Venue: Committee Room 1 - Civic Centre
Contact: Anne Jenkins Governance Team Leader
Apologies for Absence
Declarations of Interest
Minutes from 11 January were accepted as a true record.
The Leader Introduced the annual report focusing on the Council’s capital expenditure plans, the financial impact of those in terms of borrowing, and investment strategy for the year.
It was important to note that full Council ultimately approved the borrowing limits and prudential indicators contained within the report. Cabinet however, were requested to approve the detailed capital programme itself.
It was also important to note that the Governance and Audit Committee also considered the report in their most recent meeting and provided comments. In this case, their comments simply endorsed the proposed strategies, with no concerns raised.
In terms of the report itself, there were a number of key points highlighted:
§ The Council was entering a new capital programme window, with the current programme ending in March of this year and a new five-year programme taking effect from April.
§ Previously, the programme was reviewed once every five years, however the proposal was to move to a rolling approach to capital programme management, meaning that the overall programme, and borrowing affordability, be reviewed annually.
§ This change would introduce more flexibility in managing the programme and was accompanied by strengthened governance arrangements, detailed in the report.
§ Because of the extremely challenging financial context, the proposed programme contained only ongoing and previously approved schemes, which were being carried forward from the existing programme, and annual sums, which included activities such as annual asset maintenance and fleet renewal.
§ Whilst there were no new schemes being included, the programme, especially in years 1 and 2, was still significant and contained a number of the Cabinet’s highest priority schemes.
§ Due to the affordability challenges, there was no new borrowing headroom included in the strategy, meaning that capital headroom (used to pursue new schemes or address cost increases on existing schemes) was limited. As a result, every opportunity needed to be taken to boost the headroom via one-off sources to continue to respond to emerging pressures as and when they arose.
§ Whilst there was no new borrowing included in this programme, previously approved borrowing would be incurred over the next few years, increasing the overall Capital Financing Requirement and the Council’s level of debt.
§ The borrowing limits proposed took this into account and the revenue consequence of additional borrowing (e.g. interest payable on loans) was already budgeted for, following a budget investment made in 2021/22. The programme proposed was therefore affordable, prudent and sustainable.
§ In terms of Treasury Management, the report detailed the Council’s approach to borrowing and investing.
§ It confirmed that the Council would pursue an internal borrowing strategy, using available cash resources to defer external borrowing for as long as possible, and would only undertake borrowing in advance of need where there was a clear financial rationale for doing so.
§ For investing, the Council would continue to prioritise security, liquidity and yield, in that order strike an appropriate balance between risk and return.
§ A minimum investment balance of £10m was required and ... view the full minutes text for item 4.
The Leader introduced the next report to colleagues, this was the quarter three revenue update presented to Cabinet explaining the current forecast position of the Authority as at December 2022.
The report highlighted the current forecast position on the Council’s revenue budget and the financial risks and opportunities that presented themselves.
Cabinet were asked to:
(i) Note the overall budget forecast position resulting from the issues included in this report and the outstanding uncertainties and risks still present.
(ii) Agree that the Chief Executive and the Executive Board continued to review and challenge service area forecasts in an attempt to manage the overall forecasts within the core revenue budget, including revenue budget contingencies.
(iii) Note the key risks identified throughout the report, particularly in relation to homelessness and social care placements.
(iv) Note the overall position in relation to schools, when compared to previous years, but also note the risk that deficit positions could emerge in the future if good financial planning and management was not undertaken.
(v) Note the forecast movements in reserves.
(vi) Approve allocation of the 2021/22 underspend that remained unallocated at outturn as set out in section 4 of the report, noting the resulting level of the Council’s general and earmarked reserves.
Against a net budget of £343 million, the December revenue position currently forecasted an underspend of £1.1million, which represented less than 0.4% variance against budget. This underspend was after the use of all revenue budget contingencies of £4.7million included in the 2022/23 revenue budget, as agreed by Cabinet in February 2022.
Despite having established these budget contingencies for the 2022/23 year to deal with covid legacy issues, there was significant overspending in some key demand areas and other emerging risks within service areas.
