torridge.gov.uk torridge.gov.uk torridge.gov.uk @torridgedc - - PowerPoint PPT Presentation

torridge.gov.uk @torridgedc torridge.gov.uk @torridgedc torridge.gov.uk @torridgedc

torridge.gov.uk @torridgedc

Draft Budget 2020/21 MTFS to 2024/25

torridge.gov.uk @torridgedc

What am I going to cover in summary?

Government Funding Council Tax Business Rates New Homes Bonus Funding Horizon Assumptions & Risks

Headlines

• Projected financial position has

“improved” but caveats !

• Funding Model changes from 2021/22
• Greater uncertainty and risks –

particularly from 2021/22

• Lengthy Report & Presentation

torridge.gov.uk @torridgedc

What am I going to cover in summary?

Government Funding Council Tax Business Rates New Homes Bonus Funding Horizon Assumptions & Risks

Report & Presentation

• Pick out / highlight key points
• Questions as go along
• Sum up and conclusions
• Recommendations at end / debate &

discussions

• Provide reasons and rationale to

support why we reached the recommendations

torridge.gov.uk @torridgedc

Provisional Settlement 2020/21

• Core Spending Power – Headline figure to rise by 6.3% (4.4% in

real terms); however for Shire Districts the figure is 3.4%

• Revenue Support Grant confirmed at 2019/20 levels uplifted for inflation - £132k,

Rural Services Delivery Grant also confirmed at 2019/20 levels - £474k.

• New Homes Bonus funding confirmed for 2020/21 but reward monies arising

from increased number of properties liable for Council Tax only payable in 2020/21 (previously reward monies accrued for four years).

• Confirmation of addition £1.4billion for Adult Social Care, payable to upper tier

authorities such as Devon County Council.

• Confirmation of continuation of Flexible Homelessness Prevention funding

for 2020/21 - £144k, previous award of funding covered the period 2017/18 – 2019/20.

• Council Tax Referendum limit for shire districts confirmed at 2% or £5 per

Band D Equivalent (£5 equates to 3.06% for Torridge). Upper Tier Authorities such as Devon County confirmed as 2% plus 2% for Adult Social Care

• Precept. Police & Crime Commissioner £10 per Band D (circa 4.7% in

Torridge). No Referendum limits for Town & Parish Councils

• Better Care Funding £1.84billion, Torridge allocation still to be confirmed, Torridge

Council’s 2019/20 spend being circa £1.1m on disabled adaptations and energy efficiency initiatives.

torridge.gov.uk @torridgedc

Council Tax

Torridge Council is the billing authority for Council Tax, the majority of Council Tax collected is on behalf of its preceptors.

• Devon County Council
• Devon and Somerset Fire Authority
• Devon & Cornwall Police Commissioner
• Town and Parish Councils

The share of the Council Tax retained by Torridge has been in long term decline and will continue to do so.

8.20% 8.40% 8.60% 8.80% 9.00% 9.20% 9.40% 14/15 15/16 16/17 17/18 18/19 19/20

Torridge as % of total Council Tax levied

Torridge as % of total Council Tax levied

torridge.gov.uk @torridgedc

Council Tax

By statute Council are obliged to report their tax base in Band D equivalents, and increases to Council Tax are also referenced to the Band D equivalent. However the majority of properties within Torridge fall within bands A-C (68%), and consequently will pay less than the quoted Band D equivalent Council Tax.

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Band A Band B Band C Band D Band E Band F Band G Band H

Properties by Council Tax Banding

Council Tax is by far Torridge’s most dependable source of income, it easy to predict within narrow parameters.

torridge.gov.uk @torridgedc

Council Tax

Core Spending Power: When Central Government assesses the resources available to local authorities, in addition to taking direct grant income in account, it considers the potential resources available to local authorities from both business rates and Council Tax. Central Government modelling will assume local authorities raise their Council Tax up to the maximum allowed by their referendum limits. Central Government funding is a combination of an assessment of need vs resources available to meet the need. Because of the restrictions imposed by Council Tax Referendum limits it is not possible to “plug” the funding gap in subsequent years by raising Council Tax……Once the decision is made not to increase Council Tax its impact is felt in subsequent years.

