Agenda item

Purpose of report: Scrutiny of the Draft Budget and Medium-Term Financial Strategy

 

Witnesses:

David Lewis, Cabinet Member for Finance and Resources

Nicola O’Conner - Strategic Finance Business Partner

Rachel Wigley – Director Finance Insight and Performance

Nicola Kilvington – Director of Corporate Strategy and Policy

Tony Orzieri – Strategic Finance Business Partner

Louise Lawson – Strategic Finance Business Partner

Denise Turner Stewart, Cabinet Member for Customers and communities

Natalie Bramhall, Cabinet Member for Property and Waste (Remote)

Kevin Deanus – Cabinet Member for Fire and Rescue, and Resilience

Matt Furniss, Cabinet Member for Highways, Transport & Economic Growth

Key Discussions:

1. A Member asked how the Council’s financial position compared to other Councils and if transformation activities were on track to achieve savings. The Cabinet Member for Finance and Resources answered that the Council was on a sound financial footing and that transformational activities would take place over a 5-year period but faced variable challenges such as a new government and changes in grants and funding. The Director Finance Insight and Performance noted that compared to other County Councils, Surrey was fairing a lot better, and the Council had worked diligently over the last five years to improve their financial position. The Member asked for clarification on a comparative league table, the Director of Finance agreed to send information on borrowing requirements compared to the revenue budget.

 

2. A Member asked what potential deterioration of services that fell under the remit of the Committee could be expected considering the year-on-year deterioration in budget. The Executive Director of Environment, Infrastructure & Growth noted that the focus was on finding efficiencies in the budget and driving more value out of existing contracts such as Waste contracts, not service cuts. The Executive Director emphasised that there wasn’t an area that fell in the remit of the Committee that would see a service reduction. The Member asked if the Council was still trying to lobby Government for a better funding formula for road maintenance. The Executive Director noted that the Leader of the Council was chairing the County Council Network, and the Council was exploring a host of solutions to improve funding.

 

3. The Cabinet Member for Highways, Transport & Economic Growth noted that the funding formula criteria had been raised with the Secretary of State for Transport, who was open to the idea of changing the formula and offered to report the outcomes of meetings with Department for Transport officials.

 

4. A Member asked if the Council was confident in the assumptions that had been made around non-pay inflation. The Strategic Finance Business Partner noted that the level of inflation had a huge impact on budget pressures and that the impact had been significant. The corporate non-pay assumption was 5% in the draft budget and would be reviewed ahead of the Final Budget proposals which were due to be presented to Council in February.  It was noted that the corporate inflation assumptions were only used where there was no other insight. Inflation on food, fuel and in specific markets such as children’s social care where rates exceeded the corporate assumption.  In addition, where contract terms and conditions included annual inflationary uplifts, inflation assumptions in the draft budget were made consistently with these terms. Inflation had come down recently and the forecast was for inflation to reduce further in the coming year.

 

Capital Programme

 

5. A Member asked if the Council should lower aspirations to further reduce underfunded capital borrowing and if this could be an area to close the budget gap. The Cabinet Member for Finance and Resources answered that the capital budget was put together considering statutory duties and what was affordable. An affordability test was applied to ‘unfunded’ capital projects which receive no grants and are not self-financing and a cap was placed on unfunded capital borrowing.  Although the Capital programme is ambitious, we are not doing everything we want to do. The Cabinet Member explained that due to the time lag any reduction in capital budget for 2024-25 would not close the revenue gap for 2024/25 but would have an impact from 2025/26 onwards.  The Member noted the reduction in highway maintenance capital by £30 million in two years’ time and suggested this would have a significant impact. The Cabinet Member for Finance and Resources noted that this was not a reduction in core highways investment, but the budget reflected the commitment of this Council for an enhanced capital budget and investment for highways to the end of this Council term. It would be for future Council to decide on future priorities but emphasised that highways would always be maintained. The Member noted that land based solar farms were not in the capital funding. The Cabinet Member for Customers and Communities agreed to send how much of the capital funding would be invested in green projects. The Cabinet Member for Finance and Resources noted that the greener futures agenda was embedded in every project by the Council and that details of some Greener Futures schemes were included in the Capital Pipeline which was subject to robust business case before being included in the capital programme.

