Councillor Janette Williamson introduced a report by the Senior Finance Manager which summarised the projected year-end revenue position as at the end of Quarter 1 (June 2020) of the 2020/21 financial year, including:

·  the financial risk profile presented by the COVID-19 pandemic

·  a review of pressures and savings contained within the original budget position and

·  an update to the Medium-Term Financial Plan.

The Cabinet was informed that the year-end forecast recorded as part of the June 2020 financial monitoring activity represented an adverse variance to revenue budget of £30.432m; this comprised:

• £23.987m forecast variance in relation to revenue budget overspends (including a forecast increase to in-year, earmarked reserves of £0.546m), the adverse position has arisen largely due to matters arising through the COVID-19 Pandemic:

• £2.150m forecast capital receipts, which supported the revenue budget position via flexible use of capital receipts; and

• A £4.296m gap in direct COVID-19 funding against forecast requirements.

It was reported that additional financial support had recently been announced by the Government, including:

·  £500m of funding to cover national local authority spending pressures (tranche 3); and

·  a co-payment mechanism for irrecoverable sales, fees and charges income, with the Government due to cover 75% of losses beyond 5% of planned income and designed to mitigate the sales and fees income losses for Local Authorities.

The Cabinet noted that this funding would mitigate, in part, the budget gap, however, the details relating to the implementation of the additional financial support were unknown, which meant the impact on the Council’s position was yet to be determined.

The Cabinet also noted that some savings had been identified through building closures (£0.4m) and the suspension of events (£0.413m).  Many buildings had been re-purposed for COVID-19 activity, and most others were still incurring the fixed costs associated with longstanding assets (such as rates, rents, insurance), the savings were primarily from reduced utilities costs.

The Cabinet was aware that the Council’s financial position remained challenging with much uncertainty given the recent announcement of further funding and a forthcoming Spending Round. The financial position was fluid and developing with the Government having stated its continuing support to the sector. The Council continued to limit spending to essential areas of service delivery only and Corporate Directors were supported to mitigate the risk of overspending.

Councillor Williamson made reference to the fact that this was the last Cabinet meeting and in her role as Cabinet Member for Finance and Resources paid tribute to the Director of Finance and her Team who she had worked with for the last three years.  She thanked all the officers and informed that through their efforts the Council had been on a stable footing and had delivered some progressive initiatives within Finance.  Councillor Williams said that it was such a shame that the Council was now in the financial position it was in but Members understood that residents’ health came first and that was what the Council had tried to address during the Coronavirus Pandemic.

This was the first time she had reported the risk of issuing a section 114 notice but considered it was prudent to highlight this at this time and reflect on the seriousness of the position the Council found itself in.  The section 114 notice would not ordinarily be initiated in circumstances such as the Pandemic.  It was a one-off and could not have been predicted.  The situation the Council was in was unique and not down to financial mismanagement.  Virtually every Council in the country was in the same position.

Councillor Tom Usher informed that it was extremely disappointing financial position to be in.  The Council had been given a guarantee that Government funding would be available to deal with and respond to Covid-19 properly and that had not materialised.

RESOLVED: That

(1)  the Cabinet notes the year-end forecast position at Quarter 1 of £30.432m as adverse;

(2)  the Cabinet notes the risks posed to delivering on the savings proposals withing the 2020-21 budget;

(3)  the Cabinet notes the impact of funding and expenditure as a direct consequence of COVID-19; and

(4)  The Cabinet notes the revisions to the Medium-Term Financial Strategy (MTFS) 2020-2025.