These were offset by savings against (i) revenue budget contingencies which were made available to the Council (ii) Council tax reduction scheme and (iii) other non-service budgets as set out within the report.
The forecasted position improved by £2.5 million since the last Cabinet update primarily from one off grant funding received from Welsh Government in respect of Elimination of profit funding for children’s social care and No One Left Out Approach funding to support homelessness. Whilst the additional grant funding was welcomed, Cabinet was mindful to note the key areas of overspending within service areas as set out in the report and its appendices.
The key areas contributing to the £5million forecast overspend within service areas included:
§ Increased demand across key social care areas including children’s out of area and emergency placements. These two areas alone contributed an overspend of over £4 million to the overall service position.
§ The impact of the 2022/23 NJC pay award, the average increase for Council staff would be in the region of 6.4% compared to only 4% provision in the budget. This represented a forecasted overspend of £2.4million for non-school based staff.
§ Significant pressures were evident within Housing and Communities, in relation to homelessness. An overspend of £1.9million was forecasted after ... view the full minutes text for item 5.
The Leader introduced the report which provided an overview of the updated capital budgets for this financial year, alongside the projected outturn position as at the end of March 2023.
This represented the third capital monitoring report of the 2022/23 financial year.
The last report received by Cabinet was the October Monitoring and Additions report. There were several additions and amendments made to the programme since then. Most of which related to the addition of specific grant-funded schemes. These total £8.283m, detailed in Appendix A, impacted across multiple financial years, with £1.4m added to 2022/23.
Cabinet were asked to approve these additions to the programme.
The total net impact of these additions and revisions would increase the total budget for 2022/23 to £89.8m.
Against the revised budget of £89.8m in 2022/23, expenditure totalling £61.3m was projected. This £28.5m variance was comprised of £27m of slippage and £1.5m of “true” net underspends and overspends.
The level of slippage increased by approximately £10m since the last report, due to delays and challenges across various schemes.
Cabinet was only asked to note the current forecast slippage, not to approve slippage at this stage of the year. Instead, slippage was being identified in each monitoring report and only in the final report of the year would Cabinet be asked to approve a total amount to be transferred to future years.
The report also outlined the current position in relation to the capital headroom which was made up of:
· £57k borrowing headroom.
· £258k capital expenditure reserve (this includes the potential commitment of £1.267m for band B)
· £1.474m of uncommitted capital receipts
The balance of headroom available took into accounts commitments already reflected within the Capital Programme, as well as provisional additional funding to take the overall Band B funding envelope to £90m, therefore, the capital headroom was currently £1.789m.
This overall amount of headroom, which steadily reduced over recent years, needed to be carefully managed and monitored in order to ensure that it was utilised when needed for the most critical issues over the medium term.
This need for careful monitoring and prioritisation of resources was heightened considering the challenges currently being faced in relation to rising construction industry costs and the competing priorities for capital resources.
Opportunities therefore, to add one-off contributions to the headroom needed to be taken as and when available, to ensure that the Council was able to react to emerging pressures and ensure that the full programme could be delivered.
Comments of Cabinet Members:
§ Councillor Batrouni emphasised that the Council was still investing in the city, its services and schools. Cabinet budgeted an extra £39M for schools as well as £18M in economic regeneration for the city. This was a commitment to the regeneration projects and schools within Newport.
1. Approved the additions to the Capital Programme requested in the report (Appendix A).
2. Noted the predicted capital expenditure outturn position for 2022/23.
Noted the available remaining capital resources (‘headroom’) and the earmarked usage of that ... view the full minutes text for item 6.
The Leader introduced the final proposals on the MTFP budget for 2023/24. The report followed the one considered at December’s meeting, which was approved as the basis for the public consultation on the draft budget proposals. The consultation was concluded and the report outlined the responses received to the consultation, changes in budgetary assumptions in the intervening period and final proposals for consideration. This was one of the most important reports of the year and was given careful consideration, especially considering the financial context within which the Council and residents were operating.
