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Agenda item

Financial Update


The Director of Finance and Business Improvement presented his report updating the Committee on the Council’s financial position in the light of the coronavirus pandemic.  The Director of Finance and Business Improvement advised the Committee that:


·  The Council was able to set a balanced budget for 2020/21 at its meeting on 26 February 2020 on the basis of the information available at the time and the assumptions set out in the budget report.  However, the position had changed completely since then due to the pandemic.  There had been additional expenditure arising from, for example, the Council’s work to support vulnerable people, in particular finding accommodation for the homeless and establishing a community hub.  However, the impact of reduced income was much more significant than marginal increases in expenditure.


·  The overall impact in terms of expenditure pressures and income reductions was estimated to be £7.7m at the time of writing the report compared with the Council’s unallocated general fund balance of £8.4m.


·  In terms of Government support, Maidstone’s allocation from the second tranche of funding was £1.7m.  This was significantly less than was required to cover the Council’s expected losses.  The Council would continue to lobby for additional funding.


·  Recovery from the pandemic and mitigation of the losses faced by the Council would have major strategic impacts and would require a review of its strategic priorities.  It was now likely that a major re-casting of the Medium Term Financial Strategy (MTFS) would be required.  It was suggested that in July there would be sufficient greater clarity about the nature of the recovery from the pandemic to use the meeting currently scheduled for 21 July 2020 to consider the approach to the future development of the MTFS.


In response to questions, the Director of Finance and Business Improvement explained that:


·  The Council was exposed to a reduction in Business Rates income in so far as its own share of Business Rates was concerned.  This was mitigated to an extent because the Government compensates the Council for the reliefs it gives to businesses, including the 100% relief for leisure, retail and hospitality businesses, but it was still estimated on current trends that the Council was exposed to a loss of some £1.4m.  It was also likely that Council Tax income would fall through a combination of lower collection rates and a transition from full Council Tax to a reduced level of Council Tax for many households.  At this stage, a loss of £1.7m was estimated.


·  The Council had set a minimum level of reserves of £2m.  In the event, the level of reserves currently held was in excess of this.  When setting the budget in February 2020, an unallocated general fund balance of £8.4m was projected as at 31 March 2020.  A further £4.6m of balances were due to be earmarked for a range of purposes including the Local Plan Review, giving a total of £13m.  Prior to the onset of the pandemic, it was anticipated that the outturn would be broadly in line with the projected figures.  If the financial impact of the pandemic was £7.7m as projected then the Council had adequate resources to meet the expenditure expected, but almost all of the unallocated general fund balance of £8.4m would be used up.  The Council was not at the point where it needed to consider whether borrowing, which it would have to repay at a later date, would be appropriate.


·  In terms of the Capital Programme, decisions about the progress of individual schemes were being made on a case by case basis, having regard to guidance relating to construction sites operating during the coronavirus pandemic and ways of working.


RESOLVED:  That the report be noted.


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