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DRAFT PROPOSALS FOR 2020/21 BUDGET AND REVISED MEDIUM TERM FINANCIAL STRATEGY 2020/21 TO 2023/24

Cllr Golding, Cabinet Member for Finance and Service Improvement

Report to Cabinet

Ward(s): All

Key Decision: No

Appendix 1: Detailed Savings Proposals

Appendix 2: Equality Impact Assessments (EIAs)

Papers relied on:

Foreword - Cllr Golding, Cabinet Member for Finance and Service Improvement

This report outlines budget proposals for 2020/21 and updates to the council’s Medium Term Financial Strategy. A multi layered approach has been taken to balance the budget and reflects the increasing cost of running services while ensuring the burden is not placed on residents.

A significant amount of the annual income the council receives comes from returns from investments made. This includes strong returns as part of our Property Investment Strategy. We are also reviewing services that residents value to ensure they are run efficiently and residents benefit from the best value for money. A small rise in council tax and a 3% increase in our fees and charges ensure that we have a fair and balanced approach to optional services.

The budget strategy supports the emerging council plan and will enable key activity in the priority areas of ‘Strengthening communities’, ‘Protecting and enhancing our environment’, ‘Improving safety’ and ‘Planning for the future’. The Executive commitments that underline these priorities can be found in section 12. They include investing additional funds on our community safety patrols to reduce antisocial behaviour and ensure residents feel safe, investing in the town centre and regeneration of residential areas in most need. It also introduces a councillor community grant scheme to enable ward members to support local groups and address neighbourhood issues in a responsive and flexible way.

It should be noted that this report covers revenue spending only, while some of our priorities, such as addressing the climate emergency, may require some capital

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expenditure to meet our targets. The capital programme is currently under review and will be published in February 2020.

The council continues to listen to residents and this budget prioritises the services that local people tell us matter to them most. We continue to invest in local community facilities, support for our most vulnerable residents, maintaining our green spaces, whilst protecting other frontline services. The commitments detailed in this report have underpinned our approach to the 2020/21 budget and help us provide the best value for residents.

Recommendations

Cabinet are recommended to:

1. Note the 2019/20 current year forecast outturn position as detailed in section 5.

2. Note the revised Medium Term Financial Strategy position set out in section 7 and the risks and sensitivities associated with the forecast and the contingency plans set out in section 17.

3. Note that consultation will run for 6 weeks during November and December 2019 as detailed in section 18.

4. Approve the budget proposals detailed in section 9 to 12 and as detailed in Appendix 1, with the Equality Impact Assessments (EIAs) detailed in Appendix 2.

Glossary of terms

Term Definition

MTFS Medium Term Financial Strategy

RSG Revenue Support Grant

NHB New Homes Bonus

PLGFS Provisional Local Government Finance Settlement

MHCLG Ministry of Housing, Communities & Local Government

EIA’s Equality Impact Assessments.

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1 Executive Summary

1.1 This report presents an updated Medium Term Financial Strategy (MTFS) and the Cabinet’s budget strategy proposals for addressing the budget gap in 2020/21 and an update on the longer term view to 2023/24 for consultation as part of the annual reporting on the Policy and Budget Framework required under the Local Government Act 2000.

1.2 The MTFS supports the delivery of the Council Plan which aims to continue to deliver economic growth that brings employment and quality of life opportunities whilst ensuring that the vulnerable get the support they need.

1.3 The MTFS sets out a four year plan for how the council will ensure a stable and sustainable financial position to allow the council to shape the way the borough grows whilst continuing to provide high quality services.

1.4 This report takes the currently agreed MTFS and extends this by one year using the same multi-strand approach of investing the proceeds of growth; maintaining high quality services; striving for cost reductions and better value through transformation and service reviews; generating additional income from the council’s resources; and at the same time remaining one of the lowest council tax authorities in the country.

1.5 The budget proposals identify additional savings and income of £1.42M in 2020/21 increasing to £1.82M by 2023/24.

1.6 Unavoidable pressures of £0.64M have been proposed in 2020/21 increasing to £0.66M by 2023/24.

1.7 The updated MTFS shows a budget gap of £5.01M in 2023/24. A strategic, multi-strand approach to closing the budget gap in the longer term will continue to be implemented as part of the updating of the MTFS, which focuses on:

reviewing services to identify efficiencies;

identifying opportunities for creating a modern efficient council through major programmes such as ‘smarter ways of working’ and use of latest technology to support being a digitally enabled council;

opportunities for income generation;

asset management; and

council tax policy.

1.8 Executive Commitments have also been identified totalling £0.85M in 2020/21 looking to support;

Increases in the number of Community Safety Patrol Officers;

The development of the Town Centre and Basingstoke Gateway strategies;

Support to wards through the introduction of a councillor community grant scheme;

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Regeneration initiatives in areas with higher deprivation; and

Further commitment to support the Climate Change agenda.

1.9 The updated MTFS assumes a £5 increase in council tax in 2020/21 at band D and an assumed average increase in fees and charges of 3%. This is unchanged from the current MTFS approved in February 2019.

1.10 Consultation on the Cabinet’s strategy proposals will take place during November to December 2019. Final proposals for the detailed 2020/21 budget and the updated MTFS will be considered by Cabinet on 11 February 2020 for recommendation to Council for decision on 27 February 2020.

1.11 It should be noted that all of the options in this report, relating to any potential budget changes, are for planning purposes and consultation only at this stage. Final decisions on the overall budget and Council Tax level will be made by full Council in February 2020.

2 Background, Corporate Objectives and Priorities

2.1 The Medium Term Financial Strategy (MTFS) is a four year plan that supports the delivery of the Council Plan and is shaped by Council Plan priorities. The Council Plan is in the process of being reviewed and updated but currently supports the following priorities:

Preparing for controlled and sustainable growth;

Improving residents quality of life:

Supporting those that need it: and

Creating an organisation capable of change.

2.2 The main objectives of the MTFS are:

To provide financial parameters within which budget and service planning should take place;

To ensure the Council sets a balanced budget;

To focus and re-focus the allocation of resources so that, over time, priority areas receive additional resources. Ensuring services are defined on the basis of a clear alignment between priority and affordability;

To ensure the Council manages and monitors its financial resources effectively so that spending commitments do not exceed resources available in each service area;

To plan the level of fees, charges and taxation in line with levels that the Council regard as being necessary, acceptable and affordable to meet the Council’s aims, objectives, policies and priorities whilst meeting the need to reduce the Council’s reliance on Central Government funding; and

To ensure that the Council’s long term financial health and viability remain sound.

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2.3 The MTFS sets out the council’s strategic approach to the use and management of its financial resources and provides a robust framework within which decisions can be made. It also supports all other council strategies, such as the Capital Strategy, the Asset Management Plan, the Property Investment Strategy and the Treasury Management Strategy. In particular, it acts as the framework linking the council's more detailed service plans, asset management plans and capital plans for the longer term to help ensure that the council's plans are financially achievable.

2.4 One of the main objectives of the MTFS is to plan for the delivery of services within an uncertain external environment and to ensure the achievement of value for money. The MTFS sets out a stable and sustainable financial plan over the medium term to allow the council to shape the way the borough grows whilst continuing to provide high quality services.

2.5 By agreeing a 4 year MTFS the council is identifying the financial pressures and opportunities that lie ahead at an early stage and is able to make better decisions as there is time to fully consider different options, engage with stakeholders, carry out risk assessments and develop contingency plans to manage future uncertainties.

