Agenda item

COVID-19 FINANCIAL IMPLICATIONS

Summary:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options considered:

The coronavirus COVID-19 pandemic represents a monumental challenge for the District Council which will inevitably have a significant impact on the Council’s resources and budget during 2020-21 and future years.

 

This report provides an overview of the current assessment of the emerging financial impact of COVID-19 which will have a profound impact on the organisation’s ability to achieve planned budget savings and income for 2020-21 onwards. It also considers the COVID-19 funding provided to date from government and the extent to which this will support the current financial pressures.

 

An update is also provided in relation to the support provided to local businesses through the Small Business Grant scheme and the various additional business rate reliefs announced.

 

The Council is proactively responding to the challenge of the COVID-19 pandemic to maintain the delivery of vital front line services whilst at the same time freeing up capacity to help, support and protect vulnerable people, supporting businesses and ensuring the safety of all of our staff whilst delivering this vital work.  

 

This report sets out the initial high level forecasts relating to the COVID-19 pandemic but at this stage there are no specific alternative options considered.

 

Conclusions:

 

This report provides an overview of the current assessment of the emerging financial impact which will have a profound impact on our ability to achieve savings and income for 2020/21. In addition, it helps to set the context for the Council’s MTFS and budget planning process for 2021/22, which will be reported to Cabinet later in the year.

 

The Council faces an unprecedented financial and public health crisis. It will be essential to continue to engage with Government, MPs and other stakeholders to campaign for adequate and sustainable funding for the District so that we can continue to deliver vital services to residents, businesses and visitors.

 

The current pandemic demands very different ways of working and will require review and consideration of current and future priorities. Looking beyond the immediate impacts, the overall level of uncertainty means the financial environment remains extremely challenging for the foreseeable future. The assumptions upon which both the Medium Term Financial Strategy (MTFS) and the 2020/21 budget are based have now been significantly undermined by the current crisis and will necessitate a fundamental review of the budget position given the current funding pressures.

 

The current projected budget position (c£1m deficit 2020/21) is constantly changing and therefore the high level projections contained within this report must be seen in this context and could be subject to significant change depending on further announcements over the coming months.

 

Recommendations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reasons for

Recommendations:

 

It is recommended that Cabinet note:

 

These should set out what decision(s) Cabinet is being asked to make be highlighted in bold text.  These should be set out numerically and start with the word “To…”

1.            The current package of financial support being provided to the Council by the government to support its response to COVID-19;

 

2.            Continues to lobby central government for further additional financial support;

 

3.            The forecast cost and income pressures being faced by the Council and the extent to which they exceed the available government funding and therefore the requirement for any deficit to be funded from other Council resources;

 

4.            The various caveats and risks associated with the current forecasts;

 

5.            The proposals in respect of updating the Medium Term Financial Strategy (MTFS) and the financial planning framework for the 2021/22 budget;

 

6.            The proposals for a fundamental review of the capital programme to ensure that the schemes still reflect the Council’s changing priorities and to ensure that the Council can still afford them given the rapidly changing financial landscape;

 

7.            The proposal for a further financial update to come forward to Cabinet in July, by which time there will hopefully be more clarity regarding any continuing restrictions to include;

 

·                Opportunities for re-prioritising and re-focusing currently approved 2020/21 budgets;

·                Opportunities for savings, efficiencies and income generation this year;

·                A review of the current reserves position with recommendations for re-allocation where appropriate and;

 

8.            The progress to date in respect of the application of the various new business rates reliefs announced along with progress towards the government funded Small Business Grant programme which local authorities are being asked to administer (Appendix D).

 

To make Members aware of the current COVID-19 position in respect of the Council’s budget and resource position for 2020/21 and indeed future years.

