Agenda item

Report of the Chamberlain.

To Follow.

The Committee considered a Report of the Chamberlain concerning the 2022/23 Budget and Medium-Term Financial Plan for City Fund.

A concern was raised by Alderman Luder (attending the meeting as a guest of the Chairman) in respect of the proposal to not increase the core Council Tax level; the City’s medium-term financial outlook was, as per the wording in the Report, on “a knife-edge”, with the upcoming loss of the Business Rates Growth Fund, and significant changes from the Fair Funding settlement compounding the risks. The decision not to increase, would in addition, send an unhelpful signal to central government that the City’s finances were, over the medium-term, in a better shape than was the case. Whilst currently the projections indicated a small surplus over 2022/23, it was incumbent upon the Court to use this opportunity to reinforce the City’s finances and “fix the roof whilst the sun was shining”, given the likelihood of further demands throughout this year and other cost pressures which need to be taken into account, including the national insurance surcharge and increased audit fees. The Member added that whilst increasing Council Tax would not deliver huge sums immediately, over five years an increase of 1.99% would result in a cumulative income of £2.1m, which would have a material and positive impact on the City’s financial sustainability over the medium-term. The Member therefore moved to amend the recommendation concerning the Core Council Tax to increase it by 1.99%.

A number of Members highlighted their concerns about the implications of an increase to the level of Core Council Tax at this point in the political cycle; after all, an increase would only generate a relatively modest sum of money from a relatively modest number of residents. It was thought unlikely that Government will look at a decision not to increase the Tax unfavourably, and given the rising rate of inflation, and its impact on the cost of living, it was vital that resident tax payers weren’t over-burdened during this period.

No clear view at RASC supportive of, Government will risk – Hudson 2%, JDS – BRP going up so Council Tax should go up to in interest of fairness. Corp facing significant financial pressures – reassured that those on low incomes would have a degree of protection. Not convinced that the electoral cycle should hold sway, wards with BRP increase

Several Members spoke in support of the amendment, with one emphasising that, whilst it was important to shield poorer residents from increases, those with broader shoulders could and should pay a greater contribution. Furthermore, it was vital to recognise that a failure to increase Council Tax now, irrespective of the electoral timing, could very well lead to the need to increase it by a greater sum (with the potential for the need to hold a local referendum) further down the line in order to “catch up”.

In addition, it was pointed out as unfair that a proposal to increase the Business Rate Premium (included in the recommendations), which would impact the business community, was not matched by the City’s residents taking an equivalent share of the burden by way of an increase to the Core Council Tax. 

The Deputy Chairman of the Finance Committee spoke in opposition to an increase to the core Council Tax; he highlighted that the current total UK wide tax take and the size of state as a proportion of national income was at a level not seen in the last 50 years; he emphasised the need to increase the downward pressure on costs, “cutting our cloth”, and raising productivity in the public sector as far more desirable solutions at this point than raising further taxes. 

The Chairman added that the maximum the City would be able to raise through an increase to core Council Tax in 2022/23 would be circa £140K, which would not make a material difference to the City’s finances; however, he emphasised that we should not be complacent, and, keep the finances under close and constant review.

Members voted 11 – 4 in support of the recommendation concerning the Core Council Tax, namely, that it should be frozen in 2022/23.

In response to a query, the Chamberlain confirmed that the impact of the increase in the Business Rate Premium would be restricted to the upcoming financial year 2022/23, (i.e. there was no compound implications for future years).

In response to a concern about the need for an increase this year, the Chamberlain stressed that, if Members were not minded to approve the increase, the City would need to identify a flight-path over the medium-term to plug the £36m deficit. The Chairman of the Police Authority Board added that whilst he and the Force completely accepted that there were further efficiencies to be delivered, the overall quantum simply could not be bridged without increases to the BRP. Furthermore, if the City chose not to increase the BRP, it very likely result in a reduction in central government’s core grant. In short, despite the absence of an immediate deficit over 2022/23 “we need to start filling the medium-term gap now”.

Members were broadly supportive of the Chairman of the Police Authority Board’s comments and endorsed the increase to the BRP.

