Agenda item

Resetting of Departmental Budgets 2020/21

Report of the Chamberlain.

Minutes:

The Committee considered a Report of the Chamberlain concerning the resetting of departmental budgets.

 

The Chairman opened the discussion by emphasising the grave challenges ahead. He stressed that whilst service Committees are being informed, they would not be invited to debate the size of the revised budget envelope, but they were being asked to consider how they are going to hit the new budget. Additionally, the Chairman stated that he would be sceptical of any departments proposing to significantly raise income projections as a way to plug the gap, it was evident that the primary driver to hit the new budget would be through cutting expenditure - we operated at a high-cost base and there was significant scope to do things more efficiently and effectively.

 

The Chairman highlighted that whilst all areas of the Corporation faced a difficult period,

some institutions, namely, the Barbican Centre, were in an invidious position, given the huge impact the crisis has had on ticketing and commercial income. Whilst commending the Barbican Centre’s significant efforts to reduce spending; clearly, its prospects were tethered to whether a) restrictions endure further into 2021 and b) more draconian restrictions are imposed in in the coming weeks/months.

 

The Chairman concluded by remarking that whilst we all wanted to maintain our ambitions and emerge from the crisis on the front foot, it was incumbent on everyone to ensure that sound finances were at the heart of our decisions and, crucially we cut our cloth accordingly. He cautioned Members that if we do not start the heavy lifting now then next year’s budget will be much more difficult; he urged Members to go back to their various Service Committees and ensure this message was wholeheartedly conveyed and push back on any attempt to stymie the revised budget.

 

The Chamberlain remarked that both the in-year and next year’s forecasts were still uncertain; they were subject in large-part to how the crisis unfolded over the coming months, in parallel with the potential short-term implications of Brexit, so, in short, the numbers had to be caveated. The Chamberlain and the Surveyor’s department were beginning to see the emerging impact the crisis had taken on our rental income; this would become clearer by the end of this quarter and would be reported to Members in more depth.

 

He added that officers were doing all they could to mitigate the risk to the City’s financial position and he stressed that the Corporation was still in a strong position compared to local authorities in London - the medium-term outlook was still relatively sustainable if we took action now and in 2021.

 

In response to a query concerning the Barbican Centre’s costs and savings, the Chamberlain confirmed the Centre had forecasted a 21% reduction in overall spending, this was a considerably higher percentage compared to what other departments and institutions had proposed. The Chairman added that whilst the 21% was a step in the right direction, the short – medium term prospect of increasing ticket and commercial income was remote, given the unfolding crisis, so, more would need to be done. He emphasised that the Corporation should honour its commitments and stand behind the Barbican, but it had to continue to bear down on costs.

 

The Chamberlain added that the spend at the Barbican is now forecast at £11.2m, the figure on p18 of the Report outlined a figure of £12.45m.

 

The Chamberlain also explained that whilst the Barbican (following the lead of the Corporation) chose not to furlough staff back in the spring, it had subsequently reversed this policy. The Chamberlain confirmed that the furlough support was backdated to 19th March, so, in effect, this support was not missed out on. In response to a separate Member query concerning the total amount spent on “topping up” the furlough, the Chamberlain would come back to the Member after the meeting with the figure.

 

A Member asked the Chamberlain to speculate as to the likely prospects for the Corporation in 2021. The Chamberlain responded that the potential upside would be around the slower pace at filling vacancies. The downside risk came principally from a deteriorating rental income position (a clearer picture of which should emerge in the next couple of months as the concerns of tenants become clearer and the furlough scheme is wound down). An additional concern was around the potential outcomes of the Government’s Spending Review in late November – this was unlikely to be good news at this stage.

 

The Chamberlain added that whilst the challenges were formidable, Members had an opportunity to set the Corporation on a sustainable footing with the successful implementation of the re-budgeting for 2020/21 and a positive approach to the 2021/22 budget. Furthermore, it should be highlighted that shortfalls may well ultimately be felt on

the reserve funds for the major projects – so a frank discussion around rephasing the projects would be something that Members may need to consider.

 

In response to a query, the Chairman, the Chamberlain, and the City Surveyor confirmed that no money or officer time was currently being spent on the Centre for Music project; the project was paused.

 

In response to a query concerning GSMD, the Chairman, whilst agreeing that a healthy buffer of reserves was desirable, stressed that reserves are there for a rainy day and accessing those reserves now was a logical step in the face of a generational crisis. He reiterated that the core proposition was to bear down on expenditure but using a healthy proportion of its reserves was a legitimate component in GSMD’s arsenal. It should also be kept in mind that GSMD had a co-funder, namely, the Office for Students (OfS), and that ongoing discussions around further financial support were not straightforward. The Chamberlain responded that the utilisation of reserves was a justified part of a robust response to get back on to a sustainable footing - it should be highlighted that GSMD’s position is worsening and this ultimately posed a risk to City’s Cash as the City is the banker of last resort. He added that further work was needed from GSMD and others to ensure that expenditure had been fully “pressed down upon”.

 

Finally, a Member asked officers to ensure that robust risk assessments were carried out when Members were presented with choices to stop doing things, or indeed not to start things. Officers needed to clearly set out what and why a project/item was being proposed to be cancelled and understand the potential risk(s) of that cancellation. The Chairman, whilst sympathetic to the spirit of the Member’s concerns, stressed that, whilst he viewed the Finance Committee as the focal point when it came to setting the overall envelope, he was in favour of devolution when it came to spending the envelope; it was the job of Service Committees to prioritise by making choices, and be demanding with officers when it came to how they planned to meet departmental budgets. He added that the exceptions would be if Services Committee’s came back “shroud waving” or were clearly proposing things in contravention of the corporate objectives.

 

RESOLVED – that the Committee approved the following:

 

• Note the steps already taken by officers to reduce the financial impact of the COVID-19 pandemic.

 

• Recommend to the Court of Common the adjusted departmental budgets totalling £15.2m outlined in this report, including a reduction of £400K to the original proposal to Resource Allocation Sub Committee for Open Spaces explained at paragraph 9 and the downward revision of circa £1m as outlined above for the Barbican Centre.

 

• Approve proposals to continue working with departments to identify further savings where possible.

 

• Approve continuation of recruitment controls aligned to the TOM which may give further savings in the year.

 

• As Service Committee, note the increase in budget of £1,084K for the Remembrancer

 

 

 

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