2.6 This report provides an update on the latest medium term financial projections and sets out a variety of consultation proposals to inform the final budget for 2020/21 and the MTFS, in preparation for approval at Council in February 2020.

2.7 This council has a long track record of good financial planning and management. As a result of past decisions and innovations, the council is underpinned by excellent financial foundations and has a strong balance sheet with diversified investments, healthy reserves and no significant borrowing. This financial position supports the delivery of high quality services with a very low level of council tax

2.8 Since 2009 savings of £13.7M (25% of the gross underlying expenditure budget) have been achieved, within an extended period of national public expenditure reduction and historically low interest rates. These have been delivered with minimal impact on delivery of services during a prolonged period of austerity. Chart 1 below shows how central government funding has reduced by almost two thirds or £5M over the past 5 years, requiring the council to reduce costs or identify alternative sources of income:

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Chart 1 – Government Grant Funding

2.9 In addition to making savings the council has also successfully implemented a new Property Investment Strategy that has already invested £16M in the local economy which will provide estimated additional income of £1.1M in 2020/21.

2.10 This increased commercialisation has improved the resilience of the council by diversifying funding sources and reducing reliance on government grants over which the council has little control or influence. As shown in Chart 2 below, the council has a wide range of income sources including commercial rent, shared services income, alternative investment strategy, fees and charges, business rates and council tax.

Chart 2 – Income Sources

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3 External Context

3.1 The 2019/20 funding settlement was the fourth and final year of the government’s current grant settlement. The government previously stated its intention to hold a new Spending Review in 2019, covering the period 2020/21 to 2022/23. However, with the unsettled political position around Brexit, it was announced that a one-year Spending Round would be provided, covering the financial year 2020/21; and that this would be followed in 2020 by a full Spending Review, reviewing public spending as a whole and setting multi-year budgets.

3.2 The delay of the longer term spending review covering all government departments makes medium term financial planning very challenging as significant changes are expected which could have a high risk of reducing current funding.

3.3 In addition to reviewing the overall level of local government funding, the government is also likely to make fundamental changes in the distribution of funding across different tiers (districts, counties and unitaries) and geographic areas. With the current pressure on social care budgets it is perhaps likely that there will be some redistribution of funds away from districts to those with social care responsibilities i.e. unitaries and counties.

Spending Review 2020/21

3.4 Following the delay in the multi-year settlement the government announced its one year spending plans on 4 September 2019. The main points were as follows:

Business Rate Retention, Fair Funding Review and Baseline resets will be unchanged for 2020/21 and deferred to 2021/22. Inflation in the baseline at 2% was confirmed;

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Although no impact for BDBC, 75% business rate retention pilots are to cease. Clarification has not been given on the use of the £1.4bn held by central government released from this;

New Homes Bonus (NHB)– no update was provided by the spending review announcement, but a technical consultation has now started. This includes consultation on possible changes to future NHB payments. However, as this is still an unknown, no changes have been made to the MTFS assumptions at this time;

Council Tax (Band D) thresholds – 2% general increase and a further 2% allowed for social care precept;

Additional £54M to combat rough sleeping and homelessness. This may have a direct impact for BDBC with the possibility of a further year of homelessness grants; and

Funding to remove negative RSG has been continued for 2020/21.

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Other – announcements with limited direct impact on BDBC

Additional £1bn grant for social care (children and adults) and up to £500M via 2% increase in council tax (social care precept). Also existing grants totalling £2.5bn in 2020/21 to support social care will continue;

Additional £700M to support children with special educational needs via Dedicated Schools Grant;

Public Health Grant will increase in line with inflation as will Department of Health contribution; and

Additional £24M to improve building safety.

3.5 In summary whilst additional resources were provided to the county council there was no increase in funding to this council and further clarification is awaited of detailed grant settlement amounts and council tax referendum limits for 2020/21.

3.6 The Local Government Finance Settlement 2020 to 2021: technical consultation was released on the 3 October 2019. This seeks views on a number of issues including NHB; council tax referendum limits; social care funding and RSG. The consultation closes on 31 October 2019. This will feed into the Provisional Local Government Finance Settlement (PLGFS) which is due in December 2019.

Fair Funding Review

3.7 The Ministry of Housing, Communities and Local Government (MHCLG) is currently undertaking a fair funding review on the formula for distributing funding to councils and as part of this is considering options for assessing local authority needs and resources. The review includes Revenue Support Grant (RSG) and the level of baseline business rates which each council is able to retain. The council already receives no RSG but is at risk of having to pay negative RSG to the government in future. This government spending review announced that negative RSG would be removed in 2020/21. The technical consultation seeks views on how this should be treated in future years.

Retained Business Rates

3.8 The spending review, reaffirmed the Government’s intention to introduce a new business rate retention scheme, looking to change this from the current 50% retention scheme to at least a 75% retention scheme which it can achieve without a need for a change in legislation. The ultimate aim still being to introduce a 100% retention scheme.

3.9 Additionally, it will look at the tier splits between district, counties and fire authorities (currently 40:9:1) along with business rates baseline resets.

3.10 It is anticipated that this baseline reset would have a limited impact on BDBC however, the impact will have to be assessed once further details are known and built into future updates of the MTFS.

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MTFS Funding Assumptions

3.11 Based on previously applied methodology, following consultation periods, any impact of government funding changes is likely to be phased in through transitional arrangements.

3.12 The budget strategy therefore assumes that in 2020/21 central government funding will overall remain at current levels and that council tax will increase by £5 in 2020/21, 2021/22 and 2022/23. Thereafter, the MTFS assumes the current general referendum increase limit of 1.9%.

New Homes Bonus

3.13 This is an important source of income receiving over £2.1M in 2019/20.

3.14 The current system rewards councils for housing growth with additional funding for 4 years (previously 6 years).

3.15 The MTFS currently includes £3.8M of assumed legacy payments over 2020/21 to 2022/23, based upon 850 new band D properties per annum.

3.16 The spending review in September announced that legacy payments for 2020/21 will be funded but did not give any further information. However, the local government finance settlement – technical consultation document is consulting on a change in methodology for calculating NHB. This will have an impact on the overall levels of income received.

3.17 However, the current MTFS recognises the risk of assuming the receipt of NHB and only allocates the first £0.25M to support ongoing general fund services. Given the changes indicated as part of the consultation the update of the MTFS continues this assumption.

3.18 The current accounting policy for NHB assumes that any additional grant, received in addition to the first £0.25M, will be allocated as follows:

20% to the Local Infrastructure Fund (Reserve) to provide enhanced funding for community infrastructure;

55% to the Housing Reserve - Manydown to provide funding for the development of Manydown;

25% to the Stability and Resilience Reserve; and

The first £0.25M per annum of any allocation to the Housing Reserve – Manydown will be reallocated to the Efficiency, Transformation and Digital Reserve.

3.19 The NHB accounting policy will be reviewed as part of an overall review of accounting policies that will form part of the update of the MTFS for approval by council in February 2020. This will include an update for any changes in methodology as a result of the consultation.

Council Tax Referendum Limits

3.20 The recent spending review announced that the Council Tax referendum limit is proposed at 2% but this will be subject to consultation in the PLGFS.

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3.21 In recent years there has been flexibility for districts to increase by up to £5 and this assumption has been included in the MTFS.

3.22 It should be noted that this update assumes no change in the council tax base assumptions used in the MTFS approved by council in February 2019. The council tax base will be set by the S151 officer in January 2020. Any updated assumptions will be incorporated in the budget papers for approval in February 2020.

