The Lead Member for Financial Oversight & Council Assets and the Executive Director of Finance & Commercial introduced a report and answered questions from the Committee regarding the latest version of the Financial Action Plan.
The plan updated on the key areas of the work undertaken to respond to the many and very serious financial challenges and recommendations made by external agencies. A comprehensive summary of the report was given to the Committee including on the current position of the capitalisation direction, asset disposal strategy, accounts, borrowing, Minimum Revenue Provision (MRP), Dedicated Schools Grant and the key risks and assumptions underpinning the financial strategy.
The financial strategy was founded on the sale of assets to reduce borrowings and MRP/interest costs, and reducing net expenditure through savings. The Committee was informed that positive progress was being made, however the financial position remained very challenging and would require continued delivery of savings targets and asset sales. If disposals could be made earlier than planned that would help the overall position significantly by reducing borrowing costs and risks, which was particularly important at a time when interest rates were expected to rise sharply from the low levels of recent years.
The assumptions that underpinned the figures were summarised and the key risks and pressures were discussed including pay inflation and contract inflation. Good progress was being made overall in responding to the various external recommendations with 50 of the 74 already completed and the others on track.
It was estimated that the overall capitalisation direction could be reduced from a potential total of £782m to £369m. The improvement was due to several factors including improved and accelerated asset sales leading to earlier financing and reductions in MRP profiling, together with improvements to the collection fund, council tax and funding settlement figures. Members asked a number of questions about the improved position, including whether the revised figures were robust and whether the savings and disposals remained deliverable, particularly given the fact there had been some slippage in achieving the agreed savings in the current year. The Executive Director said the financial strategy was deliverable but emphasised that the position remained very challenging and would require the delivery of a high level of savings over the coming years and asset sales in excess of £300m. In response to a question about the process for implementing savings plans it was noted amongst the measures in place officers carried out ‘challenge reviews’ with departments to test each savings proposal and seek to identify non-delivery early to take the appropriate action to get the saving back on track or find alternative savings. Concerns were raised about the 22% slippage in savings delivery in 2022/23 and questions were asked about the reasons for this and action being taken. It was responded that a significant amount of work was being done with departments to ensure savings plans robust and achievable. It was a normal part of financial management to manage a savings programme with variances during the year, but the key point was that where a saving could not be delivered it should be replaced by an alternative saving.
Senior officers from each of the directorates were present and they were asked for their views on the progress of the savings programme and how future improvements could be made. Officers highlighted the processes were now much more rigorous with detailed business cases, risk analysis and delivery plans for each saving that were tested and challenged before being agreed.
The Committee discussed the current position regarding the asset disposal programme and Members asked about the approach that would be taken to minimise any service impacts. The Lead Member highlighted that the Asset Disposal Strategy would be considered by Cabinet in the next week and it set out the sequence by which assets would be disposed of in a phased approach starting with the out of borough assets and other non-operational assets where there would not be any service impact. Future phases would include operational assets and proper consideration would be given to whether the service was still required and, if it was, how it could be delivered in a different way.
A number of specific questions were raised about departmental savings such as CCTV; the anticipated funding settlement from central government; and the recruitment of staff in certain areas to ensure key services would continue to be delivered to residents. Members raised some concerns about the fact that the digitisation of council services was a barrier to some residents and that communication and engagement was key. A new Associate Director had recently been recruited to lead on resident engagement and part of the investment in IT was to improve access.
Members asked about the future scrutiny arrangements for the report. The Financial Action Plan update report would continue to be brought to each Council meeting so that progress was clearly tracked and reported. The Committee could consider scrutiny of specific aspects of the plan where it could contribute to the recovery and improvement programme.
At the conclusion of the questions and discussion the report was noted.
Resolved – That the Financial Action Plan be noted.