Agenda item

The Executive Director Core Services and Director of Finance will submit, for information only, a joint report detailing the financial performance of the Authority during the second quarter ended 30^th September, 2020 and assessing the implications against the Council’s Medium Term Financial Strategy.  The report will also provide an update on the ongoing impact of Covid-19 on the Council’s 2020/21 budget.

The Executive Director Core Services and Service Director of Finance submitted, for information only, a joint report detailing the financial performance of the Authority during the second quarter ended 30^th September, 2020 and assessing the implications against the Council’s Medium Term Financial Strategy.  The report also provided an update on the ongoing impact of Covid-19 on the Council’s 2020/21 budget.

Reference was made to the size of the debt and to the repayment plans.  It was acknowledged that this was a high level of debt relative to near comparators, however, the Council had made conscious decisions previously to invest in a brand-new secondary school estate and also on the new Town Centre.  The Service Director Finance was confident that the costs associated with that debt were affordable and sustainable in accordance with the Council’s Medium Term Financial Plan.  The Minimum Revenue Position detailed the minimum that the Council had to repay each year on its debt portfolio and the debt was scheduled to be repaid over a 50 year period.

Written responses to questions asked by members of the Committee were provided as follows:

·         Given the plans in place to recover the 2020/21 projected deficit and subject to the delivery of the recently updated Medium Term Financial Strategy, the Director of Finance assessed the potential for him to have to issue a Section 114 Notice (Local Government Finance Act 1988), as being very low

·         The projected deficit for the entire year based on all currently available information/plans was £15.5m.  A financial recovery plan was in place to mitigate the deficit in full by year end such as by postponing planned investments to the extent that was necessary.  The recently revised Medium Term Financial Strategy factored in estimates of the potential ongoing impacts stemming from the pandemic both in terms of the impact on the cost base and income losses

·         In relation to consultation with residents, it was reported that a whole borough consultation and engagement exercise had been carried out earlier in the year to seek residents (and other key stakeholders) views on the places where they lived and on what they wanted for the future.  This would inform the Barnsley 2030 placed based vision for the Borough (with actions over 4 themes to be delivered by all strategic partners, not just the Council) and the next iteration of the Council’s Corporate Plan (the Council’s contribution to the Barnsley 2030 vision).  Specific communication, consultation and feedback on the budget would take place later (with residents, and more formally with the business community as required by legislation)

·         In response to questions regarding the CIPFA Financial Resilience Index (2018/19) and the indicators of Financial Stress, it was noted that the figures quoted were from the 2018/19 accounts as at 31^st March, 2019.  The Committee would be aware that from the Treasury Management Strategy at that time the Council’s forecast capital financial requirement looking forwards for the following three year period was in excess of £1bn – the increase from the £875m quoted being almost entirely due to a decision made by the Council at that time to proceed with the Glassworks project.

This had been the rationale for the Section 151 Officer highlighting the indicator(s) at the time. Consequently, the budget for 2021/22 and the Medium Term Financial Strategy included the following advice/mitigations from the Section 151 Officer:

o   Advice not to undertake any additional material borrowing for major infrastructure projects until such time as the Glassworks had been completed and de-risked; and

o   To safeguard the Council from interest rate risk to introduce an active strategy/target to de-risk the Council’s debt portfolio, whereby a maximum of 30% of debt carried interest rate risk (i.e.. 70% fixed and not subject to interest rate movements)

The capital financing requirement had remined broadly in line with forecasts made 2 years ago as part of the 2019/20 budget and, therefore, the advice had been followed

The strategy and targets in relation to interest rate risk had been met as reported to the Committee at year end.

Based on this and on the proviso that the plans in place for the wider Medium Term Financial Strategy were delivered, the Service Director Finance considered the current debt levels to be prudent, affordable and sustainable

The Service Director Finance would bring updated Financial Resilience and Treasury Management strategy papers to a future meeting as part of the forthcoming budget round

·         The income shortfall for Educational Psychology, Education Welfare and SEND Support Services was predominantly related to school closures

·         The expected impact of the latest lockdown and tighter restrictions of Tier 3 had been factored into detailed plans and reflected in the £15.5m forecast deficit. 

·         There remained some unknowns in relation to the Council’s role in deploying the vaccine/mass testing and the level of funding that would accompany that

·         Information on bad debt and assumptions on the bad debt provision were outlined and had been circulated to all Members of the Committee

·         The borrowing requirement of the Council had been based on approved capital plans and was not impacted by Covid -19

RESOLVED that the update report on the financial performance of the Authority during the second quarter ended 30^th September, 2020, the implications against the Council’s Medium Term Financial Strategy and the ongoing impact of Covid-19 on the Council’s 2020/21 budget be noted.