to ensure completion is not delayed

·         Progressing current negotiations regarding Lancaster Market in order to reach a conclusion by 31^st December, so that other alternative options for the future use of the building and/or the Council’s interests can be appraised, if a satisfactory outcome is not forthcoming

·         Bringing forward proposals for the future use of the Auction Mart site as an interceptor car park

·         Progress Storey Institute Creative Industries Centre to a successful launch and a first year of operation that requires little or no revenue subsidy from the City Council.

 

Resolved:

 

(8 Members (Councillors Archer, Blamire, Bryning, Burns, Charles, Gilbert, Kerr and Mace) voted in favour, 2 Members (Councillors Barry and Fletcher) voted against)

 

(4)               That, in order to achieve item 3 above, and to avoid the Council taking on any further financial or other pressures at this time, Cabinet approves in principle that other initiatives be deferred, and that this be considered in detail by Star Chamber initially, in order that formal proposals can be considered at the next available meeting of Cabinet, for referral on to Council if appropriate.

 

Officers responsible for effecting the decision:

 

Corporate Director (Finance and Performance)

Corporate Director (Regeneration)

Head of Financial Services

 

Reasons for making the decision:

 

The decision is taken in response to the deterioration in the financial outlook and in order to take forward the setting of a balanced revenue budget for future years.