 

               

Cabinet Member(s) Cllr Eric Seward

 

Ward(s) affected

All

Contact Officer, telephone number and email: Duncan Ellis (Head of Finance & Assets), ext 6330, Duncan.ellis@north-norfolk.gov.uk

 

Minutes:

The HFAM introduced the report and informed Members that he would provide a brief presentation to explain the current financial implications of Covid-19 for the Council. It was reported that at present, the Council was still facing a £1m deficit, despite having received additional funding of approximately £1.1m from Central Government. As a result, the HFAM stated that it was crucial to continue to lobby Government and MPs for further financial support. It was noted that prior to the Pandemic, a deficit of approximately £1.8m had already been predicted for the 2021/22 financial year, which suggested that budget pressures would continue to increase. The HFAM broke down funding pressures into specific categories and it was reported that cost pressures equated to a loss of £429k, income losses of approximately £1.09m, investment losses of £250k and funding stream losses of £223k. He added that the Council’s reserves were already forecast to reduce by fifty percent over the next four years, and should always be considered a last resort for balancing budgets. It was suggested that priority should be given to reallocating funding within the current year’s budget to address the deficit. The HFAM referred to the MTFS and stated that it had been approved in a very different financial climate, and as a result, there would be a significant impact on the medium term assumptions that would require substantial changes to resolve. He added that a further Committee report would be presented in the coming months that would focus on reprioritizing the budget, opportunities for efficiency savings, and income generation in the current financial year.

 

Questions and Discussion

 

The Chairman referred to written questions submitted in advance of the meeting, the first of which asked for clarification of the forecast deficit for the current year, and the years covered by the MTFP. The HFAM replied that whilst the current forecast deficit was approximately £2m, additional funding from Central Government meant that the net deficit had now been reduced to approximately £1m. He added that the forecast included a number of assumptions about when the economy would begin to recover, and this would have a knock-on impact that was difficult to predict. It was noted that Section 31 grants from Central Government had been helpful guaranteeing the Council’s cash flow position in terms of business rates income, though uncertainties still remained that made it very difficult to predict future deficits.

 

The Chairman referred to his second written question which asked for officer’s advice on the most prudent means for closing the budget gap, and whether the recommended level of the general reserve would change as a result of the crisis. The HFAM replied that in terms of closing the budget gap, the key message was that reserves should always be a last resort, as they could only be used once. He added that focus should be placed on reallocating and reproritising the existing budget, making savings where possible, and trying to generate additional income, though it would be extremely difficult under the current circumstances. In regards to the question on the level of the general reserve, speaking as the S151 Officer, the HFAM stated that this was currently set at £1.9m, though this could change if difficulties in balancing the budget persisted. He added that at present he still considered the level of reserves to be adequate.

 

Cllr N Housden asked if there was any feedback from Central Government on whether there would be increased funding to support specific areas if local lockdowns were to be implemented. The HFAM replied that he had not heard any suggestion that further funding would be made available, and this was why lobbying had to continue. Cllr S Bütikofer noted that the potential for local lockdowns was only just emerging, and she would try to get more information as soon as possible. Cllr E Seward stated the identifying the financial position of the Council was still very much a work in progress at present, due to the high level of uncertainties. He added that ideally the Council would be able to maintain all of its key frontline services, and this would require looking for savings,  as well as continuing to lobby Government for additional funding, and potentially using reserves if absolutely necessary. It was reported that the financial year had begun with a surplus of approximately £2m, which had been placed into a delivery plan reserve, though in light of the situation, it was possible that the use of these funds could be revisited. Cllr E Seward informed Members that Government had stated that there would be a delay to planned funding reviews, and once the outcomes of these were known, some financial pressure could be alleviated. He added that at present he remained fairly relaxed, and suggested that the Council had to hold its nerve to see how the situation would unfold.

 

Cllr P Heinrich asked whether any figures were available on the overall loss to the local economy, or projections on the impact should the lockdown continue throughout the peak tourism season. The HFAM replied that he was not aware of any high level review at present, though a business survey had just been completed, with the results were now being reviewed. The HECD stated that the Council had commissioned a business survey, and whilst the results had not yet been fully analysed, the survey was intended to identify businesses’ expectations, the impact of the crisis and predictions for recovery. He added that a wider survey of the region had been commissioned on the visitor economy, to which there had been a good level of response from North Norfolk businesses. A further district-wide analysis of the financial impact on businesses and tourism was expected shortly, and a second survey on the visitor economy was open until the end of May. The HECD stated that the results and analysis of these surveys would be shared in due course.

 

RESOLVED

 

To note the report.

 

Supporting documents: