Agenda item

Report of the Chamberlain. This report will also be considered by the Court of Common Council on 3 March 2016.

The Committee considered a report of the Chamberlain which presented the Committee with the overall financial position of the City Fund. The report set out the overall financial framework and Medium Term Financial Plan and the City Fund Budget requirement. The report requested that Members recommend to the Court of Common Council that the Council Tax level for 2016/17 remains unchanged, and asked Members to considered whether an increase in the Business Rates Premium should be recommended to the Court.

The Chairman advised the Committee that the budget setting process for this year had been particularly consultative, in light of the challenging budget position, particularly in relation to the budget for the City of London Police. He highlighted that three Member breakfast meetings had been held, hosted jointly by the Chairmen of Finance Committee and Police Committee, in November 2015 and January 2016, to give Members the opportunity to discuss the Police budget position in detail. He also noted that the issue of the Police’s budget position, and the potential impact this may have on the discussions regarding whether to increase the level of the Business Rates Premium.

The Chairman noted that this issue had also been discussed at the joint meeting of the Resource Allocation and Efficiency and Performance Sub-Committees (with Committee Chairman in attendance) on 21 January 2016, where an informal vote had indicated that those present were in favour of increasing the Business Rates Premium (by a margin of 16 to 10). The Chairman highlighted that a further discussion had been held at the meeting of the Policy and Resources Committee on 21 January 2016, where a vote had indicated that those present were against an increase in the level of the Business Rates Premium (by a margin of 15 to 14).

The Chairman also noted that the potential for there to be an increase in the level of the Business Rates Premium had been indicated to business ratepayers in the consultation event which had been held on 3 February 2016.

The Committee noted that the previous discussions held at the Members’ breakfast events and the Policy and Resources Committee had been without a report previously being circulated to the Members for consideration. The Committee thanked the Chamberlain for the comprehensive report which was before them, which provided all the relevant information for consideration of the budget as a whole and the Police budget and Business Rates Premium in particular.

Members discussed these issues and agreed that there were two separate issues which required consideration: firstly, whether there was a requirement for the City of London Budget to be increased, and secondly, whether that increase should be funded by an increase in the level of the Business Rates Premium.

On the first matter, Members noted that the environment in which the City of London Police operated had changed significantly as a result of the terrorist attacks in Paris on 13 November 2015. Members noted that these had occurred at a late stage during the Corporation’s budget setting process, and therefore it had not been possible to factor the changed environment in to the 2016/17 budget, although Members noted that there had been a greater level of Government spending than had previously been expected, largely as a result of the Paris attacks.

Members noted that there was a strong case to increase the Police budget in light of the changes to the security environment after the Paris attacks. However, Members also noted that such a budget increase for 2016/17 would only be justifiable if the budget increase led to an increased provision of Police services in 2016/17, rather than a smaller decrease in the level of Police reserves. The proposed funding for additional firearms officers and Counter Terrorism Security Advisors (CTSAs) indicated that improved Police services would be provided through an increase in the Police budget.

On the matter of the potential for an increase in the Police budget to be funded through an increase in the level of the Business Rates Premium, Members commented that such an increase needed to be funded through sustainable means, and that funding through either the Police reserve or City Fund was not sustainable.

A Member, also Chairman of the Police Committee, stated that, on average, Police authorities raised 32% of their funding through their Police Precept, while the City of London Police on raised 10% of its funding through its equivalent, the Business Rates Premium. The Member also noted that the majority of Police Authorities had increased their Precepts in recent years and were expected to do so again this year.

Following the discussion, the Committee agreed to vote on the issue of whether the Committee should recommend to the Court that the City Fund Net Budget Requirement for 2016/17 should be increased from £105.4m to £107m. This was unanimously agreed.

The Committee then agreed to vote on whether the Committee should recommend to the Court that the level of the Business Rates Premium be increased by 0.1p in the pound, from 0.4p in the pound to 0.5p in the pound. The Committee agreed by a vote of 14 in favour, 0 against (1 abstention) to recommend this increase to the Court.

