Agenda item

The Portfolio Holder for Finance, Cllr L Shires, introduced this item. She began by explaining that it was going to the committee for pre-scrutiny and had not been seen elsewhere yet. Overview & Scrutiny Committee was being asked to recommend to Cabinet any areas where it felt savings could be achieved. Cllr Shires then drew members’ attention to the following key areas of the report;

-       Section 2.3 highlighted the rapid rise in temporary accommodation costs

-       Section 3.3 referred to the delayed introduction of the second homes premium which meant it could not be implemented for 2024.2025

-       Section 3.5 set out the impact of a proposed increase in council tax for 2024/2025.

Cllr Shires asked the Committee to consider how to balance the budget whilst minimising the impact on the residents of North Norfolk. Their needs must be considered as part of the challenging process to make savings.

The Chairman asked the Director for Resources (DFR) if she wished to speak. The DFR said that she would like to highlight section 3.4 of the report which highlighted the impact of pay inflation on the budget for the next few years. She reminded members that the budget for 2024/25 was not balanced and the Council needed to achieve this by the February meeting of Full Council. This meant that the Council would need to look at service delivery and managers had been asked to put forward proposals for savings. Cabinet and the Corporate Leadership Team (CLT) would then consider these and report back to Cabinet in February. Overview & Scrutiny Committee would be able to review the savings proposals prior to that meeting if they wished.

The Chairman referred to section 3.3 of the report and the forecast deficit of £1.810m. He said that the predicted £600k overspend for 2023/24 was not included in the overall deficit and he asked whether it should actually be £2.4m.

Cllr L Shires replied that it was hoped that the forecast £600k overspend would be covered by the end of the year so it would not be carried over, however, temporary accommodation costs would continue to rise in the coming years unless government funding was provided.

Cllr S Penfold referred to the increase in homelessness and the rise in temporary accommodation costs. He suggested that there might be a role for the committee to look at some of the drivers for this problem and possibly invite the Police & Crime Commissioner to attend a meeting to respond to questions, particularly regarding the rise in domestic abuse cases.

Cllr V Holliday said that it wasn’t clear why the £600k overspend for 2023/2024 was not included in the forecast deficit. She then referred to the General Fund summary (Appendix A) and said that there were significant projected increases in the budget for the Communities and Resources service areas and she wondered whether there may be a possibility for savings there. The DFR replied that the rises related to increases in inflation and contract costs.

The Chief Executive (CE) explained that the reason for the budget gap in £2024/2025 was partly due to the delayed implementation of the second homes council tax. This had left a £550k gap to close which had not been previously anticipated. He said that the cost for the Communities service area was in relation to homelessness. There were a number of key drivers that were impacting on local government finances at this time and for District councils one of the main ones was homelessness and the duty to provide temporary accommodation. He added that the committee may wish to have a future review of the reasons behind the rise in homelessness but reminded members that it was due to local issues not refugees. He explained that the ability to source suitable accommodation outside the district was restricted and costs for short-term accommodation in hotels was being driven up by pressure nationally on that sector. In conclusion, he said that the rise in costs for the Communities service area over the coming years reflected this.

Cllr L Vickers supported Cllr Penfold’s proposal to have an in-depth look at the causes of homelessness in the local area.

Cllr V Holliday asked about the Medium Term Financial Strategy (MTFS). She said that it seemed very light and not a full strategy document. She asked if it would be coming back to the committee as a single document. The DFR confirmed that she could provide a separate MTFS if members requested one. The Chairman said that the MTFS and the Draft Budget had always previously been presented separately but now seemed to be conflated. Cllr Shires said that there was an intention to provide more detail in a separate MTFS ahead of setting the Budget. The DFS added that she could take an MTFS to the February meeting of Cabinet and then onto Overview & Scrutiny Committee.

Cllr N Housden queried the £0.5m allocated for the delivery of Net Zero Initiatives and asked if this was a one off. The DFR replied that £0.5m had been set aside from the Delivery Plan Reserve for Net Zero initiatives and this would be monitored carefully. If sufficient funds were available more money would be set aside.

Cllr Housden then asked about the projected figure for retained business rates in 2025/2026 which appeared to drop sharply by £2.2m. He asked for the reasoning behind this. The DFR replied this was an area that needed to be looked at more closely. It was possible that the income could increase but a cautious approach was being taken as it hadn’t been assessed closely yet. She said that two models were used for business rates and this was the current figure that was predicted.

The Chief Executive said that the figures reflected a degree of caution as the Government had been promising a review of business rates for some time and this had not been progressed. He added that there was concern about the strength of high streets versus the online sector but it was still hoped that the figure would not be as low as indicated.

Cllr Housden replied that many businesses were closing due to high business rates and it was a serious concern for both the high street and the Council.

