Agenda item

Financial Performance Report - Quarter 1

Officer: Lisa Taylor

Key decision: no

Decision:

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To

1. Note the current general fund revenue outturn forecast at the end of the first quarter of 2020/21 of £49m overspend, after the inclusion of funding received from the MHCLG for Covid19.

2. Note the details of the monthly Covid19 impact submissions being made to the MHCLG and the details of the financial support that is available to the council in light of Covid19.

3. Note the work being undertaken by the Finance Review Panel to reduce the overspend this financial year and put in place savings for next financial year.

4. Note the HRA revenue position of a £1.5m forecast overspend against budget.

5. Note the revised capital outturn projection of £309m for the general fund and HRA, forecast to be an underspend of £8m against the revised budget and that most of the underspend in 2019/20 has not been slipped into 2020/21.

RESOLVED: To recommend to Council

1. The approval of the revised capital programme as detailed in section 9 and table 8 of this report including the slippage from 2019/20, which reflects a substantial reduction in the original capital budget for 2020/21.

Minutes:

The Leader of the Council introduced the report and noted that when the budget for 2020/21 was agreed at Council in March 2020, it had received cross party support. The impact of Covid-19 on the council’s budget could not have been predicted when the budget was set, however the impact had been significant and was the priority focus of himself and Cabinet and the interim chief executive and the executive directors of the Council. The Cabinet was committed to developing a robust plan to tackle the financial difficulties which included a request to Ministry of Housing, Communities and Local Government (MHCLG) for financial support in the shape of a capitalisation direction.

The Cabinet Member for Finance & Resources stated that he believed that the level of the General Fund Reserve had not changed in the previous decade and that this had been recognised as part of the budget for 2020/21 with a commitment to increase the reserves.

He also stated that he believed that the 2020/21 budget had been a challenging one, however local authorities had been particularly hard hit in the first wave of Covid-19. As such the over spend in Croydon had reached £49m which could not be met by the reserves. The Cabinet Member stressed that despite Government assurances, the full costs of the pandemic had not been met.

The work of the Director of Finance, Investment and Risk (section 151 Officer) was highlighted by Cabinet and she and her officers were thanked for all their work on the council’s finances.

The Director of Finance, Investment and Risk advised Cabinet that the report detailed the financial position of the council at the end of Quarter 1 (June 2020) which forecasted an over spend of £49m, this figure had risen since Q1 to £51m as outlined in a report later in the agenda.

Cabinet was advised that the savings required in 2020/21 were challenging and with the backdrop of the pandemic the council was only able to progress delivery on £15m of savings out of an agreed £40.3m. In addition to the challenges of responding to Covid-19, it was highlighted that adults and children’s social care continued to significantly overspend which put further pressures on the budget.

Cabinet was advised by the Director of Finance, Investment and Risk that it was imperative that strong financial measures were put in place to ensure the position improved. The Leader continued that it was important that, as a council, there was a priority of delivering services within the tight financial envelope available as Covid-19 could continue to be an issue for future months ahead.

The Leader introduced and welcomed the new Interim Chief Executive to the Cabinet meeting and to Croydon.

The Interim Chief Executive began by saying that the report represented a very challenging first quarter for the council which was hampered by the exceptionally large savings target set within the budget which had not been achieved. Despite the challenges of the budget and Covid-19, officers had continued to work on achieving in-year savings and those budget savings. The work of the Finance Review Panel was also highlighted by the Interim Chief Executive and all those involved were thanked for their contributions.

Opposition Members thanked officers for their work during difficult times but noted that the financial position of the council was unprecedented. Whilst it was noted that a number of local authorities across the country had been impacted by Covid-19, the impact had been particularly significant in Croydon due to the financial position of the council and the low level of reserves prior to the pandemic.

In response to Member questions, the Cabinet Member for Finance & Resources stated that whilst it was known that the operator was not particularly financially robust when the council purchased the freehold of the Croydon Park Hotel; the professional advice had been that the rent the council would receive would outweigh the risk and that the site could be re-let. Unfortunately, the hotel had been forced to close as a consequence of Covid-19. However he believed taking into account that write-off, the money received by the council had more than paid off the interest accrued from the asset acquisition. Furthermore, he stated that the site was now being used to provide housing for vulnerable and homeless residents and was still generating income for the council which covered the interest payments.