Future Economic Outlook

3.23 The global economy is entering a period of slower growth in response to national and global political issues, primarily the trade policy stance of the United States. The UK economy has displayed a marked slowdown in growth due to both Brexit uncertainty and the downturn in global activity. In response, global and UK interest rate expectations have eased dramatically.

Interest Rates

3.24 It is forecast that base interest rates will remain at 0.75% for the foreseeable future and that gilt yields will also remain low. However, there are substantial risks to the forecast which are weighted to the downside, dependant on Brexit outcomes and the evolution of the global economy.

3.25 The risk of an economic downturn is that it could reduce the council’s income e.g. from commercial rents, fees and charges (including planning fees, land charges and building control fees) and investments. There could also be additional pressure on welfare related costs e.g. benefit payments, council tax support and bed and breakfast and homelessness prevention.

4 Internal Context

4.1 The current Council Plan runs to 2020 and is under review. Key priorities for the council from 2020 will be strengthening communities, protecting and enhancing our environment, improving safety and planning for the future. The Council meeting of 18 July 2019 expressed strong support for declaring a climate emergency. Following the declaration being approved by Cabinet in September actions are being taken forward at pace across a wide range of themes1.

4.2 The climate emergency , maintaining and enhancing the borough’s natural environment, and sustainability are key issues in the borough’s Horizon 2050 vision2. The Council Plan will lay the foundation for delivery of the vision which was adopted by the council and partners in March 2019. It consists of eight themes developed through extensive consultation and engagement with residents, partners and stakeholders. The themes are:

Homes and housing;

1 Cabinet 10 September 2019

2 https://www.basingstoke.gov.uk/horizon2050

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Healthy, safe and inclusive communities;

Natural environment;

Sustainability;

Transport;

Education;

Economy and entrepreneurship; and

A borough with heritage and distinction.

4.3 The vision is not a strategy or policy but provides a framework and road map to inform policy making, to plan for the future development of the borough and to make Basingstoke and Deane a great place to live.

4.4 The vision, which will help to inform the update of the Council Plan, informs the council’s key strategies including the Local Plan which is due for review with any new plan due for adoption in 2023. A number of large strategic housing sites in the current local plan have come forward in recent years generating an upturn in the number of new homes in 2017/18 and 2018/19 and this is forecast to continue to 2023/24. Over the MTFS period 2020/21 to 2023/24 the borough population will increase by 8,650 and the number of dwellings by 4,550 resulting in an uplift in Council Tax receipts. Under the current methodology for NHB this would result in an increase in NHB income.

4.5 At the same time the council is pressing ahead with its strategic projects. Manydown Garden Communities LLP has been established to deliver a new garden community at Manydown with 3,520 homes by 2029. Regeneration of the leisure park is progressing to create a world-class regional leisure destination. A programme of major development at Basing View is securing this business district as a key business destination and site for inward investment. The council’s Town Centre Strategy, Transport Strategy, Economic Growth Strategy and Economic Masterplan underpin and support this work. Enterprise M3 LEP and Hampshire County Council are strategic partners, working with the borough council to bring additional infrastructure investment into Basingstoke and Deane.

4.6 The council’s focus on investing in the future of the borough through strategic projects produces a double benefit of generating additional income while also supporting the borough in terms of employment, town centre/local economic vitality and business rates.

4.7 The council is also exploring how to roll out “smart” connectivity and the latest broadband capability, in the town and across the borough, as part of this infrastructure provision. Within the organisation, a programme of digital transformation is underway to deliver benefits to staff and customers of more joined up and efficient service delivery, giving customers more choice over how they communicate with and access council services. Linked to this, the organisation is also looking at smarter ways of working and innovative use of technology in the back office, on the front line, and for more flexible mobile working. In addition to efficiencies through technology, the council is exploring commercialisation opportunities to bring in additional funding to support service delivery.

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5 2019/20 Forecast Revenue Position

5.1 The forecast revenue outturn position for 2019/20 at 30 September 2019 is £1.25M favourable. This is mainly due to the following one-off items:

£0.4M additional commercial rent income;

£0.3M staff savings;

£0.2M re-phasing of town centre strategy; and

£0.2M re-phasing of Local Plan studies.

5.2 Ongoing savings that have been identified have been included in the proposals within the report where relevant.

5.3 The current year’s budget includes previously agreed savings targets of £1.2M and additional income targets of £1.2M. Progress with achieving these targets is undertaken through monthly budget monitoring, discussed with Heads of Service and Executive Directors and reported quarterly to Cabinet and Performance Panel.

5.4 The current forecast is that 94.25% of these targets are expected to be achieved. There are minor variances in relation to commercial income generation, Basing View parking income and minor restructure savings which are identified as cost pressures later in this report.

6 Update of the MTFS and Budget Process

6.1 The council’s approved MTFS has been reviewed with a further year added to the budget forecast for 2023/24. All assumptions have been reviewed and updated.

6.2 This year, the forecast review involved a three stage process. The stages were:

Rolling forward the financial forecast based on existing services, previous decisions, strategies and a review of key assumptions;

Portfolio Holders, supported by Executive Directors, identifying options for efficiency savings, additional income, unavoidable service cost pressures and executive commitments for new strategic initiatives; and

Cabinet reviewing options and agreeing on a set of proposals to deliver a balanced budget.

7 Budget Review

7.1 The revised MTFS has been prepared by reviewing the existing budget commitments using a detailed financial model, adjusting for one-off items, inflation, external grants and updating the forecast for central items. Table 1 below gives an updated position following this review.

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Table 1 - General Fund Revenue Budget Current Position

2020/21 2021/22 2022/23 2023/24

£M £M £M £M

Budget Gap - Approved February 2019 0.75 2.26 3.08 5.44

Central Items

Growth 2020/21 (replaced with specific proposals) (0.25) (0.25) (0.25) (0.25)

Changes in Reserve Assumptions 0.09 (0.45) (0.57) 0.01

Housing Benefit Pressure 0.11 0.11 0.11 0.11

Rephasing Provision for Contractual Agreement (0.17) 0.17 0.00 0.00

Property Rental Income (0.45) (0.11) (0.03) (0.21)

Treasury Management Investment Income (0.05) (0.11) (0.12) (0.11)

Alternative Investment Income 0.21 0.48 0.74 0.84

Fees and Charges 0.04 0.04 0.04 0.04

Amended Budget Gap 0.28 2.14 3.00 5.87

7.2 After updating the MTFS for the above changes, prior to considering the

executives budget proposals, Table 1 shows a residual budget gap.

7.3 The increasing budget gap over the period of the MTFS is mainly the result of assumed annual inflationary pressures and the previously agreed increase in revenue contributions to capital reserves to fund future rolling programme capital expenditure. The latter requirement will be considered as part of updating the Capital Programme to be reported to council for approval in February 2020. Any changes to revenue funding assumptions will be included in the update of the MTFS at that time.

7.4 The key assumptions used in the MTFS forecast, which include inflation rates and assumed increases in council tax properties, are shown in Table 2 below.

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Table 2 – Key MTFS Assumptions

Key Area Central Case 2020/21 to 2023/24

Pay 2% pa and allowance for incremental increases

Vacancy Factor 2.25% pa

Inflation 2% pa except:

1% pa supplies and services (incl external grants)

3% pa contracted services

Fees and Charges 3% pa (RPI)

Interest Rates Base rates remain at 0.75%

Business Rates Income At baseline which will increase by 2% pa

Council Tax Increase £5 pa for 2020/21, 2021/22 and 2022/23 followed by a 1.9% (£2.59) increase in 2023/24

Tax Base (band D equivalent properties)

Increase 850 homes pa for 2020/21 onwards

New Homes Bonus Growth Increase 850 homes pa for 2020/21 grant onwards

Use of New Homes Bonus Grant to support revenue budget

Use of £0.25M pa

Increasing contributions from revenue to fund future capital expenditure

£0.5M in 2020/21, £1.5M in 2021/22, £2.5M in 2022/23 and £4.0M pa from 2023/24 onwards

Central Items

Growth

7.5 The current MTFS allows for new future growth pressures of £0.25M per annum. For 2020/21, the allowance has now been removed and replaced by Cabinet’s 2020/21 cost pressure proposals.