RESOLVED – That the Committee approved the following:

·         Note the overall budget envelopes, this incorporates additional one-off funding from Government of £1.88m and retained business rates growth of £27m in 2022/23. For Police, an increase of additional grant to support the officer uplift plus £6.1m mitigations combined with £2.3m Business Rate Premium reinstated – noting this leaves the Police budget in deficit for 2022/23.

·         Continue to monitor COVID income risk during 2022/23 and maintain a COVID contingency fund, not releasing £30m of general fund reserves for major project spend – to be reassessed in December 2023.

·         Approve the overall financial framework and the revised Medium-Term Financial Strategy (paragraph 25).

·         Approve the Treasury Management Strategy Statement and Annual Investment Strategy for 2022/23, including the treasury indicators.

·         Approve the City Fund Net Budget Requirement of £167.3m (paragraph 57)

Council Tax

·         To approve an increase in the Adult Social Care Precept of 1.00% (paragraph 38).

·         To otherwise consider whether to freeze council tax (paragraph 39).

·         Determine the amounts of Council Tax for the three areas of the City (the City, the Middle Temple and the Inner Temple to which are added the precept of the Greater London Authority (GLA) - appendix A.

·         Determine that the relevant (net of local precepts and levies) basic amount of Council Tax for 2022/23 will not be excessive in relation to the requirements for referendum.

·         Determine, the current 100% discount awarded to unoccupied and unfurnished and uninhabitable dwellings is continued at zero (0%) for the financial year 2022/23 and future years.

·         Determine that the premium levied on long-term empty property for 2022/23 and future years of 100% and 200% is continued and that for properties that have been empty for over ten years, a premium of 300% is levied.

·         It is recommended that, having regard to the government guidance issued, the Chamberlain be given the discretion, delegated to the Head of Shared Services, to reduce or waive the long-term empty premium charge in exceptional circumstances.

·         Approve that the cost of highways, street cleansing, waste collection and disposal, drains and sewers, and road safety functions for 2022/23 be treated as special expenses to be borne by the City’s residents outside the Temples (appendix A).

Business Rates

·         To approve an increase of up to 0.4p in the £ in Business Rate Premium (paragraph 40).

·         Set a Non-Domestic Rate multiplier of 52.4p and a Small Business Non-Domestic Rate Multiplier Rate of 51.1p for 2022/23.

·         Note that, in addition, the GLA is levying a Business Rate Supplement in 2022/23 of 2.0p in the £ on properties with a rateable value of £70,000 and above (paragraph 62).

·         Delegate to the Chamberlain the award of discretionary rate reliefs under Section 47 of the Local Government Finance Act 1988 (paragraphs 61).

Capital Expenditure

·         Approve the Capital Strategy (appendix E).

·         Approve the Capital Budgets for City Fund and the allocation of central funding from the appropriate reserves to meet the cost of the 2022/23 new bids– release of funding being subject to approval at the relevant gateway and specific agreement of the Resource Allocation Sub Committee at gateway 4(a) (paragraph 68).

·         Approve the continuation of the allocation of central funding in 2022/23 to provide internal loan facilities for police and the HRA, currently estimated at £4.9m and £19.0m respectively (paragraph 71).

·         Approve the Prudential Code indicators (appendix C).

·         Approve the authorised limit for external debt (which is the maximum the City Fund may have outstanding by way of external borrowing) at £216.6m for 2022/23; and the Minimum Revenue Provision (MRP) for 2022/23 at £1.2m (MRP policy is included within appendix D – Treasury Management Strategy Statement and Investment Strategy Statement 2022/23 - appendix 2).

Treasury Management Strategy Statement and Investment Strategy Statement 2022/23 (Appendix D)

·         Approve the addition of multi-asset funds to the list of permitted non-specified investments subject to an overall limit of £50m (Appendix D, sub appendix 3). The Corporation is expected to maintain significant surplus cash balances for the foreseeable future. Multi-asset funds enable the Corporation to mitigate the gradual erosion of the real value of these long-term cash balances from the effects of inflation.

·         Approve the new policy for managing environmental, social and governance (ESG) risks within treasury investment activity (Appendix D, paragraph 5.4).

Chamberlain’s Assessment

·         Take account of the Chamberlain’s assessment of the robustness of estimates and the adequacy of reserves and contingencies (paragraphs 79-82 and appendices B and G respectively).