Agenda item

Purpose of the item: For the Select Committee to review and comment on the final 2021/22 budget – report to follow.

Witnesses:

Anna D’Alessandro, Director of Corporate Finance

Mel Few, Cabinet Member for Resources

Mark Hak-Sanders, Strategic Finance Business Partner

Nicola Kilvington, Director of Insight, Analytics and Intelligence

Becky Rush, Deputy Cabinet Member for Resources

Rachel Wigley, Director of Financial Insight

Key points raised during the discussion:

1.    The Chairman reminded the Select Committee that it had reviewed the draft budget in December 2020 and the comments, conclusions and recommendations of all four select committees would be presented to the Cabinet at their meeting later in January 2021. There was one recommendation from this Select Committee, which concerned working with each district and borough council to agree assumptions about the collection fund and receipts of council tax and business rates to ensure the Council’s 2021/22 budget was based on robust figures.

2.    The Chairman noted that these final proposals being presented to the Select Committee highlighted the changes from the December 2020 figures, how the budget gap of £18.3m was to be closed, and provided further information requested from the December 2020 meeting.

3.    The Director of Financial Insight shared slides and explained that the budget, which stood at circa £1bn, was now balanced and did not require any contribution from reserves. At the draft budget stage, there had been a circa £18m gap, which had been closed following the provisional settlement from central government. Moreover, the directorate position had improved by £3.3m since the draft budget, and two additional reserve contributions of £9m and £4.9m respectively had been made in special educational needs and disabilities (SEND) and Covid-19. The council was expecting the government to confirm details on collection fund losses soon; it was expected that central government would underwrite a 75% share of irrecoverable collection fund losses.

4.    The Director of Corporate Finance described Surrey County Council’s close relationship with the district and borough councils within Surrey. The Director of Corporate Finance and Director of Financial Insight attended regular Treasurer meetings with district and borough councils’ Chief Financial Officers and collected information on collection rates from district and borough councils on a monthly basis, which was then sent to the Cabinet Members. Collection assumptions had been reviewed regularly throughout 2020/21. The Council had received a directive from central government allowing it to spread 2020/21 collection fund losses over the next three years. The Council currently had a £21m collection fund deficit (before the impact of grant-funded retail and nursery reliefs of £19.2m), which had decreased from £37m over the course of the development of the 2021/22 budget. The numbers could continue to change until the final budget, when Surrey County Council would receive confirmation from district and borough councils. The most up-to-date estimate for the 2021/22 collection fund deficit was £12.8m (again, before the impact of grant funded retail and nursery reliefs of £19.2m).

5.    The Director of Corporate Finance explained that Central Income and Expenditure was different from a corporate resources budget; it was central and not allocated to individual service areas. In 2021/22 the Central Income and Expenditure budget totalled £83.2m. The number was proportionate to the relatively large size of Surrey County Council. Over the course of the Medium-Term Financial Strategy (MTFS), the largest contributor to the changes in the budget requirement in Central Income and Expenditure was the additional cost of the capital programme.

6.    The Director of Corporate Finance stated that Earmarked Reserve would increase to £186.5m by the end of 2020/21, due to an increase in the budget equalisation reserve. Also, the general fund had been increased compared to previous years in order to provide more resilience. The Covid-19 reserve stood at £9.9m and any of this funding not used in 2020/21 could be carried forward into 2021/22.

Graham Knight joined the meeting at 10:29am.

7.    A Member noted that the additional funding required because of the deterioration in assumed council tax base, updated collection fund loss assumptions (offset by business rate relief grant) and ‘Covid-19 75% share of irrecoverable collection fund losses’ were all listed in the report as ‘to be confirmed’. If they were confirmed and involved more expenditure or less income, how would this be dealt with? The Director of Corporate Finance replied that the Council had been in a surplus position in 2020/21, so a reserve had been put aside to smooth any impact if more expenditure was required. The Cabinet Member for Resources provided assurance that it was unlikely there would be a significant difference between expenditure required and funding available.

8.    A Member expressed confidence in the budget overall, but requested more information about the £9m additional contribution to the SEND reserve. The Cabinet Member for Resources explained that SEND expenditure was limited to the budget envelope agreed to by services, and these extra funds had therefore been put in as an added contingency. The Council was trying to reduce costs by providing in-county placements for people with SEND. The Director of Financial Insight stated that there was already a £24m contribution to the SEND overspend on the high needs block. SEND was undergoing an extensive transformation programme that included sufficiency of placements, inclusion of SEND children in mainstream schools where possible, preparation for adulthood, and partnership working. There was also an increase in the grant for 2021/22, but this was not sufficient to cover increased costs and demand. It would be necessary to find efficiencies of around £22m, which could be challenging. Therefore, the £9m reserve had been put aside in case the £22m efficiencies could not be made. The Council’s position with regards to the High Needs Block was challenging, as it was not possible to contribute money to it directly. The offsetting reserve was a contingency factor. The Council was lobbying government for more central funding to be allocated to the High Needs Block.

9.    A Member asked why the £27m Eco Park reserve was needed and whether it was sufficient. The Cabinet Member for Resources stated that work on the Eco Park had not yet been signed off. The amount referred to was not a reserve but a sinking fund, which would be used to offset the expected running costs once the full project had been certified as operational. The Director of Corporate Finance added that reserves were matched against risk and that there were ongoing pressures in SEND, waste, and environment, transport and infrastructure. The numbers were proportional to the budget. Covid-19 risk and uncertainty also needed to be taken into account.

10.  The Director of Insight, Analytics and Intelligence outlined the budget consultation process. There were 213 responses to the consultation and opportunities for people to contribute to broader engagement activities prior to that. Thousands of residents were involved in the Community Impact Assessment research.

11.  A Member expressed concern that only 213 people had responded to the budget consultation and suggested that the method of consultation might need to be re-examined. The Director of Insight, Analytics and Intelligence replied that there were multiple avenues to the consultation. More participatory consultation exercises were costly, and their value should be weighed up against this. The principle of meaningful consultation and engagement were important when setting the budget.

12.  The Select Committee remained concerned about the low response rate and expressed the opinion that the budget consultation had been unsuccessful for this reason. The Director of Insight, Analytics and Intelligence stated that Surrey County Council did base its consultation on examples of best practice from other local authorities. It was important to note that recruiting a representative sample would require contracting an agency, which would be costly. It was agreed that the Director of Insight, Analytics and Intelligence would return to present an item to the Budget Sub-Group on the budget consultation early in the process in order to take into account Members’ views.

13.  In conclusion, the Select Committee thanked the Cabinet Members and officers for their work in successfully developing a balanced budget for 2021/22 and had no new recommendations for the Cabinet. The Select Committee also concluded that the updated information provided assurance on the robustness of the council tax and business rates budget for 2021/22.

Recommendations:

1.    The Select Committee recommends that a report on the budget consultation is presented to the Budget Sub-Group early in the consultation process, and that Members’ views are taken into account when conducting the consultation.

The minutes of item 11/21 of the 26 January 2021 Cabinet meeting are annexed to these minutes. They include the Resources and Performance Select Committee Chairman’s presentation to Cabinet on the scrutiny of the final 2021/22 budget.