Agenda item

Reports of Head of Financial Services and Corporate Director (Finance and Performance)

The Panel received reports that had recently been considered by Cabinet. 

Firstly, Members considered the report of the Head of Financial Services on the Medium Term Financial Strategy Review, which provided updated financial projections for future years based on information currently available, so that the appropriateness of existing targets for Council Tax increases could be reviewed by Cabinet and recommendations made to Council, as appropriate.

The Head of Financial Services advised Members that major financial issues had arisen recently which had affected the Council’s financial outlook and resulted in uncertainty, namely the Icelandic Investments position and Concessionary Travel.  Other issues, such as rises in energy and fuel prices and the impending Fair Pay award, had also impacted.  These had caused a significant deterioration in budget prospects.

Regarding capital, at its meeting on the 19^th November, the Council had resolved that the 2008/09 Capital Programme funding be updated to provide a £1.4M underlying increase in unsupported borrowing, on the basis that this be ‘repaid’ in 2009/10, and that the updated Capital Programme, as set out at Appendix A to the report, be approved (Minute No. 71 2008/09 refers).  Unsupported borrowing would allow the Council to borrow to a level it felt was affordable outside of Central Government approvals for borrowing. 

Regarding investments, it was reported that, at present, projections only provided for loss of some interest from the time that the Icelandic banks went into receivership. 

At its meeting on the 11^th November, Cabinet had noted the revised financial projections and the assumptions underpinning them; and had resolved to recommend to Council that the existing Council Tax target increase be retained at no more than 4% for future years, but that this be reviewed as the budget developed.  The Government had a reserve power to cap the budget if spending decisions led to an excessive Council Tax.

Cabinet had also recommended that actions be 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, including progression of the sale of land at South Lancaster and current negotiations regarding Lancaster Market, bringing forward proposals for the future use of the Auction Mart site as an interceptor car park and progressing the Storey Institute Creative Industries Centre to operation that required little or no revenue subsidy from the City Council.

Members were advised that, in addition to the Icelandic banking collapse, the Concessionary Travel scheme, which had been introduced for anyone over the age of 60 or the eligible disabled, entitled free off-peak local bus travel within the local authority area, had financial implications.  Lancashire authorities had agreed, in principle, to enter into pooling arrangements to help spread the costs and risks, but the agreement had not yet been finalised.  Under the arrangement, councils would move to being charged the actual share of concessionary travel costs, unlike the present estimates on a phased basis over the next three years.  Information released showed that the extra net costs facing the Council in this area were between £129K and £243K, as at the end of July, allowing for using £150K set aside in the Concessionary Travel Reserve and assuming that the pooling agreement would be implemented, although it was noted that a number of other councils were reviewing their position.

Secondly, Members considered the report of the Corporate Director (Finance and Performance), which gave an update on the Star Chamber meetings held since the last report to Cabinet on 2^nd September 2008, and the action notes appended to the report.

The action notes considered:

• ‘Every Penny Counts’ campaign, which had been launched in October.
• Budget Update and Future Progress, the new process for bringing forward efficiency and savings options, with directors arranging meetings with Service Heads and Cabinet Members to progress options for efficiencies, savings and growth.

Resolved:

That the reports be noted.