 

6. A Member asked what assumptions had been made about the Your Fund Surrey capital investment programme over the Medium-Term Financial Strategy. The Cabinet Member for Customers and Communities noted that the criteria was constantly being reviewed to prioritise projects with greater impacts.

 

7. A Member asked what number of projects was in the pipeline to be considered as well as their value. The Cabinet Member for Customers and Communities answered that £10 million had already been committed for the next year with a plan for up to 300 projects.

 

Directorate Budgets

 

8. A Member asked how much funding The Council could expect from the changes to the HS2 Funding and if the Council could use the funding to reduce existing capital costs or new improvement projects. The Executive Director for Environment, Infrastructure & Growth noted that the Council would receive an additional £2.6 million in 2023/24 as part of the minimum additional funding of £82 million from 2023/24 until 2033/34. Whether the funding could be used for additional projects was still being explored. The Cabinet Member for Highways, Transport & Economic Growth noted that the £2 million was guaranteed funding but the Council was trying to gain additional funding. The Member queried if the £2 million had to be spent this financial year and how much government funding had the Council received for road maintenance. The Strategic Finance Business Partner said that the main grant was £25.7 million a year from the Government.

 

9. A Member expressed concern about the efforts of charities preparing bids for Your Fund Surrey which may have little chance of success given the funding constraints and reductions to the fund. It was important to be open and honest with applicants if there were not sufficient funds available to fund applications in the pipeline.   The Cabinet Member for Customers and Communities noted that these issues had been factored into the expected allocation and that pipeline applications had been rigorously assessed. Officers worked closely with applicants and applicants were only being denied if they did not fit the criteria. The Cabinet Member noted that applicants should contact the Council to discuss the criteria and how they could meet it.

 

10. A Member asked what assurances there were for highways and environment services in the 2024/2025 budget as it was the most important outcome for Surrey residents in a recent public survey. The Cabinet Member for Finance and Resources said that those services would not be impacted by the budget gap.

 

11. A Member asked if the Council should be using reserves for core services and if a £700,000 efficiency was realistic and achievable for the SFRS considering the new list of required improvements. The Chief Fire Officer said that the £700,000 in efficiencies were achievable.

 

12. Following discussion of the Committee’s draft Budget recommendations it was resolved that:

 

RESOLVED

 

That the Communities Environment and Highways Select Committee

 

1. Supports in broad terms the budgetary approach set out in the slides

shared with the Committee including the directorate efficiency proposals

and the broad goal to achieve efficiencies without any reduction in

service or visible impact to residents over the immediate 24/25 financial

period and in future years.

 

2. Supports the Capital programme which remains ambitious, specifically

the ongoing investment in highways and roads improvement, flooding

and drainage schemes and greener futures programmes.

 

3. Notes that revenue funding gaps persist particularly in relation to the

Environment, Transport and Infrastructure budget where a further £8m

reduction is still to be found. Notes with some concern that this gap does

not reflect the full £8.7m required to fully implement the Task & Finish

group recommendations although it does reflect the lower investment

amount of c. £5m to address this work.

 

4. Further notes the results of the public engagement consultation and

feedback to Councillors which shows that better roads and pavements is

of the highest priority to residents; and therefore, recommends that

spending on protecting our highways assets and infrastructure should be

prioritised in line with residents wishes and priority given to plugging this

funding gap in further budget discussions.

 

5. Supports continued investment in ITS schemes to improve Road Safety

and urges Cabinet to remain focused on the need to reduce deaths and

injury on Surrey’s roads and for funding to be looked at for future years.

 

6. Highlights that tackling climate change remains a high priority for

residents as evidenced by the Surrey Says open survey exercise and

urges Cabinet to ensure this continues to be reflected in budget planning over the MTF period as further cuts are sought.

 

Actions/requests for further information:

 

1. Director Finance Insight and Performance (Rachael Wigley) to Share league table slide setting out projected borrowing requirement compared to other Councils with Cllr Baart. 

 

2. Cabinet Member for Highways, Transport & Economic Growth (Matt Furniss) to feedback outcomes from meetings with Department for Transport officials around the Highway Funding Formula.