Changes in Reserves Assumptions

7.6 In relation to the Interest Risk and Rent Risk reserves, the current accounting policies assume the use of reserves to balance the bottom line of the MTFS over the period of the MTFS.

7.7 The MTFS should include the actual predicated level of interest and rents to be received with adequate risk reserves being held.

7.8 Therefore, the MTFS has been updated to remove the assumption to make draws or add to these reserves.

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7.9 It should be noted that the remaining balances on these two reserves will still be within the risk assessed reserve balances that should be provided for.

7.10 All reserves and financial policies will be reviewed as part of the Budget Report to Council in February 2020.

Housing Benefits

7.11 Modelling of the impact of changing housing benefit caseloads, new government initiatives and the continued roll out of Universal Credit has identified an estimated increase in annual cost of £0.11M over the next four years. This is mainly due to the effect on housing benefit subsidy of supported housing initiatives and new smarter processes for obtaining updated earnings information which results in the earlier identification of benefit overpayments.

Rephasing of Provisions under Contractual Agreement

7.12 The MTFS assumed the provision of a contractual compensation payment in relation to the Adventure Golf Course in 2020/21. If this cost is incurred, it is not likely to be required until 2021/22.

Property Rental Income

7.13 Additional property rental income is expected due to more favourable assumptions in occupation and rent review assumptions. The updated forecast for rental income and empty unit costs included in the updated MTFS is shown in Table 3 below.

Table 3 – Rent Income and Empty Unit Costs

2020/21 £M

2021/22 £M

2022/23 £M

2023/24 £M

Rental Income

Assumed in current MTFS (15.05) (15.35) (15.35) (15.11)

Latest Forecast (15.60) (15.79) (15.77) (15.64)

Expected Increase (0.55) (0.44) (0.42) (0.53)

Costs & Voids

Assumed in current MTFS 0.53 0.31 0.13 0.43

Latest Forecast 0.63 0.64 0.52 0.75

Expected Increase 0.10 0.33 0.39 0.32

Net Expected Increase in Rental Income

(0.45) (0.11) (0.03) (0.21)

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Treasury Management Investment Income

7.14 Increased interest income is expected due to changes in cashflow assumptions in respect of alternative investments. A breakdown of the investment income forecast over the medium term forecast period is set out in Table 4.

Table 4 – Treasury Investment Income

2020/21 £M

2021/22 £M

2022/23 £M

2023/24 £M

Average Balances (130.50) (122.00) (116.00) (114.50)

Average Returns 1.7% 1.6% 1.5% 1.5%

Forecast Income (2.16) (1.93) (1.79) (1.68)

Current MTFS Assumption (2.11) (1.82) (1.67) (1.57)

Net Change In Income (0.05) (0.11) (0.12) (0.11)

Alternative Investment Income

7.15 The MTFS includes future additional income from the use of alternative investments in line with the Property Investment Strategy, Invest to Grow Fund Strategy and investment in the Manydown project. The latest assumptions are shown in Table 5. This includes an assumption that there will be no new activity with regards to the Invest To Grow Fund which will cease and that the current Eli Lilly Investment will be repaid in 2020/21.

Table 5 – Additional Alternative Investment Income

2020/21

£M

2021/22

£M

2022/23

£M

2023/24

£M

Property Investment Strategy

Income

(1.58) (1.97) (1.97) (1.97)

Invest to Grow Fund Income (0.55) (0.00) (0.00) (0.00)

Manydown Loans Income (0.45) (0.83) (0.84) (0.74)

Total Additional Alternative

Investment Income

(2.58) (2.80) (2.81) (2.71)

Current MTFS Assumption (2.79) (3.28) (3.55) (3.55)

Cumulative Reduction 0.21 0.48 0.74 0.84

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Fees and Charges

7.16 The MTFS assumes an average increase in fees and charges of 3%. However, as some fees are set by legislation and cannot therefore be increased by the council e.g. planning fees, an adjustment has been included to reduce the level of increased income by £0.04M.

7.17 A review of all fees and charges has been undertaken with each service manager reviewing each of their charges with the aim of achieving a 3.0% increase in fees and charges where possible and agreeing their proposals with the relevant Portfolio Holder. As part of this review, benchmarking has been carried out on the council’s fees and charges to compare them to our comparator neighbours.

7.18 In cases such as parking and centre shuttle fees where charges are rounded e.g. to the nearest 10p, the proposed increases may not be 3.0%. However, there are no significant impacts on income from these rounding adjustments.

7.19 Further information on any proposals to increase fees and charges by more than 3% are detailed in section 10 of the report.

7.20 In some areas, whilst still achieving an overall increase in fees and charges in line with the assumed 3%, there are variations within the charging structure that fall below and above the 3% increase. Those areas impacted by this are detailed below. It should be noted that as these variations still generate an increase in line with the 3% average increase there is no additional income assumed over and above the previously approved income level in the MTFS.

Centre Shuttle Season Tickets

7.21 These are proposed to increase by between 3.2% and 3.7% to maintain discount levels when compared with all day return fares. Whilst freezing fares for some user groups, such as students, to bring our charges in line with industry norms, it is proposed to increase a child fare to be 50% of an adult fare. Historic data collected between January and December 2018 indicates this increase is likely to affect on average 22 child passengers per month. These proposals result in increases ranging between 14% and 17% (this represents fare increases of 10p and 20p respectively).

Market Pitches

7.22 Changes have been proposed to clearly differentiation between permanent and casual traders in line with market standards as recommended by the market manager. The changes provide increases to gross pitch fees, per linear foot, ranging from £0.03 (1.5%) for regular traders to £0.34 (16.5%) for casual traders. Annual parking permits for market traders will increase from £10.30 to £20 (94.2%). The gross daily energy charge will reduce from £6.18 to £6.00 (-2.9%). In all cases the charges have been determined as being appropriate for the benefit provided and have been rounded as necessary for ease of cash handling.

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General MTFS 7.23 The MTFS contains the most up to date information at the time of drafting but

the council's financial position is dynamic. The council faces a number of financial uncertainties that could affect the council's financial position over the medium term. The MTFS model will therefore continue to be updated as and when government’s changes to local government finance are clarified and the economic context evolves. Any additional information provided as part of the PLGFS will be included in the MTFS update to Council in February 2020.

8 Budget Proposals for 2020/21- Balancing the Budget

8.1 There are a range of approaches to balancing the budget. Broadly speaking these fall into the following categories:

Growth and Development Opportunities within the Borough;

Commercialisation – understanding what this means for the council and what opportunities are there for income generation;

Review of all services – are there efficiencies that can be achieved – with possible links major transformation projects such as Digital and Smarter Ways of Working;

Improved Asset Management;

Review of central activities such as Treasury Management;

Reviewing our policies around things such as Council Tax and use of Reserves; and

Understanding our Capital Spend needs and how best to meet the cost of these.