Cllr A Brown spoke about the delay in the election of a directly-elected Leader for Norfolk County Council, which was now likely to take place in May 2025. He said that this could impact on two potential revenue streams – the second homes council tax premium and the funding through the County Deal. He asked whether the County deal would have any impact on the negotiations that NNDC would have with Norfolk County Council (NCC) about the majority of second homes council tax income being spent on affordable housing in the district. The Chief Executive replied that there was a significant stock of second homes in the district and it was possible that owners may choose to switch to a business rates charge instead. He explained that only 8 pence of every pound generated by council tax income came to NNDC and 74 pence went to NCC. It had always been suggested that there would be discussions between the Leader of the Council and the Leader of NCC regarding an aspiration to see the bulk of the second homes council tax income being spent on affordable housing supply in the district. For now, conversations would continue with the NNDC Leader and the current Leader of NCC.

In terms of the wider county deal, there were some additional monies that would come to the wider County and NNDC could make bids to access some of these funds. He said that for now, members should focus on the figures in from of them as they could influence them, which may not be the case with funding via the county deal. The Chairman agreed, saying that funding for the County Deal was for the whole county of Norfolk not just NCC and there was a willingness to involve second tier authorities in the running of affairs in relation to the County Deal. He said that he supported the CE’s view that it was unlikely to be a problem solver for NNDC. There were a lot of unknowns and it wouldn’t be confirmed that there would be a directly elected leader until July 2024.

Cllr V Holliday asked whether the second homes premium would be earmarked for affordable housing and not applied against the deficit. The CE replied that it was a political decision. There would be approximately £550k in income and there would have to be a choice about how to allocate it. He added that the Council provided a wide range of discretionary services and hard choices would have to be made about some of these.

Cllr S Penfold said that Cllr Housden had raised an important point about the allocated funding for Net Zero initiatives. He asked if there was a risk regarding delivery of the project if it was not sufficiently funded. The DFR replied that in 2023/2024 a reserve of £0.5k was established to support the delivery of Net Zero initiatives. It was a decision for members if they wanted to set more aside. Cllr Penfold said that he was concerned that the Administration had made the commitment to achieve Net Zero by 2030 and that there may mot be sufficient funding in place to deliver it.

The Chief Executive explained that the previous administration had agreed to set aside the funding so that Net Zero could be delivered at pace. Some other capital budgets also included allocations for Net Zero in addition to the £0.5m. He added that there would be a requirement to offset carbon emissions after 2030 and the Council was trying minimise the cost impact of this. In addition, the LGA Peer Review had recommended that the Council established a strategic route for decarbonisation so this would be progressed in the coming months. Cllr Shires reiterated that several service areas had budgets for decarbonisation as well as ongoing day to day activities that were working towards achieving Net Zero by 2030.

Cllr N Housden asked about the figures for the building control service and why they varied so much. He also asked for more information on the coast protection budget. The DFR replied that the figures in this table related to the planned use of reserves, not the cost of the service. Cllr Housden said that it would be helpful for members to have more information regarding the earmarked reserves so they could understand what they were for. He asked whether the coastal protection budget was being spent on NNDC coastal assets or more widely. He also queried why there was nothing allocated from 2025/2026 onwards. The DFR replied that there was more detail regarding earmarked reserves in the Annual Statement of Accounts. She said that this could be included in the Budget papers if members required it. In response to the query on coastal protection, she said she understood that the budget was relating to NNDC coastal assets. Cllr Housden said that if this was the case, it would be prudent to include figures for future years. The DFR replied that the coast protection budget was in addition to the Coastwise scheme which would be the main focus for coastal work going forward.

Cllr L Withington commented that planning revenue was forecast to decrease in future years and she asked if this was due to Land Registry charge changes. The DFR replied that the Land Registry changes were reflected in the ‘net cost of services’ category in the table. Any transitional funding from the Government would also be included here, once it was confirmed.

Cllr Penfold referred to his earlier proposal for the Committee to undertake a ‘deep dive’ into the drivers for homelessness in the district. The Chairman replied that the focus of the current discussion should be on making recommendations to Cabinet on the draft revenue budget. As he saw it, the options were limited to reducing costs, raising income or taking money from reserves, which would come with caveats.

He said that reducing costs would have to focus on creating efficiencies and service redesign and a possible review of the Corporate Plan delivery budget. Looking at raising income, this could include increasing charges for some existing services as well as suggesting new income streams. Finally, there was the possibility of using reserves on an ‘invest to save’ basis. This could also be an opportunity to look at the homelessness issue and whether more could be done. The Chairman added that there was limited time now to make suggestions for the 2024/2025 budget but the Medium Term Financial Strategy (MTFS) was included within it and in previous years members had taken an optimistic view as to whether forecast deficits were real or apparent and it was clearer now that it was becoming a real issue. A longer lead-in time would be needed to look at the gaps that were highlighted in the MTFS. He suggested that the Committee would want to look at work done along these lines and this could be undertaken on a broad front, involving all councillors possibly via workshops. This would be an inclusive approach and help all councillors understand the financial challenges that the Council faced. He suggested that recommendations to Cabinet could be based on these options.