Central Government Assessed Need Government Assumed Resources Actual Local Authority Resources Actual Local Authority Resources Funding Provided Funding Gap

torridge.gov.uk @torridgedc

Council Tax

If the Council in previous years had increased the Council Tax in line with the relevant referendum limits it would be able to levy an additional £368k per annum in Council Tax Income (as at 2018/19). The cumulative council Income forgone over this period is just under £2m. Circa £2m would pay for Torridge Recycling Refuse Fleet – 13 vehicles x £150k In previous financial years Torridge did not increase its Council Tax, but instead received non recurrent Council Tax Freeze grant. The consequences being that when the freeze grants ceased to be received, it was unable to make good the lost

• pportunity to raise its

Council Tax.

torridge.gov.uk @torridgedc

Business Rates

• Prior to 2013, Torridge collected business rates on behalf of central

government, any losses due to increases in empty properties, reliefs, bankruptcies etc. borne by Government. Conversely any gains from new businesses was retained by Central Government. Torridge Council’s finances largely unaffected by economic health of its businesses.

• From 1st April 2013: Torridge retains 40% of business

rates, 10% to Devon County & Fire, 50% to

• Government. 100% of income from renewables (Wind,

Solar etc.) retained by Torridge.

• Torridge gains from growth in business rate base but is

exposed to:

• Business Rate Appeals
• Growth in reliefs, e.g. Charitable, Academy School

status

• Bankruptcies, Empty Properties
• Complexities caused by Central Government

changes to reliefs.

• Business Rate Income can be difficult to

predict!...................but Torridge has enjoyed circa £750k growth from Business Rates since 2013

torridge.gov.uk @torridgedc

New Homes Bonus

Introduced in 2011/12

• Rewards Councils for new homes becoming liable for

Council Tax

• Rewards Councils for reducing the number of long term

empty homes (over 6 months), conversely penalised for increases in the number of long term empty homes.

• There has been two major changes since its inception
• Introduction of a deadweight adjustment 0.4% about

which Councils are rewarded for growth in new

• homes. For Torridge no reward received on the 1st

115 new additional properties.

• The reward period for increases to new properties

reduced from 6 years to 4 years

• New Homes Bonus funding has been earmarked as follows
• 50% earmarked for the Capital Program
• 25% support the revenue budgets
• 25% earmarked for member/community grants (£115k top sliced from

this allocation to balance the 2019/20 budgets).

torridge.gov.uk @torridgedc

New Homes Bonus

Government has signalled that 2020/21 will be last year of the current New Homes Bonus scheme. Legacy payments are expected to be honoured, but the reward earned in 2020/21 for increased properties numbers will only be paid for one

• year. Consequently in 2021/22 Torridge will lose TWO years New Homes Bonus

reward monies.

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 Reward earned (2014/15 increased property numbers) 326,392 Reward earned (2015/16 increased property numbers) 440,254 440,254 Reward earned (2016/17 increased property numbers) 388,873 388,873 388,873 Reward earned (2017/18 increased property numbers) 216,647 216,647 216,647 216,647 Reward earned (2018/19 increased property numbers) 143,360 143,360 143,360 143,360 Reward earned (2019/20 increased property numbers) 0 174,709 Total - New Homes Bonus Funding 1,372,166 1,189,134 923,589 360,007 143,360

• Loss of funding earned in

2016/17 received for FOUR years Loss of reward monies earned in 2019/20, payable for only ONE year

torridge.gov.uk @torridgedc

New Homes Bonus

In 2019/20 New Homes Bonus funding is allocated as follows:

• 50% to Capital funds contributions to Vehicle

and ICT replacement Reserves

• 25% to support the Councils revenue

budgets

• Balance to Community & Members (after

£115k top slice)

• Loss of New Homes Bonus will put pressure on revenue budgets as

contributions to Vehicle and ICT Replacement reserves will still have to be made. Capital budgets are currently over committed by £1.1m.