8.2 The 2020/21 and future years’ budget proposals for consultation include the

following:

Savings that minimise the impact on the delivery of services, utilising the approaches detailed in 8.1;

Additional income items;

Unavoidable cost pressures; and

New executive commitments to support key Council Plan priorities.

8.3 Details of the financial implications of these proposals are summarised below in Table 6. A full list of savings proposals is detailed in Appendix 1. The proposals that require consultation are detailed further in the following sections.

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Table 6 - General Fund Revenue Budget Updated Cabinet Proposals

2020/21 2021/22 2022/23 2023/24

£M £M £M £M

Amended Budget Gap 0.28 2.14 3.00 5.87

Cabinet's New Revenue Budget Proposals:

Identified Savings (0.98) (1.04) (1.32) (1.27)

Additional Income (0.44) (0.51) (0.55) (0.55)

Total Savings (1.42) (1.55) (1.87) (1.82)

Unavoidable Cost Pressures 0.64 0.66 0.70 0.66

Total Savings Net of Cost Pressures (0.78) (0.89) (1.17) (1.16)

Executive Commitments

Executive Commitments 0.85 0.40 0.40 0.40

Less funded from existing budgets and reserves (0.35) (0.10) (0.10) (0.10)

0.50 0.30 0.30 0.30

Revised Budget Gap - November 2019 0.00 1.55 2.13 5.01

8.4 The combined impact of the proposed budget proposals has closed the budget gap for 2020/21 budget and reduced the future years’ MTFS budget gaps. This will be updated further following any changes to the proposals following the budget consultation and for any further information that may impact on the MTFS following the release of the PLGFS and any post Brexit budget announcements.

8.5 A strategic, multi-strand approach to closing the budget gap in the longer term will continue to be implemented as part of the updating of the MTFS in future years.

9 Savings Proposals

9.1 Table 7 summarises the savings proposals by portfolio. A detailed breakdown is included in Appendix 1. Appendix 2 details the Equality Impact Assessments (EIA’s) for those proposals that require consultation.

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Table 7 - Summary of Savings Proposals

2020/21 £M

2021/22 £M

2022/23 £M

2023/24 £M

Portfolio

Leader (0.01) (0.01) (0.01) (0.01)

Communities, Culture and Partnerships (0.01) (0.01) (0.01) (0.01)

Borough Development and Improvement (0.01) (0.01) (0.01) (0.01)

Environment and Enforcement (0.17) (0.20) (0.20) (0.20)

Finance and Service Improvement (0.38) (0.41) (0.68) (0.63)

Homes and Families (0.09) (0.09) (0.09) (0.09)

Planning, Infrastructure and Natural Environment (0.31) (0.31) (0.32) (0.32)

Total Savings 2020/21 and Future Years (0.98) (1.04) (1.32) (1.27)

Environment and Enforcement Portfolio

Review of public convenience services within the Borough £0.02M 2020/21 increasing to £0.05M in future years (EIA 1)

9.2 The provision of public conveniences in the borough is being reviewed to understand levels of usage, and ensure that they are being run efficiently and meeting customers’ needs. An initial assessment has been carried out to review the usage and condition of the following council-owned services: Castons Yard (accessible toilet only), Stratton Park (currently closed), Worting Road Cemetery (minor usage), Eastrop Park (high usage) and parish council provision at Kingsclere, Whitchurch, Overton and St Mary Bourne, which have generally low usage levels.

9.3 Consideration is being given to future options for the provision and management of these facilities, particularly in parished areas. Further, more detailed, work on these proposals is pending and this assessment will be revisited accordingly to inform any decisions that are taken.

Planning, Infrastructure and Natural Environment Portfolio

Contract management and service efficiencies identified in public and community transport in the borough £0.01M 2020/21 increasing to £0.02M in future years (EIA 2)

9.4 Through ongoing contract management and the identification of efficiencies over time, a modest saving has been assumed. It is important to note that such service changes must be carefully balanced with the need to provide communities with an alternative mode of transport, particularly in rural areas.

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10 Additional Income Proposals

10.1 Table 8 summarises the income proposals by portfolio. A detailed breakdown is included in Appendix 1. Appendix 2 details the Equality Impact Assessments (EIA’s) for those proposals that require consultation. Table 8 - Summary of Additional Income Proposals

2020/21 £M

2021/22 £M

2022/23 £M

2023/24 £M

Priority

Environment and Enforcement (0.20) (0.19) (0.19) (0.19)

Finance and Service Improvement (0.15) (0.15) (0.15) (0.15)

Homes and Families (0.08) (0.16) (0.20) (0.20)

Planning, Infrastructure and Natural Environment (0.01) (0.01) (0.01) (0.01)

Total Additional Income 2020/21 and Future Years (0.44) (0.51) (0.55) (0.55)

10.2 The following paragraphs provide further detail on the income proposals that require consultation.

Environment and Enforcement Portfolio

Targeting of free hour parking to drive business at Top of the Town £0.09M (EIA 3)

10.3 In order to focus the free one hour parking on improving footfall in Top of the Town, this will be retained in those car parks located at the top of town (Albert Yard, Castons Yard, Feathers Yard and Jacobs Yard) and removed from Central and Joices Yard car parks, which research shows are currently not being used for that purpose.

Change Sunday parking charges (in line with other days) £0.04M (EIA 3)

10.4 To extend the standard Monday-Saturday daytime charges to Sundays, which is consistent with the charges at Festival Place and the Malls. This will simplify the existing parking charges and improve turnover of spaces on Sundays which are one of the busiest shopping days of the week.

5% increase in parking season tickets (2% above inflationary increases) £0.01M (EIA 3)

10.5 5% increase in parking season tickets (2% above inflationary increase). The proposed charges would remain competitive and allow for significant improvement works to be carried out in the main permit holder car park (Vyne Meadow) during 2020/21. This would include resurfacing, improving bay widths and the general layout and landscaping works. 

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Increase charges for residents parking permits £0.02M (EIA 3)

10.6 This will be required by Hampshire County Council via the new agency agreement with them and savings would cover necessary enforcement and maintenance costs. The cost of a permit for residents and visitors parking permits will be £25.

Bulky household waste collections – above inflation increase to charges £0.01M (EIA 4)

10.7 This is a discretionary service for which a charge is made. The standard charge for up to 3 items is £30.06 (with 50% concession being offered for those in receipt of council tax support or housing benefit). The proposal is to increase the charges by 10% to bring BDBC charges more in line with the other comparable authorities. Changes to charges in other local authorities has not

resulted in an increase in fly tipping

Planning, Infrastructure and Natural Environment Portfolio

Increase in allotment charges £0.01M full year impact from 2020/21 (EIA 4)

10.8 Increase charge for a full size allotment. This will ensure that charges are

consistent and fair in comparison with other local authorities. It will also allow for allotments to be maintained appropriately. It should be noted that approximately 45% of allotment holders qualify for the 50% concession (for over 60s).

11 Pressures

11.1 Table 9 summarises the pressures identified by Priority as per the current Council Plan. A detailed breakdown is included in the following paragraphs. Table 9 - Summary of Unavoidable Cost Pressures

2020/21 £M

2021/22 £M

2022/23 £M

2023/24 £M

Priority

Preparing for Controlled and Sustainable Growth 0.03 0.04 0.04 0.04

Improving Residents Quality Of Life (through improved services/facilities) 0.46 0.51 0.55 0.51

Creating an Organisation Capable of Change 0.15 0.11 0.11 0.11

Total Cost Pressures 2020/21 and Future Years 0.64 0.66 0.70 0.66

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11.2 The following paragraphs provide further detail on the pressures identified.

