To consider the Medium Term Financial Strategy and receive a budget update.
Minutes:
Documents:
· Report of the Portfolio Holder for Finance
· Medium Term Financial Strategy 2019-2024
Discussion:
· The MTFS has been refreshed but not changed significantly
· The budget gap has changed
· The primary change within the document is with reference to the Integrated Planning process
· A 5-year model has been adopted but there is less detail in the latter years – it is expected that this will be rectified when the next MTFS is updated
· The Panel questioned whether the budget outturn will affect the MTFS – the MTFS is the strategy which considers modelling etc. The Finance Resource Model (FRM) is continually updated to reflect the current position.
· The document refers to a grant to top up protection relating to sparsity – this grant is not guaranteed, and this should be made clear
· The Leader’s introduction refers to an additional £1M put into schools. As the MTFS reflects the position for 2019-24 this should be amended as the £1M was fixed for three years and will not continue to 2024.
· Funding scenarios for schools now show a decline after pay and price pressures are included
· The Panel questioned how much modelling had been done on the likely fall in revenue due to falling school rolls together with the rising costs and risk to the Authority of not transforming schools. Contract pressures relating to school transport have been included. Individual pupil numbers are reflected at school level and in the FRM. Transformation of schools needs to move more quickly. School budget pressures on the overall budget is seen as the single biggest risk to the Authority. School deficits are projected to rise considerably. Some schools currently only set a one-year budget, but greater clarity is being obtained through meetings and assessments at schools
· The Panel asked at what point the current school system became unviable. There was no clear point, but deficits continue to indicate pressures in schools delegated budgets. The school estate exacerbates this situation.
· It was noted that Council Tax is average across Wales for a Band D property. However, overall, Council Tax per dwelling is the third highest in Wales despite Powys having a low wage economy. Affordability is a major issue.
· The Head of Finance was asked whether each service would provide an Integrated Business Plan (IBP) to support the 20/21 budget round and if an analysis of those plans would identify whether they could deliver service to an acceptable standard. The aim of IBP is to focus on outcomes and delivery of those services as efficiently and effectively as possible. The Authority will no longer offer funding scenarios but will require services to identify outcomes. Some services are more advanced with the new process than others but there is an expectation that this will be fully in place within three years. There is still some uncertainty regarding transformation and how this may impact upon service delivery.
· Pressures show that there will be a £1.4M reduction in Social Care. Members questioned whether this was realistic. The Panel was informed that pressures will be managed differently particularly with prevention becoming the focus of work.
· Capital Funding costs are based on the 5-year programme agreed in January 2019. The impact of revenue costs is a concern and a complete review of the Capital Programme is underway. IBPs will also reinforce capital needs and revenue costs to services.
· There was concern that the cost of projects exceeded predicted costs. A new process has been introduced which will see an increased level of scrutiny of business cases. The 5-case business model is used for all projects, and existing projects will also be subject to review under this model.
· Members asked if there were contingency funds within the budget. Members needed to understand what is affordable and what can be taken forward.
· The rate at which the capital budget is spent is also a concern and has been highlighted previously
· The Head of Finance was asked how much had been raised through capital receipts over the last three years and how much of this had been spent on staff severance
· It was not clear what the potential was for capital receipts in terms of the revenue budget. Were there any constraints and how could these be removed to get the best use from the Authority’s assets. The Head of Finance reported that there was a commitment of £2M within the budget for use for transformation projects. However, capital receipts exceeded this allowing some flexibility. The HRA has purchased land from the Authority and can also be included. The level of capital receipts dictates how much can be used. The IBP process should indicate those areas where greater investment may be needed to facilitate transformation. There is no information regarding whether there will be an extension to the directive beyond 2022. The Panel questioned whether an accelerated programme of disposals should be considered. Capital receipts can also impact upon the capital programme which may reduce revenue costs. Proposals will be drawn up for consideration by Cabinet and the Panel will have the opportunity to scrutinize those proposals.
· The Panel requested examples of where receipts have been used to invest in change
· The MTFS shows that savings delivery stood at 80% in 2013/14 but this has reduced steadily to 53% in the previous year. This is a stark reminder that transformation is essential.
· Reserves are used to deliver a balanced budget yearly – this would usually be the use of planned specific reserves. Last year was the first year where a policy decision was made to use reserves to balance the budget.
· The WAO is currently undertaking work regarding financial resilience – the results of this work would be shared with the Panel
· Costs arising from the Estyn Inspection have not yet been included within the MTFS. This is a work in progress and should be addressed through the Schools IBP.
Outcomes:
· The Panel note the Medium-Term Financial Strategy and have requested the following information:
o Capital receipts over 3 years and how much of this has been spent on severance payments
o Examples to be provided of where Capital Receipts have been used for transformation projects
Supporting documents: