Agenda item

(A)City Fund 2017/18 Budget Report and Medium Term Financial Strategy – to approve the budget for 2017/18.

21 February 2017

(A) City Fund 2017/18 Budget Report and Medium Term Financial Strategy

The Court proceeded to consider a report of the Finance Committee presenting the overall financial position of the City Fund (i.e. the Corporation’s finances relating to Local Government, Police and Port Health services) recommending that:

·           the Council Tax for 2017/18 remain unchanged from 2016/17; and

·           the Business Rate Premium be unchanged.

 

The Chairman spoke to introduce the budget and clarify a number of elements, following which a number of Members took the opportunity to ask questions.

 

Noting the provision of £400,000 for adult social care, a Member spoke to seek assurances that the money would be used to prevent, as far as possible, any delayed hospital discharges involving City residents. Replying, the Chairman observed the distinction between provision and allocation of a budget, observing that the case would need to be made by the Community and Children’s Services Committee for the funds to be allocated. He agreed that such delays should be minimised as far as possible and suggested that the Chairman might, accordingly, wish to use a decrease in such delays as an objective or measure of success in making his case for funds to be allocated.

 

Responding to a plea from a Member for a more ambitious approach to tackling the underlying causes and issues associated with rough sleeping and homelessness, the Chairman expressed sympathy with the view that a shift away from a merely reactive strategy to a more proactive one would be beneficial. He highlighted the work of The City Bridge Trust and the City Corporation’s other charitable arms in this field and urged the Member to engage with the Trust’s current quinquennial review, suggesting that this might be factored into its future strategy. Members also noted the Social Investment Board’s recent contribution towards the building of a new YMCA hostel in the City, which would accommodate up to 150 potential rough sleepers.

 

In response to queries concerning the recent revaluation of business rates and the disproportionate impact on small and medium enterprises in the City, the Chairman agreed that the current system was not ideal and observed that City ratepayers were effectively being asked to contribute an additional £230m. This clearly did not align with the ambition to make London a more competitive place and, indeed, risked detracting from its global reputation. However, he also noted the difficulty in identifying and implementing a better and fairer alternative. With the Chancellor of the Exchequer having indicated he would be seeking to explore new ways of taxing businesses, particularly in respect of the digital economy, as well having announced a review of the revaluation system and the prospect of greater fiscal devolution to London in this area, the Finance Committee would be working with the Policy and Resources Committee, as necessary, to consider forthcoming proposals and any appropriate next steps. The City was clear in its desire to see the burden of business taxation set in a way that maintained London’s competitiveness and which struck a fair balance between different sectors, whilst securing the revenues to ensure the delivery of first rate services.

 

Resolved – That that the report be agreed to and that the Court do pass a Resolution in the following terms:-

 

1.      that for the 2017/18 financial year the Court of Common Council approves:

 

·           the Premium multiplier on the Non-Domestic Rate and Small Business Rate multipliers be set at 0.005 (no increase on the present multiplier) to enable the City to continue to support the City of London Police, security and contingency planning activity within the Square Mile at an enhanced level;

·           an unchanged Council Tax of £857.31 for a Band D property (excluding the GLA precept);

·           the overall financial framework and the revised Medium Term Financial Strategy for the City Fund; and

·           the City Fund Net Budget Requirement of £119.3m.

 

Council Tax

 

2.      It be noted that in 2012 the Finance Committee delegated the calculation of the Council Tax Base to the Chamberlain and the Chamberlain has calculated the following amounts for the year 2017/18 in accordance with Section 31B of the Local Government Finance Act 1992:

 

(a)       7060.39beingtheamountcalculatedby the Chamberlain (as delegated by the Finance Committee),in accordancewith the Local Authorities (Calculation of Council Tax Base) (England)      Regulations 2012,as theCity’sCouncilTaxBasefor theyear; this amount includes a calculation of the amount of council tax reduction;and

(b)       Partsof CommonCouncil’sArea

 

InnerTemple	MiddleTemple	City excl. Temples (special expense area)
84.79	68.74	6906.86

 

being the amounts calculated by the Chamberlain, in accordance  with  the  Regulations,  as  the amounts  of  the  City's  Council  Tax  Base  for  the  year  for dwellings in those parts of its area to which the special items relate.

 

3.      For the year 2017/18 the Common Council determines, in accordance with Section 35(2)(d) of the Local Government Finance Act 1992, that any expenses incurred by the Common Council in performing in a part of its area a function performed elsewhere in its area by the Sub-Treasurer of the Inner Temple and the Under Treasurer of the Middle Temple shall not be treated as special expenses, apart from the amount of £16,494,000 being the expenses incurred by the Common Council in performing in the area of the Common Council of the City of London the City open spaces, highways, waste collection and disposal, transportation planning and road safety, street lighting, drains and sewer functions.

 

4.      That the following amounts be now calculated by the Common Council for the year 2017/18 in accordance with Sections 31 to 36 of the Local Government Finance Act 1992:

 

(a) £387,200,000	Being the aggregate of the amounts which the  Common   Council estimates   for  the items set out in Section 31A(2) (a) to (f) of the Act, including the local precepts issued by the Inner and Middle Temples
(b) £381,147,057	Being the aggregate of the amounts which the  Common   Council  estimates   for  the items set out in Section 31A(3) (a) to (d) of the Act;
(c) £6,052,943	Being the amount by which the aggregate at 4(a)  above  exceeds  the aggregate  at 4(b) above, calculated by the Common Council, in accordance with Section 31A(4) of the Act, as its council tax requirement for the year;
(d) £857.31	Being the  amount of  4(c) above, divided  by the amount at 2(a) above, calculated by the Common Council, in accordance with Section   31B   of   the   Act,   as  the   basic amount of its Council Tax for the year;
(e) £16,860,638.85	Being the aggregate amount of all special items referred to in Section 34(1) of the Act, including the local precepts issued by the Inner and Middle Temples;
(f)   £1,530.75 CR	Being the amount at 4(d) above less the result given by dividing the amount at 4(e) above by the amount at 2(a) above, calculated by the Common Council, in accordance with Section 34(2) of the Act, as the basic amount of its Council Tax for the year for dwellings in those parts of its area to which no special item relates.

 

(g)  Parts of Common Council’s Area

 

InnerTemple	MiddleTemple	City excl. Temples (special expense area)
£	£	£
857.31	857.31	857.31

 

being the amounts given by adding to the amount at 4(f) above the amounts of the special item or items relating to dwellings in those parts of the Common Council’s area mentioned above divided in each case by the amount at 2(b) above, calculated by the Common Council, in accordance with Section 34(3) of the Act, as the basic amounts of its Council Tax for the year for dwellings in those parts of its area to which one of the special items relate; and

             

(h)  Council Tax Valuation Bands

 

 

being  the  amounts  given  by  multiplying  the  amounts  at  4(g) above by the number which, in the proportion set out in Section 5(1) of the Act, is applicable to dwellings listed in a particular valuation band divided by the number which, in that proportion, is applicable to dwellings listed in valuation band D, calculated by the Common Council, in accordance with Section 36(1) of the Act, as the amounts to be taken into account for the year in respect of categories of dwellings listed in different valuation bands.

 

5.      It be noted that for the year 2017/18 the Greater London Authority has proposed the following amounts in precepts issued to the Common Council, in accordance with Section 40 of the Local Government Finance Act 1992, for each of the categories of dwellings shown below:

 

ValuationBands	Precepting Authority
	GreaterLondonAuthority
	£
A	49.26
B	57.47
C	65.68
D	73.89
E	90.31
F	106.73
G	123.15
H	147.78

 

 

6.      Having calculated the aggregate in each case of the amounts at 4(h) and 5 above, the Common Council, in accordance with Section 30(2) of the Local Government Finance Act 1992, hereby proposes the following amounts as the amounts of Council Tax for the year 2017/18 for each of the categories of dwelling as shown below:

 

Council Tax Valuation Bands Inclusive of GLA Precept

 

 

7.      The Common Council of the City of London hereby determines that the following amounts of discount be awarded:

 

i.      to dwellings in Class B as defined in the Council Tax (Prescribed Classes of Dwellings) (England) Regulations 2003 prescribed by the Secretary of State under the provisions of Section 11A of the Local Government Finance Act 1992 (i.e. second homes) - Nil for the financial year beginning on 1st April 2017;

 

ii.     to dwellings in Class C as defined in the Council Tax (Prescribed Classes of Dwellings) (England) Regulations 2003 prescribed by the Secretary of State under the provisions of Section 11A of the Local Government Finance Act 1992:

 

(a)       in the case of a vacant dwelling that has been such for a continuous period of less than 6 months ending immediately before the day in question: 100% for the financial year beginning on 1st April 2017;

 

(b)       in the case of a vacant dwelling that has been such for a continuous period of 6 months or more: nil for the financial year beginning on 1st April 2017 (i.e. a dwelling that is unoccupied and substantially unfurnished will qualify for a discount from the date the dwelling became vacant of 100% for the first six months (less one day) and nil thereafter)

 

iii.    to dwellings in Class D as defined in the Council Tax (Prescribed Classes of Dwellings) (England) Regulations 2003 prescribed by the Secretary of State under the provisions of Section 11A of the Local Government Finance Act 1992 (i.e. vacant uninhabitable dwellings or vacant dwellings undergoing major works to make them habitable or vacant dwellings where major repair works have taken place): 100% for the financial year beginning on 1st April 2017.

 

8.      The Common Council of the City of London hereby determines that its relevant basic amount of council tax for 2017/18, calculated in accordance with Section 52ZX of the Local Government Finance Act 1992 is not excessive in accordance with the Referendums Relating to Council Tax Increases (Principles) (England) Report 2017/18.

 

Council Tax Reduction (formerly Council Tax Benefit)

9.      It be noted that at the Court of Common Council meeting in January 2017 Members approved the Council Tax Reduction Scheme for 2017/18 to be the same as the scheme for 2016/17 Effectively, the City’s Local Council Tax Reduction Scheme for 2017/18 will have the annual uprating of non-dependent income and deductions, and income levels relating to Alternative Council Tax Reduction, or any other uprating as it applies to working age claimants, adjusted in line with inflation levels by reference to relevant annual uprating in the Housing Benefit Scheme or The Prescribed Council Tax Reduction Scheme for Pensioners. 

