Agenda item

Report of the Chamberlain.

 

(TO FOLLOW)

The Committee considered a report of the Chamberlain outlining the overall financial position of the City Fund and the impact of the medium-term financial plan on the Fund. The Chairman set out the discussion under three sections:

1.    Key decisions on proposals for increasing Council Tax and Business Rates

2.    Impact of revenue bids

3.    Changes in the Treasury Management Strategy Statement

 

Council Tax and Business Rates

Firstly, Members discussed the proposal to increase the Business Rates Premium by 0.1p to 0.6p in the £, raising an increase to the forecast of over £2m, which could be applied to bringing the budget back into balance and to the increased demands that the City of London Police (CoLP) are facing in maintaining the security of the City. The Chairman was clear that the CoLP would need to submit a full business case so that the Committee had a sufficient understanding and oversight on what this money would be spent. After some discussion, it was agreed that a ‘security PIP (Priorities Investment Pot)’ would be set up (with £4.2m  in total) against which the CoLP could bid for funds. The Chairman underlined the expectation of the Committee, that demands on the CoLP should, as much as possible, be found within its existing budget before bidding for funds from the Security PIP.

 

Although stating their usual reluctance in raising taxes, other Members supported the recommendation that the Business Rates Premium be increased, due to the serious security requirements in the City.

 

The Chairman presented the pros and cons of raising Council Tax and sought Members views. On the whole, Members supported the recommendation to increase the City Corporation element of Council Tax Demand by 2.99%. Members considered the political positioning of the City Corporation in light of the Fair Funding Review, particularly in the league table of other London councils, where the City Corporation stood at third or fourth lowest.

 

A Member was wary that, as the latest forecast for City Fund was shown to be in surplus by £19.8m in 2019/20, it would be difficult to justify the tax increase when looking at one single year. However, the point was made that looking at several years, there would be a longer-term deficit.

 

Members discussed the impact of the 2.99% increase of council tax and the additional levying of an Adult Social Care Precept of 2% on residents in the City, whilst also highlighting the importance of considering the needs of poorer residents. Members were advised that Council Tax support would still be in place for those who struggled to pay, and that the average additional cost for an individual on Band D Council Tax level would only be £3.80 per month. With this in mind, most Members (with the exception of two) felt that the increase was not unreasonable for residents to pay.

 

In addition, a Member asked officers for advice on how long the GLA’s 2p business rate supplement levy on non-domestic properties would last to help pay for Crossrail. Officers advised that this would be approximately a further 20 – 25 years.

 

Finally, the Chairman moved to vote on the recommendations relating to Council Tax, Adult Social Care Precept and Business Rates Premium. Those in favour of an increase of 2.99% in the City Corporation’s element of the Council Tax Demand numbered 16, with 1 Member against and 1 Member abstaining. The recommendations relating to the Adult Social Care Precept of 2% and the Business Rate Premium increase of 0.1p to 0.6p in the £ were approved unanimously.

 

Revenue Bids

The Committee then discussed the situation regarding the prioritisation of revenue bids. The Chairman reported that the current behaviour within the City Corporation was unsustainable. He made clear that departments should not expect, in year, to have an increase in their local risk budgets, and new projects or activities should be funded from existing budgets. Members also discussed how challenging it had been to align budgets for major projects with the Corporate Plan.

 

Members discussed how the City Corporation needed to take lessons from what had happened with the Crossrail project and put cash limits in place for major projects. For example, the Committee discussed how the requests for funding for the Museum of London project was continuing to rise. The point was made that the more that was spent on projects, the less that was available for front line services.

 

The Chairman urged Members to consider that choices needed to be made on spending. It was important that bids were always prioritised against the corporate plan, that the impact of choices on vital services needed to be considered. The Deputy Chairman stated that the cash limit needed to be a limit and that projects might not be as originally envisaged if an affordability issue became apparent down the line.

 

Members discussed various projects, including the Museum of London relocation and the consolidation of the three markets. The Policy Chair made the point that, if consolidating all three markets were to become unaffordable, then this would need to be reviewed again and the project might not take the form as originally envisaged. Members highlighted that there needed to be a cultural change within the City Corporation in view of what was actually affordable.

 

The Director of Major Projects reminded Members that all the major projects were in their early stages, as well as all being at very different stages. The figures provided to Members at committee stage would always be ‘worst case scenario’. Overall, Members felt that whilst the major projects were not under overwhelming pressure and that their status was agreed, choices needed to be made throughout the progress of the projects to ensure that priority was given to front line services.

