Agenda item

N Howcutt presented the revised draft budget, noting that all the budgets were presented on 1st December and that they are now looking at a second scrutiny with the focus to look at changes that came out as a result of the Local Government Finance Settlement that came out on 19th December 2022 and to also highlight minor changes from a service perspective. The impact of the pensions review will also be considered as well as changes to treasury management.

The Local Authority Fair Funding Review has been delayed until the next parliament in 2025. It was assumed that council tax would be retained at the higher rate of 2.99% or £5, and DBC has proposed an increase of 2.9%, an equivalent of £6.27, for every resident on average at a Band D level. Several decisions were made as part of the Local Government Finance Settlement, firstly that the council tax referendum level has been extended to 2024-25. For negative RSG, this is the money that the government expected the Council to return as the level of funding required was exceeded by other income streams. This was set in place 2019-20 and the government have suspended negative RSG and therefore the payment will not be made, though no certainty has been provided regarding 2024-25. This additional budget will now be allocated to reserves to support overall corporate objectives. The government has also implemented a new Minimum Funding Guarantee, meaning that each authority has had an increase in funding of at least 3% year on year. This additional funding will be allocated to reserves. The Services Grant, originally implemented to cover the cost of the National Insurance increase and social care payment, has been higher than expected.

N Howcutt referenced the change to the New Homes Bonus, noting that they are receiving more than previously projected, meaning that the planning moratorium has had less of an impact on the bonus. It is assumed that the New Homes Bonus will not continue after 2023-24, and whilst there will be another vehicle to fund housing, it is not yet known what this will be.

Looking at reserves for 2023-24, N Howcutt noted that reserves have been used over recent years to support some service areas. One-off payments in 2023-24 are helping to bolster reservers back up to closer to pre-COVID levels. For 2021, reserves were high due to the number of one-off grants that covered multiple years and were therefore held in reserves.

There have been three key areas for changes to the General Fund regarding business rates, pensions and treasury. On business rates, there is a revaluation that has taken place nationally for 2023-24, resulting in significant increases across the country. Whilst the national average increase has been 7.3%, Dacorum has an increase of over 25% and Hertfordshire has 8 of the highest 26 increases nationally in business rates. DBC will continue to receive the same level of funding that was expected and more business rates will instead go to central government to allocate elsewhere. To reduce the impact, the government has brought in transitional relief for businesses and will reduce the amount by up to 75% or £110k per business, though there will be an overall increase over 3 years. Due to the increase in rates, DBC has had to increase its budget for 2023-24 by £60k, which will increase over the next 3 years as transitional relief rolls out to an overall increase of £230k by 2025-26.

There has been a greater return on treasury management, reaching around 3% from levels of 0.5% and lower throughout the COVID period. The Council decided, in December, to repay £10m of loans taken out for this facility, meaning that the Council could take advantage of favourable terms offered by the government to repay debt at a time they wanted to increase their own cash flow, meaning the Council could reduce the amount owed. There are also very low levels of borrowing at around £7m and the Council will therefore continue to look to repay this, where possible.

N Howcutt noted the pensions triennial report, advising that the Council has to review its pension fund every 3 years as part of the Hertfordshire Fund. The review suggested that there would be a 1% reduction in primary contribution rates, though the report shows that the fund for Dacorum has performed well, going from having the funds to cover 93% over the next 20 years to being 101% funded, meaning that fewer contributions are required to meet future liabilities of the pensions of current and previous employees. The review was performed on the basis of the pension fund in March 2022, and the increases in pay will also increase future liabilities. This will be monitored annually and further money may need to be kept aside to address any future shortfalls.

There are 3 additional capital projects requested for the leisure service, and there is an intention to expand the football pitches refurbishment capital project to ensure pitches are fit for purpose going forward. On reserve allocations, N Howcutt noted the proposal to allocate £50k for Armed Forces Day and the King Coronation events, and the allocation of £50k in 2023-24 and £65k in 2024-25 for project support for the development of the new Light Industrial Programme.

N Howcutt noted a minor change for the draft HRA budget, advising that they are looking to put additional money into the existing HTIP for next year, with an additional allocation of £550k, as well as an additional £250k in response to legislation around damp and mould.

N Howcutt was happy to take any questions.

Cllr Hollinghurst commented on the move towards hybrid working and asked if businesses would retract in terms of the office space they occupy and therefore the business rates that they are liable for. N Howcutt advised that if a business has a low rate able value, then they don't pay business rates and therefore the smallest businesses will not be impacted. Some businesses will grow just outside of this as part of the revaluation and will therefore be impacted. Office space has decreased in certain areas and if rental rates decrease, then business rates will also drop. A business rate revaluation has been promised every 3 years and further changes are expected at the next revaluation.

Cllr Hollinghurst noted that cash holdings remain static and asked if the rising interest rates would result in a net benefit to the Council. N Howcutt advised that debt levels from a General Fund perspective are very low at around £7m, which was taken out around 2017, with favourable interest rates that were fixed at the time of the loan. On the cash balances, these are healthy, which is primarily due to COVID and the delaying of several capital projects. There is an extensive capital programme for 2023-24 that will eat into these cash reserves, though the Council will ensure there is as great a return on these funds as possible. Minor changes will be proposed on treasury management, though there will be no change to the risk approach. N Howcutt noted that whilst there is a benefit now in terms of interest rates, there will be an impact on budgets when they come back down.

Cllr Banks commented on the reference to grants that the Council had been successful in receiving and whether this funding would be repeated. Cllr Banks asked if this is being experienced across the country. N Howcutt confirmed that this is a collective issue. For Negative RSG, there are 100 authorities across the country impacted by this and Dacorum were in the top 10 in terms of value, so whilst it is a national issue, Dacorum is one of the biggest winners. N Howcutt confirmed that the minimum funding guarantee was nationwide.

The Chair thanked the Finance team for the work completed.

The Committee proposed the draft budget to Cabinet.

Actions:

N Beresford to liaise with M Pinnell for update on housing with regards to actions on damp and mould issues to be circulated to all council members.