Preparing for Controlled and Sustainable Growth

Creation of a temporary car park on Basing View £0.03M

11.3 Income of £0.08M was expected from admissions at the new temporary car park at Basing View. However, based on current admission levels it is now estimated that it will only generate income of £0.05M.

Income generated from battery storage facility on the Thornycroft Site £0.01M from 2021/22

11.4 This is a former approved saving. It was intended to negotiate a lease agreement for battery storage facility on the Thornycroft Site, however, the identified partner found an alternative site. It is not expected that a new prospective partner will be identified at the current time.

Improving Residents Quality of Life

Historic budget to review Basingstoke Live that has now been replaced by BLove £0.01M

11.5 A saving proposal was approved to achieve a saving from a review of Basingstoke Live working on collaboration with partners. This budget is required to support the BLove event which has a family focus and to enable some of the costs of this event to be met. The format and provision of this event is still under review with partners.

Income from Worting Road Cemetery £0.04M

11.6 The level of income receivable from the Worting Road Cemetery, which is reaching capacity, is now expected to remain static. Therefore, future assumed income will not be achieved.

HCC Transformation Savings – Impact on waste and recycling £0.26M increasing to £0.36M in 2022/23

11.7 As part of HCC's transformation to 2021, the County Council propose to stop paying recycling credits; recharge the cost of disposing of contamination/non-recyclable materials; and retain the income from the sale of recyclable materials. It is intended that a sum will be allocated to the Stability and Resilience Reserve in the first instance and will be released once the actual pressure is known. A provision of £0.26M, to mitigate towards this risk, has been identified in 2020/21 towards this cost pressure.

Additional resource to support S106 agreements £0.04M (to be reviewed for 2023/24)

11.8 To provide additional resources to recover commuted funds and to transfer land from developers for current and future expected increases in the number of S106 agreements.

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Tree Strategy Budget Pressure £0.10M

11.9 The number of trees maintained by the council has risen over a number of years and is expected to continue to rise. To meet the current levels there is a need to provide ongoing funding to carry out essential safety inspections and tree works on borough owned trees.

Creating an Organisation Capable of Change

Transport and Parking Teams £0.03M

11.10 An anticipated saving from a restructure of the Transport and Parking team has not been achieved. It was intended to merge roles as a result of a vacancy in the Parking Team. On further review this was not possible.

Reduction in Income Generation – Commercialisation of Street Scene Activities £0.05M (one off 2020/21)

11.11 Further investigation was undertaken into the potential for the service to generate a commercial income and as a consequence it was found that this level of income was not feasible at an early stage. The work to ready the service will continue and alongside this further service efficiencies have been made, which has generated an offsetting saving.

Lone Working – Corporate Approach £0.03M

11.12 At present there is not a corporate approach and provision in respect of lone working at the council. Society is changing and there is a need to provide a more resilient method of protecting staff carrying out council duties. The budget ensures provision for a resilient and corporate approach for those engaged in lone working.

Maintain Internal Audit Resources £0.02M (from 2021/22)

11.13 In order to continue to support the provision of shared services and seek additional income generating opportunities it is necessary to now retain this internal audit resource. This was a previously agreed saving.

Procurement Team – Increased Resource £0.04M (one off 2020/21)

11.14 This is a one off provision of additional resources to undertake a full review of the procurement and contracts process to generate longer term overall financial savings for the council.

Additional resource to meet increased Communications and Marketing Team Activity £0.01M

11.15 An additional ongoing resource is required to meet the increasing demand from social media and number of major projects that the council is undertaking.

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Retention of an Human Resources Officer £0.03M (from 2021/22)

11.16 There is now a need to retain this HR post to support the organisation through a period of significant change aligned to the council’s vision of being a modern and efficient council. This was a previously approved saving.

12 Executive Commitments

12.1 Table 10 summarises the proposed Executive Commitments. The following paragraphs provide further detail.

Table 10 – Executive Commitments

2020/21 £M

2021/22 £M

2022/23 £M

2023/24 £M

Priority

Preparing For Controlled And Sustainable Growth 0.40 0.20 0.20 0.20

Improving Residents Quality of Life 0.10 0.10 0.10 0.10

Supporting Those That Need It 0.35 0.10 0.10 0.10

Less funded from existing budgets and reserves (0.35) (0.10) (0.10) (0.10)

Total Executive Commitments 2020/21 and Future Years 0.50 0.30 0.30 0.30

Preparing for Controlled and Sustainable Growth

Town Centre Strategy £0.30M 2020/21, £0.10M future years

12.2 Basingstoke town centre is popular and successful. It is important that the council protects and enhances its attractiveness in the face of various challenges effecting many shopping areas across the country. A new long term strategy is required to make the town centre future proof and fit for the twenty first century. It is intended to appoint market leading advisers, working with the council and other stakeholders, to assess and to re-visualise the town centre including improved accessibility, use of council land and opportunities for third party investment.

Basingstoke Gateway Strategy £0.10M 2020/21 and future years

12.3 Basingstoke is one of the leading towns in the south of England. This strategy is aimed at enhancing the appearance of key strategic gateways into the town – making it a much more welcoming environment for visitors and residents.

Improving Residents Quality of Life

Increase in the Number of Community Safety Patrol Officers £0.10M (EIA 5)

12.4 It is proposed to increase of Community Safety Patrol Officers by 2.5 FTE. The additional resource will be focussed on reducing anti-social behaviour and crime in both urban and rural parts of the Borough helping to achieve safer and more connected communities, supporting them to feel safe and resilient.

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Climate Emergency

12.5 The council formally declared a Climate Emergency at the meeting of Cabinet on 10 September in response to a motion agreed at the meeting of Council in July. This declaration recognises the need to take urgent action to tackle the growing issue of a changing climate and the impact that this will have on all of our lives. In response to this, the council is currently reviewing the actions it is taking and considering what additional steps to take in the future, through both an officer delivery group and a proposed Members Advisory Panel with the input of partners through a summit of Basingstoke Area Strategic Partnership in November. The actions to be taken by the council will cover a range of Cabinet members’ portfolios, some of which are likely to have financial implications in order to progress successfully. These will need to take into account the Green Initiatives Fund (with a budget of £0.35M) which was established in 2014 and which has been used to support relevant projects since that time, with the potential for future funding requests as new projects develop.

Supporting Those That Need It

Councillor Community Grants - Budget £0.10M 2020/21 and future years

12.6 Introduction of a scheme to provide flexible, community-led funding with timely and direct impact to meet identified priorities. A sum of up to £2,000 will be available to each ward member to support those projects that require smaller amounts of funding, satisfying local need. It is intended that this will be funded from within the existing overall grants funding budget.

Borough Regeneration £0.25M 2020/21

12.7 Investing and improving parts of the borough that need it is a key council priority. This budget will be used to initiate pilot schemes to enhance the open spaces of those wards most in need of new investment, working with local communities and key stakeholders such as Housing Associations and ward members. If successful, additional ongoing funding will be sought.

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13 Updated MTFS/General Fund Summary Position

13.1 A summary of the updated Medium Term Financial Strategy for 2020/21 to 2023/24 including the budget proposals is shown in Table 11.

