Agenda item

Presentation by Head of Corporate Finance

Theresa Channell, Head of Strategic Finance gave a presentation on Corporate Risks for further scrutiny that focused on funding. She highlighted the following points:

(a)  Changes in funding of services from national taxation to local taxation, reliance on funding from Council and Business Tax is a risk that  is classed as red, or severe, if it occurred as it would impact on the Council’s ability to provide services in an effective way adversely affecting the citizens of Nottingham;

(b)  in 2018/19 there will be a budget gap of £12million rising to £18million in 2019/20. The Council has committed to delivering £24million savings in 2017/18 and has made over £204million in savings since 2010;

(c)  savings have been made through partnership work with organisations such as the NHS to jointly deliver services to citizens whilst saving funds. This partnership work has allowed the Council to continue to provide services as outlined in the Council Plan and are key to reducing funding gaps;

(d)  43% of Council funds are spent on Children and Adult services and these services are more likely to feel the impact of reduction in funding;

(e)  to deliver further saving the Council aims to continue its success in commercialisation opportunities alongside reducing demand for services by focusing on early intervention;

(f)  the Council will also work on modernising and redesigning the services and identifying and addressing inefficiencies to offer the same outcomes but through a different model;

(g)  the budget strategy aims to deliver savings but also to protect frontline services and minimise the impact of changes on vulnerable citizens;

(h)  there has been a significant reduction in funding from central government through the Revenue Support Grant (RSG) since 2011/12. As a result of this Council tax has been increased go towards covering the shortfall;

(i)  council tax levels can be influenced by the number of new homes being built and what band they fall within, however there is very little movement of this figure in Nottingham due to the high number of lower band properties;

(j)  alongside RSG there is an additional top up payment made to the Council when funding does not match needs. This top up has been fixed through a 4 year settlement with Central Government  up to 2019/20;

(k)  changes to business rates mean that 100% retention is expected in 2019/20;

(l)  beyond 2019/20 it is uncertain how funding will look;

(m)projected income from Council Tax in 2017/18 is £100.947million, increased are capped at 1.99% + 3% adult social care precept in 2017/18. Any increase beyond this figure would require a local referendum;

(n)  the assumed collection rate of Council Tax is 96.4% and there are systems in place to collect outstanding Council Tax and recover debts;

(o)  Nottingham City has a relatively low tax base, 63,368 Band D equivalents, due to high numbers of student exemptions (10,947 in October 2016), 91.9% of the 135,201 dwellings fall into the lower bands;

(p)  Business Rates income is projected to be £67.987million in 2017/18 which is 49% of the total. The rate of Business rates is set centrally by government and cannot be influenced at a local level;

(q)  there is still a degree of volatility around the outstanding appeals that currently amount to £19million;

(r)  100% retention is expected in 2019/20 and will be accompanied by a new formula to measure service demand and need. The scheme will be cost neutral nationally and some form of redistribution is expected, and appeals will be centralised and outside the Local Authority’s control. There may be some scope for limited local control of ratings multiplier;

(s)  there is suggestion that local pooling schemes could be allowed, there is a piece of work currently being undertaken to look at what this would mean for Nottingham City;

(t)  a technical consultation is due to be completed on 3 May 2017, the results of which will be bought to a future meeting;

(u)  the Medium Term Financial Strategy aims to increase income, control costs and deliver targeted saving, the budget strategy in 2017/18 looks to manage demand/cost pressures, increase income, and reorganise the way services are delivered as priority;

(v)  the general fund has been increased from £9million in 2016/17 to £11million in 2017/18 in response to this risk. The Chief Finance officer has stated that the budget is robust and that resources are adequate.

Following questions and comments from the Committee the following further points were made:

(w)there is very little scope for the Council to influence the banding of properties. The Valuation Office are responsible for giving a property a value and therefore the council tax banding. Concerns were raised that student properties were given low bandings despite artificially high rents which presented a false picture. There was also discussion around various anomalies within the housing market of properties being in bands much lower than were expected;

(x)  in an effort to fully understand the changes being made staff are attending workshops and briefing events, there is work taking place with other Core Cities and with other local councils looking at pooling arrangements;

(y)  it is not likely that the student exemption from Council Tax is likely to be reconsidered or reviewed in the foreseeable future;

(z)   the Capital Programme is very important as is continued investment in the City to encourage more businesses into the City;

(aa)  Charities get mandatory relief from business rates from Central Government and there is also a discretionary relief after 20% that can also be applied at a local level;

RESOLVED TO:

(1)  thanks Theresa Channell for her attendance and presentation to the Committee and to note its contents;

(2)  ask Theresa Channell to contact the Valuation Office and feed back to Committee Members on the rules in place around valuation of new properties;

(3)  Theresa Channell to brief Councillors on the level of debt and arears to the Council through Council Tax and Business Rates;

(4)  invite a suitable officer to attend a future meeting to update the committee on the Accounts receivable, current position and outstanding debt;

(5)  invite Theresa Channell back to a future meeting to update the Committee on the outcome of the technical consultation on Business Rates;

(6)  invite a suitable officer to attend a future meeting to present to the Committee on economic regeneration and reliefs available to small and micro businesses.