RESOLVED – That the Committee recommends that the Court of Common Council approve all of the following recommendations:

·         Approve the overall financial framework and the revised Medium Term Financial Strategy (as set out at paragraph 2 of the report)

·         Approve the City Fund Net Budget Requirement of £107.0m (as set out at paragraph 12 of the report).

·         Note the following changes in assumptions from the previous forecast (as set out at paragraphs 3 and 28 of the report):

o        Allowances for pay and prices are factored in at 1.5% in 2016/17 and then reducing to 1% across the rest of the period; and

o        A £250k contingency is provided in 2016/17 for the final stages of moving suppliers to the London Living Wage contracts;

o        A contingency has been provided for severance costs relating to service based review savings (£0.5m p.a. in both 2016/17 and 2017/18);

o        Following the identification of a bow-wave of delayed cyclical repairs work, an additional £1m p.a. funding has been included; and

o        Provision has been included for transformation funds – £0.5m p.a. from 2016/17 to 2018/19. 

·         Note that a provision of £1.2m p.a. has been made in the revenue estimates from 2017/18 for reductions in the City’s baseline funding level as part of the Rates Retention Scheme.

·         Approve the publication of an efficiency plan, subject to assessment of detailed requirements.

·         Note the Local Council Tax Reduction Scheme set by the Court of Common Council on 14 January 2016 and as set out at paragraph 27.

Key decisions

The key decisions to make are in setting the levels of Non Domestic Rates and Council Tax. 

Business Rates

·           Set, exclusive of the Business rate premium, a Non-Domestic Rate multiplier of 49.7p for 2016/17 together with a Small Business Non-Domestic Rate multiplier of  48.4p (as set out at paragraph 15 of the report).

·           Approve an increase in the Business Rates Premium of 0.1 in the pound (from 0.4p in the pound to 0.5p in the pound), with the additional income to be allocated to the City of London Police.

·           Note that the Greater London Authority is, in addition, levying a Business Rate Supplement in 2016/17 of 2p in the £ on properties with a rateable value greater than £55,000 (as set out at paragraph 20 of the report).

·           As in previous years, delegate to the Chamberlain the award of the discretionary rate reliefs under Section 47 of the Local Government Finance Act 1988 as set out in paragraph 19 of the report.

Council Tax

·           Recommendation is for the City’s Council Tax (excluding the Greater London Authority precept) to remain unchanged.

·           Based on a zero increase from 2015/16, determine the provisional amounts of Council Tax for the three areas of the City to which are added the precept of the Greater London Authority (appendix A to the report).

·           Determine that the relevant (net of local precepts and levies) basic amount of Council tax for 2016/17 will not be excessive in relation to the requirements for referendum.

·           Approve that the cost of highways, transportation planning, waste collection and disposal, drains and sewers, open spaces and street lighting functions for 2016/17 be treated as special expenses to be borne by the City’s residents outside the Temples (appendix A to the report).

Other recommendations

All other recommendations are largely of a technical and statutory nature; the only one to highlight for particular attention is that it is proposed that the City of London Corporation remains debt free.

Capital expenditure

·                Note the proposed financing methodology of the capital programme in 2016/17 (as set out at paragraph 30 of the report).

·                Approve the Prudential Code indicators (Appendix B to the report).

·                Approve the following resolutions for the purpose of the Local Government Act 2003 (as set out at paragraph 33 of the report and Appendix E to the report) that:

Ø at this stage the affordable external borrowing limit (which is the maximum amount which the Corporation may have outstanding by way of external borrowing) be zero.

Ø the prudent amount of Minimum Revenue Provision (MRP) for 2016/17 is zero.  For subsequent years MRP will equal the amount of deferred income released from the premiums received for the sale of long leases in accordance with the MRP Policy at Appendix E to the report.

·                Any potential external borrowing requirement and associated implications will be subject to a further report to Finance Committee and the Court of Common Council.

·                Note that the funding for the £200m contribution from City Fund to Crossrail has been assembled over the past few years from a planned strategy in relation to investment properties and is now in place, with payment anticipated to be in March 2017.

Chamberlain’s assessment

·                Take account of the Chamberlain’s assessment of the robustness of estimates and the adequacy of reserves (as set out paragraphs 36, 37 and 42 of the report, and Appendix D to the report)