Table 11 – Updated Medium Term Financial Forecast

Original Budget 2019/20

£M

Forecast Budget 2020/21

£M

Forecast Budget 2021/22

£M

Forecast Budget 2022/23

£M

Forecast Budget 2023/24

£M

Net Cost of Services

Leader 0.24 0.25 0.22 0.24 0.22

Homes and Families 0.08 (0.01) (0.09) (0.13) (0.13)

Planning, Infrastructure and Natural Environment 0.62 0.20 0.30 0.20 0.20

Communities, Culture and Partnerships 2.44 2.51 2.48 2.48 2.48

Finance and Service Improvement 3.02 2.81 3.06 3.50 3.74

Borough Development and Improvement 0.44 0.59 0.50 0.33 0.33

Environment and Enforcement 1.26 1.40 1.48 1.59 1.64

Regeneration and Property (0.14) 0.13 (0.11) (0.12) (0.12)

Holding and Agency Accounts (0.40) (0.46) (0.66) (0.75) (0.76)

Business Units 24.95 25.31 24.90 24.62 24.11

Net Inflation Allowances Included Included 0.59 1.12 1.68

Future Allowance For Growth above above 0.25 0.50 0.75

Net cost of Services 32.51 32.73 32.90 33.57 34.13

Investment Property Trading Accounts (14.33) (14.75) (14.95) (15.31) (14.95)

Interest and Investment Income (3.04) (3.16) (2.76) (2.63) (2.32)

Property Investment Strategy Income (1.24) (1.58) (1.97) (1.97) (1.97)

Council Tax Income (7.99) (8.42) (8.87) (9.32) (9.61)

Collection Fund Surplus (council tax) (0.12) (0.05) (0.05) (0.05) (0.05)

Retained Business Rates (3.95) (3.24) (3.30) (3.37) (3.44)

Business Rates Deficit (previous years) 1.98 0.00 0.00 0.00 0.00

New Homes Bonus Grant (2.13) (2.33) (2.98) (3.36) (3.13)

Other Government Grants (0.56) (0.44) (0.39) (0.33) (0.28)

Corporate Income (31.38) (33.97) (35.27) (36.34) (35.75)

Use of Revenue Budget to Finance Future Capital Spend

0.00 0.50 1.50 2.50 4.00

Net Expenditure (Surplus) / Deficit 1.13 (0.74) (0.87) (0.27) 2.38

Contribution To / (From) Reserves:

Revenue Reserves For Capital Purposes (2.04) (0.25) (0.25) 0.00 0.00

Infrastructure Reserves 0.56 0.61 1.09 1.65 1.95

Earmarked Revenue Reserves 1.75 0.33 0.71 0.47 0.00

Risk Reserves (1.40) 0.05 0.87 0.28 0.68

Future Savings Requirement 0.00 0.00 1.55 2.13 5.01

Council Tax Base 65,769 66,619 67,469 68,319 69,169

Band D Council Tax £121.42 £126.42 £131.42 £136.42 £139.01

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14 Capital Investment

14.1 The Capital Programme update and Capital Strategy will be reported to Cabinet and Council in February 2020.

14.2 New capital investment requirements are currently being considered alongside the funding of new potential capital schemes.

14.3 The revenue implications of the capital programme update will be built into the MTFS for approval in February 2020 including any assumed contributions from revenue to support the capital programme.

Invest To Grow Fund

14.4 The Basingstoke Invest To Grow Fund was established following council approval in July 2016, allocating £25M.

14.5 The vision for the fund was to provide capital through loans or equity investment to stimulate local development activity and leverage private sector investment in support of local socio-economic growth.

14.6 The fund has pursued a series of potential investment opportunities but despite considerable effort only one opportunity has been successful, which was the forward funding of a new office building for Elli Lilly on Basing View. This funding will be repaid once the build is complete.

14.7 Following a review of the effectiveness of the fund, the Audit and Accounts Committee were informed in June 2019 that activity to pursue further opportunities had ceased and that future options for utilising the £25M would be considered as part of budget setting for 2020/21and future years.

14.8 Therefore, consideration is being given to how this funding can be utilised to generate an income return to the council to support the council’s revenue position.

15 Reserves and Balances

Reserves

15.1 To ensure proposals are considered in a full financial picture, it is important to set out the expected position on earmarked reserves and the General Fund Balance.

15.2 The Council maintains resources in the form of revenue reserves and capital receipts to:

support the annual revenue budget;

fund the Capital Programme;

fund infrastructure and major development projects;

fund property and alternative investment;

support housing and homelessness;

manage risk; and

earmark reserves for specific purposes.

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15.3 The financial risks facing the council in the medium term are assessed within

the MTFS. This includes assessing the risk of continuing reductions in government funding. The subsequent budget shortfalls that the council then faces and overall local and national economic factors can affect the financial stability of the council.

15.4 In light of the increasing level of risk and uncertainty identified within the MTFS and the increased probability of resources being required to support its delivery, a full review of useable reserves and provisions will be undertaken to ensure that the level of reserves is appropriate given the level of risks identified. This will form part of the updated MTFS to be reported to Council in February 2020.

15.5 Maintaining appropriate and adequate risk reserves is essential to the council’s contingency planning and to give the council resilience and flexibility. Whilst the use of risk reserves in the short term helps to manage downside risks should they materialise, use of one off funding from reserves to support the annual revenue budget is not sustainable in the longer term.

General Fund Balance

15.6 The General Fund Balance is forecast to be £1.5M at the end of 2019/20. The required level of balance is determined by assessing the level of risk the Council faces. This is currently assessed at £1.5M.

15.7 The assessed minimum balance will be reviewed again for the MTFS update in February 2020, taking into consideration both risk and affordability.

16 CIPFA Resilience Index

16.1 The Chartered Institute of Public Finance and Accountancy (CIPFA) has introduced an authoritative measure of local authority financial resilience through the creation of a new index.

16.2 The index uses a range of indicators including the rate of depletion of resources, level of resources generally, demographic and social services pressures and level of borrowing.

16.3 The index is used as an indicator for whether an appropriate and robust independent challenge and support could be given to some councils on financial strategy and trajectories which is intended to provide challenge where needed so that appropriate action can be taken at a local level.

16.4 The index forms part of a broader strategy that CIPFA has for ensuring that S151 Officers have the support needed to achieve a balanced budget linked a concern that financial management capabilities and sharing good practice have at times been hollowed out by the repeated need to cut budgets.

16.5 In conjunction, CIPFA will be publishing the new Financial Management Code, alongside the updated Prudential and Treasury Management Codes in autumn 2019.

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16.6 This information will be considered as part of reviewing the adequacy of reserves and balances to inform the update of the MTFS to be reported to Council in February 2020.

17 Risk Management, Sensitivity and Contingency Plans

17.1 The budget strategy forecast is based on assumptions about the future which are more volatile than usual in the current economic climate. The MTFS will be reviewed annually and will need to remain flexible to respond to changing circumstances.

17.2 A relatively small change in key underlying assumptions can produce a significant change in the forecast. The key sensitivities are employee costs, business rates income, rent income and investment income. These are outlined in Chart 3 below.

Chart 3 – Annual Impact of 1% change key sensitivities

Brexit

17.3 There is still a risk from changes to the economic climate due to Brexit. Impact assessments have been undertaken covering the following areas of risk:

Economy and Business Support;

Access to public funds in a no deal scenario;

Food, fuel and medical supplies;

Service resilience; and

Lorry Parking.

£0.24M

£0.13M

£0.06M

£0.02M

£1.27M

£0.17M

£0.07M

£0.08M

£0.14M

Employees

Supplies and services

Contracted services

Grants made

Short term interest rates

Rent income

Fees and charges

Council tax

Business rates growth

ANNUAL IMPACT OF 1% CHANGE

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17.4 Internal assessments have been undertaken to understand the impact on local service provision for our front line services. These assessments show that the council is well informed and is taking positive and proactive steps to ensure that service delivery, support services, financial services, and internal processes are robust. The council has been working closely with partners such as Hampshire County Council to assess resilience across the whole range of public sector services, with the council and partners taking steps to mitigate where issues arise. The impact assessments are continually under review as more information and guidance becomes available.