The Leader gave a backdrop to the budget, outlining that the report represented the culmination of an incredibly challenging period, which began with Cabinet considering the implications as we transitioned out of the worst of the COVID-19 pandemic. At the beginning of the year, there was concern about the lasting impacts of the pandemic and a temporary COVID contingency was created to mitigate some of the uncertainties ahead.
What had transpired however, was quite different to what was expected, high inflation represented the single biggest challenge facing the Council and the wider economy. This resulted in pay awards being much higher than anticipated, placing a significant in-year pressure on finances as well as a lasting one that was being addressed as part of this budget. Additionally, energy inflation was running at historic levels, this affected budget planning for next year. It was not only the costs incurred by the Council, but its service providers were also facing the same pressures, which was being passed on to us.
Demand for services was also high and there were a number of significant pressures emerging. One example related to homelessness services, where the continued high demand for temporary accommodation placed an extraordinary financial pressure upon the Council. This draft budget addressed the current level of overspend to the tune of over £4m and allowed us to continue supporting some of the most vulnerable people in our city.
As a consequence of these pressures, our December budget report highlighted an unprecedented budget gap and a number of strategies was outlined to address this gap, including a proposed Council Tax rise and savings from all services. In the meeting itself, we outlined a specific approach in relation to schools, whereby the Council would meet the cost of certain pressures, with schools themselves being asked to absorb others.
The proposals set out within the report were those that formed the basis of the consultation with the public that concluded earlier this month. This was an incredibly difficult process and the decisions to consult on those proposals were not taken lightly. The Leader was therefore, pleased to see the high levels of engagement that the residents of Newport, and other stakeholders, had in this consultation process, evidenced by the vast array of responses received.
The report highlighted the different sources of consultation responses that were received, with just under 1,800 responses in total. This represented a significant increase on previous years, aided in part by ... view the full minutes text for item 7.
The Leader introduced the latest update on the external pressures impact on Newport City Council’s services, as well as providing a summary of actions taken with local partners.
This monthly report provided an overview of the current wider economic impact in the UK and Wales since the last report presented at Cabinet in January 2023.
For many residents this was one of the most difficult periods they had experienced, and Cabinet continued to do all it could in collaboration with key partners across the city.
With these pressures continuing, the Leader urged all residents experiencing difficulty to contact the council for information on the advice and support available to help with household bills and other financial obligations.
During times such as these, the ability to work in partnership to support our residents, businesses and staff was of utmost importance
The commitment of officers and our partners to work together to make a difference and support people to access help, advice and support was clear in all conversations taken with the Leader internally, locally, and nationally both in her role as Leader of the Council and as Chair of our OneNewport partnership.
This issue was being felt across Wales and wider. The Leader continued to raise the need for support at every opportunity and ensure, as a council, support for local and Welsh Government initiatives to maximise the help that Council and its partners were able to provide.
With the media reporting charities seeing an estimated 30% increase in those accessing food banks, the Council continued to work in partnership with GAVO to provide assistance to food banks across the city.
The report outlined how schools were maximising the funding and support they could access and provide to children and young people to help families in need across Newport.
During cold weather spells, residents were encouraged to access warm spaces across the city for warmth and for sources of support and advice.
As a city with a long history of welcoming people seeking sanctuary offering a place of safety for those fleeing conflict and persecution, the Council continued to support refugees to find accommodation and access support.
Comments of Cabinet Members:
§ Councillor Davies mentioned half term next week and thanked WG for their voucher scheme, appreciating that it was difficult for families on low income and child care provision to cover the cost whilst schools closed for the week. Needed to focus on next summer school foundation phase, every child would be entitled to Free School Meals which would be rolled out in September.
§ Councillor Lacey referred to support from GAVO and food banks and thanked Raven House and other food banks for their help within the city. There was an uptake of food banks and between both Always and Ringland wards Councillors Lacey and Harvey were covering 50 food parcels a week. There was also an uptake in other wards and Councillor Lacey stressed that if residents needed help with food parcels, they should not hesitate to contact ... view the full minutes text for item 8.
This was the regular monthly report on the work programme.
Please move acceptance of the updated programme.
Cabinet agreed the Work Programme.