Agenda item

To consider the report

To accept the information, to note the uncertainty in the context of the Council's budget for 2021/22, and support the strategy to balance the budget by using contingencies and reserves to mitigate resource losses in the short term, rather than to give thorough and unnecessary consideration to the lists of potential savings and service cuts during the likely second wave of the Covid-19 pandemic.

Submitted – the report of the Cabinet Member for Finance requesting that the Committee notes the uncertainty in relation to the Council's budget for 2021/22, and provides comments on the strategy.

The Cabinet Member for Finance set out the context for the report. He emphasised the importance of the virtual seminars on the budget for members in January, and he pressed on everyone to attend the sessions.

He noted that the Cabinet had considered the report at its meeting on 13 October, and had resolved as follows:-

To approve the procedure and timetable for producing the 2021/22 Budget, while also
noting that financial planning is extremely challenging, and therefore if there was a funding gap to balance the 2021/22 budget, the Council will use contingencies and reserves to mitigate resource losses in the short term, rather than giving intensive and unnecessary consideration to lists of potential savings and service cuts during a probable second wave of the Covid-19 pandemic.

The Head of the Finance Department noted that, further to what was contained in the report, he had pleaded with the Welsh Government in the past few days to stick to this year's draft budget, otherwise it would be impossible to plan for 2021/22.

During the discussion, members raised the following matters:-

·         In response to a question on the Council's policy with regard to balances, it was explained that keeping reserves was part of a bigger picture. It depended on how much risk was incorporated into budgets in terms of things like provision for inflation and unknown issues. Many of the reserves had been committed to specific purposes, but the Council did have general balances of £8m, which basically reflected the risk of a possible cut in the Council's grant. Over the past two years, the Council had stuck to this amount, in case it found itself in a situation of having to buy time to deal with the need to find savings and cuts.

·         A member enquired whether consideration had been given to borrowing money to fill the gap in the short term, since interest rates were so low at present. In response, it was explained that the regulations did not permit borrowing for revenue purposes, unless the Welsh Government permitted a Capitalisation Direction. Some other councils had been calling for this in Wales, but no statement had been made on this to date.  Also, in keeping with the spirit of the Future Generations Act, the Council did not wish to pass on problems to the next generation, and preferred to try to address the problem from the reserves available.

·         It was noted that should the reserves be used, the Council should ensure that the funds were replenished in the following years, and it was emphasised that the current crisis had underlined the importance of the reserves.

·         It was noted that the UK Government had caused difficulties in setting a budget by cancelling the Autumn Budget, although we understood the reasons for doing so in the circumstances. However, this had led to the problem being transferred to the Welsh Government who, in turn, had transferred the problem to the councils. It was agreed that it was not appropriate to allocate staff time to search for savings when they were under pressure dealing with the crisis. It was believed that these factors meant that the two governments had a moral duty to ensure that there were no cuts in the grant and that the final settlement was sufficient, and it was important that the Council stated this clearly. The pandemic had highlighted just how damaging the cuts to the public sector had been over the past ten years, especially in health, but also in other fields, and the public infrastructure throughout Wales and Britain was not adequate to deal with the challenges faced.

·         A member enquired whether there was a risk of the Government allocating a smaller grant to a council that had reserves. In response, it was explained that the factors which drove the various element of the formula were things like population changes, the number of school pupils, elderly etc.

RESOLVED to accept the information, to note the uncertainty in respect of the Council's budget for 2021/22, and support the strategy to balance the budget by using contingencies and reserves to mitigate resource losses in the short term, rather than give thorough and unnecessary consideration to lists of potential savings and service cuts during the likely second wave of the Covid-19 pandemic.