Appendix 1

 

 

 

 

 

 

Part A: Executive Summary & Overview                                        Page 2     

 

Part B: Revenue Budget Q1 2020/21

B1)    Revenue Budget                                                              Page     5

 

Part C: Capital Budget Q1 2020/21

C1)     Capital Budget                                                                           Page 9 

 

 

 

 

 

 

 

 

 

 

Part B

 

This report provides members with a financial update for the first quarter of 2020/21, covering activity within this committee’s revenue and capital accounts for this period, and a projected outturn for the year.

Members will be aware that since the budget was agreed in February, the position for 2020/21 and future years has changed significantly as a result of the Covid-19 pandemic.  Specific impacts include:

-        Redirection of existing resources to support vulnerable people

-        Administering government support schemes, notably business rate reliefs and grants

-        Temporary closure of many Council facilities

-        Reduction in levels of activity in many other Council services

-        Income generating activities severely impacted by overall contraction in economic activity

-        Change in working patterns, with almost all office-based staff now working from home

-        Reduced levels of Council Tax and Business Rates collection.

 

This has resulted in many service areas reporting or projecting adverse variances against the budget for 2020/21, particularly in relation to income.  The overall projection for the council is summarised in table 1 below, and shows that the potential impact of Covid-19 on the council’s financial position is £8.547m.  These projections are based on information submitted to central government as part of the monthly financial monitoring return which councils have been asked to complete to enable a comprehensive picture of the financial impact of Covid-19 on local authorities to be compiled by the Ministry of Housing, Communities and Local Government.  The projections are based on the information available to finance officers at the time of submitting the return and are being regularly updated as the situation unfolds and further information becomes available.

	£000
Additional Spending	1,377
Income Reductions:
Business Rates (MBC share)	1,901
Council Tax (MBC share)	950
Other Income	4,319
Total	8,547

                                     Table 1, Covid-19 financial impact

 

Income reductions related to business rates and council tax were based on estimates made earlier in the financial year.  Collection rates have actually proved better than anticipated so this will mitigate the financial impact, although there will still be a significant loss overall.

It should be noted that the projections detailed within table 1 will not necessarily align to the in year budget outturn projections.  This is partly due to the statutory accounting arrangements for council tax and business rates which impact on the timing these losses reaching the general fund balance.  In addition to this, the variances above reflect an estimate of the financial impact of Covid-19 and do not take into account other factors which may impact on the budget outturn.

To date, support totalling £2.2m has been received from the government.  A further support package to compensate for fees and charges losses has been announced recently and will be confirmed later this month.  Any residual in year deficit will need to be met from reserves.  Given the all-encompassing impact of Covid-19 across many of the council’s services, mitigation for losses will be treated as a corporate exercise, and we will therefore not necessarily seek to apportion all unringfenced support received across service committees. The impacts which arise from areas within this committee’s remit are detailed within section B of this report.

Headline messages arising from other sections of this report are summarised below:

Part B: Revenue budget – Q1 2020/21

·         Overall expenditure at the end Q1 for the services reporting to ERL is £0.435m, compared to the profiled approved budget of £0.256m, representing a shortfall of £0.179m. The forecast year end outturn for ERL is a shortfall of £0.668m.

·         We are anticipating funding to mitigate the impact of losses from fees and charges income, however, the value of support to be received will not be confirmed until October.  Initial calculations indicate that this funding could be in the region of £1.7m for the council as a whole.

 

Part C: Capital budget – Q1 2020/21

·           Capital expenditure for the services reporting to ERL of £34,000 has been incurred against the approved budget of £3.901m. Forecast spend for the year is £1.340m.

 

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B2)   Revenue Budget  

B1.1  The table below provides a detailed summary on the budgeted net income position for ERL services at the end of Quarter 1. The financial figures are presented on an ‘accruals’ basis (e.g. expenditure for goods and services received, but not yet paid for, is included). 

ERL Revenue Budget & Outturn

 

B1.2  The table shows that at the end of the first quarter overall net expenditure for the services reporting to SPI is £0.435m, compared to the approved budget of £0.256m, representing a shortfall of £0.179m. It should be noted that this forecast does not take into account further government support for income losses announced recently.  The planned scheme will see councils absorbing losses of up to 5% of planned sales, fees and charges income, with the government compensating for 75p in every pound of ‘relevant losses’ thereafter.  We are therefore confident that the position will improve from the forecasts set out in tables 2 and 3 above.

B1.3  The table indicates that in certain areas, significant variances to the budgeted income levels have emerged during the first quarter of the year.  The reasons for the more significant variances are explored in section B2 below.

B2)   Variances

B2.1  The impact of Covid-19 and lockdown can be seen most significantly in those areas where income is a significant element of the budget. This has been exacerbated by the fact that the period of lockdown covered the late Spring and early Summer period when the Council would normally expect visitor numbers to the market and leisure facilities to be high. However the market and some leisure facilities were able to re-open in July and this has led to a partial recovery in terms of income received, but given that the peak Summer period has now passed it is highly unlikely that any significant recovery will be possible. The year end forecast is for a shortfall of £0.668m, but that does not include the potential recovery of fees and charges from the government outlined earlier in this Appendix or measures taken to mitigate the overspend such as deferring recruitment plans and cancelling non-essential expenditure.

B2.2  The forecasts are based on the circumstances as they stand at present, and assume a gradual return to normal levels of activity, but the timescale of that is less clear, and of course the possibility of a second wave of the virus remains a risk that needs to be considered.

 

 

	Positive Variance Q1	Adverse Variance Q1	Year End Forecast Variance
Economic Regeneration & Leisure Committee	£000
Festivals & Events – Events planned for spring and summer were cancelled due to the Covid-19 pandemic, and it is unlikely that there will be sufficient further opportunities to significantly reduce the shortfall in income.		-39	-31
Mote Park Adventure Zone – The facility was closed during the lockdown period, and the contractor was granted contract relief in recognition of this. Although it has now re-opened there is unlikely to be a significant reduction in the shortfall for the year.		-58	-56
Market - The market was closed during the lockdown period, and consequently there was a significant drop in income. Although it has now re-opened the current forecast assumes that there will only be a gradual recovery.		-34	-50
Leisure centre – Following the closure of the leisure centre at the start of the lockdown period, Serco Leisure have indicated that they propose to take advantage of their contractual position and recover their losses from MBC, less £5,000 which would be payable by the Leisure Trust.  Details remain subject to negotiation and the projected variance represents a preliminary view of the likely outcome.			-500
Salary Slippage - This is a credit budget, which allows for service underspends on salaries, due to temporary vacancies arising from staff turnover. This adverse variance offsets underspends in other service areas.		-8	-31

       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B1)   Capital Budget: Economic Regeneration & Leisure (ERL)

B1.1  The position of the 2020/21 ERL element of the Capital Programme at the Quarter 1 stage is presented in Table 3 below. The budget for 2020/21 includes resources brought forward from 2019/20.

Table 4:     ERL Capital Programme 2020/21 (@ Quarter 1)

B1.2  Comments on the variances in the table above are as follows:

·         Mote Park Visitor Centre – the project has been deferred for a year while the capital programme is reviewed in light of the Covid-19 pandemic. The budget retained for this year will enable preliminary work such as architecture and design to proceed.                                                                      

·         Mote Park Lane – Dam Works – the project is now under way and should be substantially completed by the end of the financial year.