torridge.gov.uk @torridgedc

2020/21 Budget

• Headline – Favourable/ adverse movements from MTFS reported in February 2019

Revenue Support Grant (RSG) and Rural Services Delivery Grant (RSDG) - £226k favourable Homelessness Grant Funding - £144k favourable Reduced contribution to Pension deficit - £208k favourable Staff Efficiencies - £275k favourable Refuse related savings, cost share income and transport related £200k favourable

Assumed staff pay award, incremental growth, increased vacancy factor - £177k adverse

Increased building inflation, increased contribution to property maintenance reserve - £75k adverse Reduced Business Rate income from renewable energy - £237k adverse

torridge.gov.uk @torridgedc

2020/21 Budget

Assumptions PRIOR to considering impact of changes to Local Authority funding regime effective from 2021/22

• Pay awards 3% 2020/21, 2.5% 2021/22, 2% thereafter
• RSG/RSDG to be received for duration of MTFS, uplifted by inflation
• Flexible Preventing Homelessness Grant to be paid for duration of the

MTFS

• Underlying growth in business rates base 1.18% per annum
• Council Tax to increase at Referendum Limits
• No change to New Homes Bonus / Business Rate Retention

(800) (600) (400) (200) 200 400 20/21 21/22 22/23 23/24 24/25 2020-21 MTFS (197) (15) 119 315 387 2019-20 MTFS (734) (689) (578) (460)

£'000

2020/21 MTFS vs 2019/20 MTFS

BUT !!!

torridge.gov.uk @torridgedc

Funding Horizon from 2021/22 !

• Major changes to local authority financing

from 2021/22

• Comprehensive Spending Review
• Fair Funding Review
• Business Rate Retention
• Business Rate Revaluation
• Replacement scheme for New Homes

Bonus

torridge.gov.uk @torridgedc

Funding Horizon 2021/22 onwards

• The Comprehensive Spending Review (CSR) - determines the
• verall level of Central Government spending and the proportion

attributable to Local Authorities. The Fair Funding review will determine Torridge’s share of the Local Authority “pot”. Government has indicated an end to “austerity”, so it is to be expected that the total funding allocated to the local authority sector will rise.

torridge.gov.uk @torridgedc

Funding Horizon 2021/22 onwards

The Fair Funding review will assess the “relative” needs of individual authorities and hence their share of the overall local authority funding pot. The last fair funding review took place in 2013 prior to the introduction of local business rate retention. The are many variables in the current formula, the Fair Funding review will go out to consultation in Spring 2020. The main factors within the Fair Funding formula will be impact upon the funding allocated to Torridge are: Population Rurality There will be relative winners and losers under the fair funding formula. It is too early to say how Torridge might fare from the Fair Funding review ….but Central Government’s recent focus on Adult Social Services would indicate it would be a relative loser

torridge.gov.uk @torridgedc

Business Rates: Move to 75% Business Rate Retention

• The Government has signalled a movement towards 75% local business rate
• retention. As yet there is no information available regarding that percentage of

business rates which will be retained by Torridge. Currently Torridge retains 40%

• f all the business rates it collects.
• Torridge Council along with many shire districts has benefited from business rate

income growth compared to their funding baseline. The reverse is true for shire counties who only retain a modest proportion of business rates (9%), whilst having high need (Social Services, Children Services etc.)

torridge.gov.uk @torridgedc

Business Rate Revaluation

Business rates will be revalued with effect from the 1st April 2021. The Business Rate revaluation is designed to be are fiscally neutral on a national basis (i.e. it is not intended to raise additional revenue). It is intended to reflect relative changes in property rentals between different business. For local authorities such as Torridge, business rates revaluations should also be fiscally neutral, with increases/decreases in the potential business rate income being neutralised by changes to the business rate tariff…….BUT Changes to business rates pertaining to renewable energy schemes are NOT neutralised by changes to the business rate tariff. Up/downward movements on renewables business rate valuations will have an impact on the finances of Torridge Council

torridge.gov.uk @torridgedc

Post 2021/22 - Local Authority Funding Changes

Transitional Arrangements

torridge.gov.uk @torridgedc

MTFS Assumptions

• Pay award 3% 2020/21, 2.5% 2021/22 2% thereafter
• New Homes Bonus – replacement scheme will be 75% of 2020/21 funding levels
• Business Rate Revaluation – fiscally neutral for Torridge
• Council Tax increases at Referendum levels for duration of MTFS
• Revenue Support Grant, Rural Delivery Grant and Flexible Homelessness

