Agenda item

To consider the report

To accept the Wales Audit report

The report was submitted by Alan Hughes (Wales Audit Office). It was noted that although the report had been written prior to the arrival of Covid-19, the key findings, concepts and principles remained appropriate. Reference was made to the summary of the audit's findings, highlighting the fact that the main finding was that the Council's financial situation remained strong at present, with financial strategy supporting financial resilience. Despite this, a risk was highlighted around the significant overspending of some services, and the fact that not all savings were being realised. The findings were presented one by one, with attention drawn to the risks.

In response, the Head of Finance expressed gratitude for the report, noting that it was a fair reflection of the situation, but that the report had dated somewhat by now. An verbal update of the current situation was provided:

·         Gwynedd had been the first authority to report on the Impact of Covid-19 on the 2020/21 Budget, and this had been presented to Cabinet on 19/05/20.

·         Since then, several authorities had received reports from their treasurers, and the common factor in all the reports was the uncertainty -

                       a) regarding the continuation of crisis restrictions, and

                       b) regarding the amount of support to be expected from Welsh Government.

·         Gwynedd Council's likely situation had not seen any fundamental changes since reporting in May.

·         During the first quarter, the additional expenditure was approximately £2m, which was slightly higher than projected, but a large portion of this had been compensated. 

·         The additional cost reported did not include Council Tax Reduction payments. It was expected that Welsh Government would also compensate for this, with discussions to be held on 30/07/20

·         The Council's loss of income had been slightly lower than anticipated, and there was hope that this amount would also be compensated during Q.1.

·         In May, an income loss of £5m in Q.1., and a further £5m in Q.2., had been discussed. The true loss of income in Q.1. was £4.9m, and it was likely that Welsh Government would compensate authorities for a considerable amount of this (application submitted 27/07/20).

·         The Welsh Local Government Association (WLGA) were to present a case for Welsh Government to set aside a fund for Q.2., but there was no certainty regarding this.

·         The Council's assessment of loss of income did not include the situation in terms of Council Tax collection. This was a concern and impossible to measure at present.

·         However, there was reason to expect that Q.2. income would be at a considerably nearer level to the budget as businesses reopened, visitors paid for parking, etc.

·         The reserves would take a knock, but there was enough available to cope with the situation for the current year.

·         There would be a need to plan forward for 2021/22, as there was no guarantee that the Local Government grant would keep up with inflation - prior to the crisis, the 2020/21 settlement was one of the best in a decade and more, which suggested that the years of strict cuts had been eased.

·         It would be necessary to take stock of the situation, and to make efforts to consider a wide range of possibilities for the following year. The information was to be formally presented to the Cabinet in October.

The members expressed their gratitude for the report, and for the Head of Finance's input.

In response to a question regarding the total financial deficit of £37.8m, and how confident we were of these figures, it was noted that the 2019/20 and 2020/21 balances had been dealt with, but that it would be very difficult to put a figure on the other years; the situation was therefore presented with a health warning, due to the uncertainty.

In response to a question as to whether the Council's success would be punished due to the healthy levels of its reserves, it was noted that reserve levels was not a factor which influenced the grant payments from Welsh Government. The claim would be determined based on need and the difference between the income of the current year and the previous year, along with valid true additional costs e.g., cost of additional staff and PPE.

The Cabinet Member noted that there was great uncertainty regarding the total funding we were likely to receive from Welsh Government, who are themselves dependent on decisions made by the Westminster Government. The Cabinet Member was of the opinion that the situation would be acceptable for the current year, but that there was real concern for 2021/22.

In response to a question regarding obtaining a composite report from all the councils in order to have a ratio, it was noted that it was intended to collate all the messages in one national report, but that the conclusion had been reached to redistribute the resources and focus on the situation faced by councils as a result of Covid-19. It was added that there was a need to consider the impact of the risk of 'no income' in future.

RESOLVED to accept the Wales Audit Office report and observations