Cllr Penfold said that a high-level, inclusive approach made sense, if the Portfolio Holder, Cllr Shires, was supportive.  Cllr Shires said that it might be more beneficial to run workshops once Cabinet had agreed on the savings and income proposals that had been put forward by managers. This may work better rather than just inviting suggestions as this approach had not worked very well at the corporate planning workshops. Overview & Scrutiny Committee could then review the outcomes of the workshops. The Chairman replied that it was a matter for Cabinet to decide which proposals it would like to focus on and how they were delivered. It was not the role of Overview & Scrutiny Committee to be prescriptive on how the process was done.

Cllr Shires said that Cabinet wanted everyone to feel included in the process, including officers and this would require conversations with the Corporate Directors on the best way to move forward. She said that Cabinet wanted to be as open and inclusive as possible.

The CE said that he appreciated that the figures were stark and that the Council was entering into a financial position that it had not been in before. He outlined the process for setting the budget, which would take place over the next 8 weeks. Assistant Directors had asked their managers to identify savings of at least 10% in their service areas. Cabinet had a workshop planned within the next few days to consider the proposals. He said that he was supportive of the principle of all-member workshops but given the timescales, members needed to be realistic about how much could be achieved during January so that a balanced budget could be set in February. The CE went onto say that quite a high number of NNDC employees were on fixed term contracts – with almost 25% of the People Services team of such contracts. Hard choices would need to be made about some of the discretionary services that the Council currently provided and it was therefore important that officers were given a clear steer as to where the focus should be.

The Chairman said that the difference between the Corporate Plan workshops which Cllr Shires had referred to was that they were on broad themes and there were no restraints on what could be discussed. The budget discussion were much more focussed on closing the financial gap and members’ focus should stay on that. He concluded by saying that the MTFS was always focussed on savings and the lead time was now very short. In previous years this report had been presented to the committee in the Autumn. If this had happened then members could have intervened earlier.

Cllr M Hankins said that there was always more that could be done. He felt that a workshop or ‘brainstorming’ session would be very helpful.

Cllr N Housden commented that there was an unstable political situation nationally for at least the next 12 months and although he accepted the point made by the CE regarding timing, he felt that members just needed a synthesis of the key internal elements where savings could be made. The synthesis of external elements, including the impact of central government, would also be necessary, ideally looking ahead to the next 12 – 24 months.

Cllr V Holliday suggested a two phase approach. Firstly, Cabinet should consider the savings proposals and then Overview & Scrutiny Committee could review Cabinet’s recommendations at their next meeting. Secondly, starting in January, there should be some brainstorming sessions to look at the following years’ budget. This would allow sufficient time for members to focus on what was required to make significant savings for 2025/2026 onwards.

Cllr L Withington commented that it was unfair to imply the financial situation had suddenly happened, members and officers had been preparing for the approaching deficit for some time. Every council faced similar challenges and a short lead in time to take decisions around where savings should be made was not unusual.

Cllr J Toye said that the financial reports were not presented very clearly. If the information stated which services the Council had a statutory duty to provide and which services were discretionary, then it would enable members to make decisions regarding savings. He felt that this was a key issue that should be addressed as soon as possible. Cllr Vickers agreed and said that it was important that members understood

The CE reminded members that that they did not need to wait until the next meeting to make suggestions regarding savings. There were choices to be made around the services and facilities that the Council provided and this should be driven by members. The Chairman agreed, saying that members and officers needed to converse to ensure the best outcomes were achieved. He concluded by saying that members should focus on how savings could be achieved, how income could be increased and in the longer term, invest to save projects.

Cllr Penfold said that he was supportive of Cllr Holliday’s two stage approach.

It was proposed by Cllr V Holliday, seconded by Cllr S Penfold and

RESOLVED to recommend to Cabinet

The following two stage process for scrutiny of the draft Budget and MTFS:

1. Cabinet to identify areas for cost reductions from: efficiencies, service redesign, CP delivery plan budget, etc; and, income generation from: raising discretionary charges, new income streams, Council Tax, etc. This should include opportunities to invest to save schemes. The Overview & Scrutiny Committee to review Cabinet proposals at their next meeting in January.

2. Preparations for the 2025-2026 Budget and MTFS gap closure proposals to commence in early 2024 to ensure early engagement and input from Members and more implementation lead time.