 

Non Domestic Rates

10.   The Common Council of the City of London being a special authority in accordance with Section 144(6) of the Local Government Finance Act 1988 hereby sets for the chargeable financial year beginning with 1st April 2017, a Non-Domestic Rating Multiplier of 0.484 and a Small Business Non-Domestic Rating Multiplier of 0.471 in accordance with Part II of the Schedule 7 of the said Act.  (Both multipliers are inclusive of the City business rate premium of 0.005).

 

11.   In addition, the levying by the Greater London Authority of a Business Rate Supplement in 2017/18 of 0.020 (i.e. 2.0p in the £) on hereditaments with a rateable value greater than £70,000, to finance its contribution to Crossrail, be noted.

 

12.   A copy of the said Council Taxes and the Non-Domestic Rating Multipliers, signed by the Town Clerk, be deposited in the offices of the Town Clerk in the said City, and advertised within 21 days from the date of the Court’s decision, in at least one newspaper circulating in the area of the Common Council.

 

 

 

Capital Expenditure and Financing for the Year 2017/18

Having considered the circulated report, we furtherrecommend that the Court passes a resolution in the following terms:-

 

13.   The City Fund capital budget is approved and its final financing be determined by the Chamberlain, apart from in regard to any possible borrowing options.

 

14.   For the purpose of Section 3(1) of the Local Government Act 2003, for the financial years 2017/18 to 2019/20, the Court of Common Council hereby determines that at this stage the amount of money (referred to as the “Affordable Borrowing Limit”), which is the maximum amount which the City may have outstanding by way of external borrowing, shall be £0.

 

15.   For the purpose of Section 21(A) of the Local Government Act 2003, for the financial year 2017/18, the Court of Common Council hereby determines that the prudent amount of Minimum Revenue Provision is £896,000 which equals the amount of deferred income released from the premiums received for the sale of long leases in accordance with the Minimum Revenue Provision Policy at Appendix E.

 

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

 

17.   The Chamberlain be authorised to lend surplus monies on the basis set out in the Annual Investment Strategy, with an absolute limit of £300m for maturities in excess of 364 days.

 

18.   The following Prudential Indicators be set:

 

Prudential indicators for affordability, prudence, capital expenditure and external debt:

 

	2017/18	2018/19	2019/20
Estimates  ofthe  ratio  of financingcoststo netrevenue stream: HRA          Non-HRA                Total	1.13  (0.25)	0.53  (0.33)	0.53  (0.16)
	(0.12)	(0.25)	(0.10)
Estimateof the incremental impactof capitalinvestment decisionsontheCouncilTax - compared to 2016/17 estimates and expressed as a Band D equivalent	£ 4,488	£     5,614	£    9,527
Estimate of the incremental impact on average weekly rent of capital investment decisions on housing rents	£   (4.89)	£   (4.06)	£   (1.70)
Estimatesof Capital Expenditure HRA Non-HRA Total	£m   36.615 95.601	£m    25.253 105.450	£m   7.331 95.658
	132.216	130.703	102.989
Estimatesof CapitalFinancing Requirement – underlying need to borrow HRA Non-HRA Total	£m     0.000 49.688	£m        0.000 100.955	£m     0.000 154.509
	49.688	100.955	154.509
Net borrowing/(Net investments)   Capital financing requirement – underlying need to borrow	Period2016/17to2019/20 £m (35.193) 154.509

 

Prudential Indicators for Treasury Management:

 

	2017/18	2018/19		2019/20
OperationalBoundaryforExternalDebt   Borrowing   OtherLong TermLiabilities     Total	£m   0   14.0	£m   0   13.9		£m   0   13.8
	14.0	13.9		13.8
AuthorisedLimit   Borrowing   OtherLong TermLiabilities     Total	£m   0   14.0	£m   0   13.9		£m   0   13.8
	14.0	13.9		13.8
UpperLimit- FixedInterestRate Exposure	100%	100%		100%
UpperLimit-VariableInterestRate Exposure	100%	100%		100%
UpperlimitforPrincipalSums Investedfor> 364days	£300m	£300m		£300m
MaturityStructureof NewFixedRate BorrowingDuring2015/16	UpperLimit   %		LowerLimit   %
Under12months	0		0
12monthsand within24months	0		0
24monthsand within5 years	0		0
5 yearsand within10years	0		0
10yearsandabove	0		0

 

Local Indicator focusing on revenue reserves:

 

	2017/18   Estimate	2018/19   Estimate	2019/20   Estimate
Timescoverby dividing unencumberedrevenue reserves by annual revenue deficit/(surplus) - bracketed figuresdenoteannual surpluses	(5.5)	26.0	1.1

 

 

Other Recommendations

19.   The Treasury Management Strategy Statement and Annual Investment Strategy 2017/18 are endorsed.

 

20.   The Chamberlain’s assessment of the robustness of budgets and the adequacy of reserves is endorsed.