 

A Member noted that the City’s Cash Borrowing Policy Statement mentioned foreign currency in terms of borrowing, and felt concerned on that matter. The Chamberlain confirmed that the City Corporation’s borrowing would all be drawn in Sterling.

 

Changes to the Treasury Management Strategy

Members noted that the Chamberlain’s recommendation for a limit per group under the Treasury Management Strategy for foreign banks had changed and that it should be £100M rather than £25M. Members agreed that this decision could be made under delegated authority by the Town Clerk in consultation with the Chairman and Deputy Chairman of the Finance Committee.

 

RESOLVED, that it be recommended to the Court of Common Council that:

·         The establishment of a fundamental review of priorities to align resources to the Corporate Plan be approved, and a sustainable medium-term financial plan be delivered;

·         The mitigation actions with respect to the Police budget be approved;

·         The overall financial framework and the revised Medium-Term Financial Strategy be approved;

·         The Treasury Management Strategy Statement and Investment Strategy Statement for 2019/20 be approved, subject to a decision under delegated authority from the Town Clerk in consultation with the Chairman and Deputy Chairman of Finance concerning the upper limit for Foreign Banks, and for it to come into effect following the meeting of the Court of Common Council on 7 March 2019;

·         The operational boundary and authorised limit for external borrowing as stated in the Treasury Management Strategy Statement and Investment Strategy for 2019/20 be approved;

·         The City Fund Net Budget Requirement of £137.2m be approved;

·         The increases in base budget, detailed in appendix B of the report for 2019/20 be approved, subject to inclusion within the scope of the fundamental view in the special meeting of the Resource Allocation Sub-Committee, included within the City Fund budget requirement;

·         It be noted that the forecast includes items already agreed by the Policy & Resources Committee;

·         It be noted that the revenue estimates assume that a Business Rates reset will remove the City’s recent business rates growth receipts in 2020/21 (forecast at £37m in 2019/20) and further reforms of Business Rates could worsen the impact from 2020/21;

·         It be noted that the Local Council Tax Reduction Scheme will remain the same as set out by the Court of Common Council on 12 January 2017.

 

Key Decisions

 

Key decisions were also made in setting the levels of Council Tax and Non Domestic rates.

 

Council Tax

 

RESOLVED, that:

·         The City of London Corporation element of the Council Tax Demand be increased by 2.99%;

·         The City of London Corporation charge an Adult Social Care Precept of 2.00%;

·         The amounts of Council Tax for the three years of the City (the City, the Middle Temple and the Inner Temple), to which are added the precept of the Greater London Authority (GLA), be determined;

·         It be determined that the relevant (net of local precepts and levies) basic amount of Council Tax for 2019/20 will not be excessive in relation to the requirements for referendum;

·         It be approved that the cost of highways, street cleansing, waste collection and disposal, drains and sewers, and road safety functions for 2019/20 be treated as special expenses to be borne by the City’s residents outside the Temples.

 

Business Rates

 

RESOLVED, that:

·         A Non Domestic Rate multiplier of 51.0p and a Small Business Non-Domestic Rate Multiplier Rate of 49.7p for 2019/20 be set, inclusive of a Business Rates Premium increase of 0.1p to 0.6p in the £;

·         It be noted that, in addition, the GLA is levying a Business Rate Supplement in 2019/20 of 2.0p in the £ on properties with a rateable value of £70,000 and above;

·         It be delegated to the Chamberlain the award of discretionary rate reliefs under Section 47 of the Local Government Finance Act 1988.

 

Capital Expenditure

 

RESOLVED, that:

·         The proposed financing methodology of the capital programme in 2019/20 be noted;

·         The Capital Strategy be approved;

·         The Prudential Code indicators be approved;

·         The following resolutions for the purpose of the Local Government Act 2003 be approved:

o   The external borrowing limit (which is the maximum the City Fund may have outstanding by way of external borrowing) is £241m

o   The prudent amount of Minimum Revenue Provision (MRP) for 2019.20 is £1.152m.

 

Treasury Management Strategy Statement and Investment Strategy Statement 2019/20

 

RESOLVED, that:

·         The change to allow external borrowing to be undertaken within City Fund within the parameters of the Prudential Code be approved.

 

Chamberlain’s Assessment

 

RESOLVED, that:

·         The Chamberlain’s assessment of the robustness of estimates and the adequacy of reserves and contingencies be taken account of.