Prevention Grant to be received for duration of MTFS

• Business Rate Retention
• Shire District split to reduce to 30% from 40%
• Torridge will keep 50% of £750k business rate growth from 2013
• Loss of business rate growth will be phased in over 4 years
• Underlying 1.18% growth in business rate base

SO WHAT DOES THIS ALL MEAN ???

torridge.gov.uk @torridgedc

MTFS – updated for post 2021/22 funding adjustments

Figures in (brackets) indicate deficit. Projected cumulative deficit over the MTFS is £1,379k, for information if no Council Tax increase in 2020/21 then cumulative deficit increases to circa £2m.

torridge.gov.uk @torridgedc

Recommendations and Rationale

• Torridge Band D Council Tax for 2020/21 be increased by £5 (3.06%)

from £163.66 to £168.66 per year to contribute towards the funding deficit.

• Recognises Council Tax is the Council’s most stable source of

funding

• Central Government assessment of Core Spending Power

assumes Council Tax increased up to Referendum limits

• Responsibility to provide long term options on managing the

Council’s finances

• External Auditors review Torridge’s “going concern” & financial

sustainability.

• Torridge Net Revenue Budget 2020/21 is £9.737m
• Specific Requirement
• £196,531 will be transferred from the Transition in Funding Reserve

to balance the 2020-21 budgets

• Legal obligation to set balanced budget
• Will depend upon recommendation to increase Council Tax

torridge.gov.uk @torridgedc

Recommendations and Rationale

• The recommendation of Internal Overview & Scrutiny to cease

earmarking New Homes Bonus funding for Community Grants is confirmed, namely:

• Recognises that with the decline in New Homes Bonus funding, the resources

available after setting aside monies to Capital, Revenue and Member Grants; it is not viable to operate a community grants scheme for 2020-21.

• Those organisations listed under external grants but who provide a Service

Level Agreement (SLA) for Torridge Council should be removed from the external grants list and funded at existing levels. However, bodies should submit a break-down of proposed spending at the start of each year to justify their grant and an evaluation undertaken at the end of the financial year. Bodies include

• North Devon Biosphere
• North Devon Coast Area of Outstanding Natural Beauty
• TTVS
• Citizens Advice Bureau
• North Devon Plus
• North Women’s aid

torridge.gov.uk @torridgedc Recommendations and Rationale

• The recommendation of Internal Overview & Scrutiny to cease

earmarking New Homes Bonus funding for Community Grants is confirmed, namely:

• Funding for existing recipients to be continued to be continued as is for

2020-21, halved for 2021-22 and then ended. The bodies affected and their current totals shown below

• Holsworthy Community Transport

£6,500

• Affinity Bideford TIC

£1,000

• Holsworthy TIC

£4,500

• Great Torrington TIC

£4,200

• Bideford New Year’s Eve

£3,000

• Role of the Community Engagement Officer to actively engage with and

support community bodies across the district, as well as to map current provision and where gaps exist.

• Capacity building should be provided to existing grant recipients and
• ther bodies who are operating at a community level who have

previously received grant funding.

torridge.gov.uk @torridgedc

• The contributions to the Council’s reserves as outlined in paragraph

11.4 are approved

• Set aside resources for specific priority areas

Recommendations and Rationale

• That the Head of Paid Service, Senior Management and the new

council review and revise strategic plan & priorities and prepare

• ptions to achieve the savings going forward.
• Recognises that the projected deficit will exhaust the Transition in

Government funding reserve by early 2023/24 and that saving need to be found to balance the Council’s finances over the medium term.

torridge.gov.uk @torridgedc