17.5 Additionally, any risks arising from a no Brexit deal in place will need to be considered, with the implications for this and other known risks in the update of the MTFS to Council in February 2020.

Property Investment

17.6 Local authorities have had to find new and innovative income streams in order to continue to deliver services to the highest standards that are expected by their residents, businesses and partners.

17.7 Linked to this is significant growth in property investment by local authorities to generate an income return.

17.8 Further consultation was undertaken on the CIPFA prudential code, specifically linked to property investment, with a view nationally, that too much reliance has been put on this area of investment by local authorities to underpin their financial position. Predominantly this concern relates to the need to borrow to undertake this investment.

17.9 The council has a successful track record in property investment which generates significant financial returns, and supports strong financial resilience and sustainability. It is important to note that it has been able to do this without the need to borrow.

17.10 There is a risk in the current uncertain economic climate of a downturn causing a loss of rental income or capital value of an asset affected which, if it is one of our more substantial assets, could have a significant impact on the overall budget position. The property investment strategy will be kept under review alongside the development of the council's overarching property strategy and an update of the asset management plan to ensure that we continue to protect this vital income stream. Any changes will be reported in due course.

Hampshire County Council (HCC) Transformation Savings

17.11 HCC consulted on its financial budget options for 2020 to 2022 from June to July 2019. This included a range of proposed actions and changes to services that will be delivered through its Transformation to 2019 and 2021 programmes. A summary of the potential impact of the proposed changes to local services is as follows:

Community and voluntary sector: increased demand on volunteers / reduced grants for short breaks activities;

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Social inclusion: some improvements and some reduction in support for vulnerable people;

Digital: increased use of online channels is in line with council work but could leave some people more socially isolated;

Transport and Climate Change Strategies: potential issues of increased school transport, need to travel longer distances to services and potential environmental impact due to wood burning at home (as a result of charging for wood at waste recycling centres);

Health and wellbeing work: reduction in some public health services, participation in activities by children / young people with special educational needs and adults with learning or other disabilities;

Reduction in some services: trading standards, library, street lights turned off for longer, highways and winter maintenance, short breaks activities, public health services e.g. Family Support Service; and

Actions to mitigate these potential changes are being considered and HCC has confirmed that, subject to the views of its Cabinet and Full Council, more detailed consultations will be undertaken. These would provide information on proposed changes to services and a comprehensive evidence base and rationale for the proposals. Further feedback from these consultations will be drawn upon to inform final recommendations for HCC’s final decision-making process.

18 Consultation and Communications

18.1 Communications and consultation plans are being developed to ensure that the council gathers a broad range of views on the budget proposals. As part of this engagement activity, a public consultation will take place between November and December 2019. Communications channels will include press releases, social media, the council’s website and engagement with stakeholders, including parish councils and partner organisations.

18.2 The feedback will be collated and considered by Cabinet before presenting the final budget proposals in February 2020.

19 Legal Implications

19.1 The council’s constitution requires Cabinet to present its proposals for the Policy and Budget Framework for consultation prior to Full Council’s consideration of the budget.

20 Equalities Implications

20.1 The key aspects of Cabinet’s proposals for the Medium Term Financial Strategy 2020/21 to 2023/24 have been equalities assessed to consider the impact on the protected characteristics and other groups, and the implications for the Public Sector Equality Duty (Equality Act 2010). The full assessments have been included in Appendix 2 of this report and a summary of the findings is as follows:

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Increases to parking and residents permit charges should not have a differentially adverse impact on any of the protected groups, however, it could be an issue for some people on a low income. Disabled parking spaces would continue to be free for people who hold a Blue Badge;

Changes to the provision of public conveniences, such as potential reductions to the service or closures, could have a differentially adverse impact on some older people, families with babies or young children, people with certain disabilities, such as Chron’s Disease, and some carers. Alternative provision to mitigate the impact of any changes should be considered in more detail;

Increases to charges for bulky household waste collection and allotments should not have a significant impact on any group as they are infrequent charges and concessions will be maintained. The potential increase in the charge for parking season tickets should not have a differentially adverse impact on any of the protected groups, however, it could be an issue for some people on a low income;

A reduction in support provided for public and community transport in the borough could have a differentially adverse impact on older people, young people, disabled passengers and their carers. People who are on a low income who use the service could have issues paying for other forms of public transport and those who live in rural areas may not have other public transport available to them. Additional data and a more detailed consideration of mitigating actions are required; and

The proposed increase of Community Safety Patrol Officers by 2.5 FTE would be differentially positive for people who are potentially vulnerable and will go towards improving community relations in the wards that have not previously had support from the Community Safety Team.

20.2 If these proposals (with the exception of the changes to Community Safety) are approved for consultation, the equalities assessments will be re-visited to consider any unforeseen impacts on any groups. Further equalities assessments may need to be carried out on specific activities that form part of the implementation of the budget.

21 HR Implications

21.1 Some of the budget strategy proposals set out in section 9 involve reductions in staff numbers. In accordance with the council’s Redundancy Handling Policy, the council’s aim is to avoid compulsory redundancies wherever possible.

21.2 The council has a range of policies in place to manage organisational change and restructuring and support staff affected.

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22 Conclusion

22.1 The MTFS aims to support the Council Plan, deliver a balanced budget and set future year’s savings and income targets whilst dealing with the implications of the government's public sector expenditure reduction plans, the interest rate environment and the council’s structural budget position.

22.2 The Council is involved in the delivery of key strategic growth projects in support of the Council Plan that span the MTFS period and beyond. Delivery of these projects requires upfront revenue and capital funding with financial returns generally anticipated outside the MTFS period.

22.3 The Medium Term Financial Forecast has also identified budget pressures over the period.

22.4 The Cabinet’s budget strategy provides additional funding for corporate priorities and executive commitments and proposes a multi stranded approach to balancing the future year budgets in 2021/22 to 2023/24.

22.5 The council faces challenges in managing the financial risks and in delivering a balanced budget over the MTFS period. The council will need to adopt a strategic approach to balancing the longer term budget and evaluating new investment strategies and will have to continue to undertake robust monitoring of the implementation and delivery of the medium term strategy proposals.

22.6 The council will need to continue to remain flexible and plan for the longer term whilst ensuring adequate risk reserves are maintained.

23 Summary and reason for the decision

23.1 The Medium Term Financial Strategy continues the development of a robust and flexible financial framework that plans for the delivery of a balanced budget in the medium term and sets a financial approach to support the council’s priorities during a period of considerable uncertainty and challenging public sector funding.

24 The options considered and rejected

24.1 Alternative financial strategy options, scenarios and assumptions.

Date: 12 November 2019

Decision taken by: Cabinet

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Lead officer Sue Cuerden - Executive Director of Finance and Resources (S151 Officer)

Report author

Sue Cuerden – Executive Director of Finance and Resources (S151 Officer) Tel No: 01256 845513 Email: sue.cuerden@basingstoke.gov.uk

Phillip Hood – Head of Financial Services

Tel No: 01256 845660 Email: phillip.hood@basingstoke.gov.uk

Version Cabinet Report

Dated October 29 2019

Status Open

Confidentiality

It is considered that information contained within this report (and appendices) do not contain exempt information under the meaning of Schedule 12A of the Local Government Act 1972, as amended, and therefore can be made public.