The joint report of the Interim Chief Executive and Interim Section 151 Officer was presented on the Medium Term Financial Strategy 2019-20 to 2022-23, which included a financial forecast for 2019-23, a detailed revenue budget for 2019-20 and a Capital Programme for 2018-19 to 2028-29. 

The Interim Section 151 Officer reported that MTFS has been significantly guided by the Council’s priorities and while there had been year-on-year reductions in Aggregate External Finance (AEF) has necessitated significant budget reductions across service areas.  The Council still plays a very significant role in the local economy, responsible for annual gross expenditure of around £400M and is the largest employer in the County Borough.  The Interim Section 151 Officer informed Council that the Corporate Plan is being presented to Council for approval alongside the MTFS 2019-23.  The two documents were aligned to each other, enabling explicit links to be made between the Council’s priorities and the resources directed to support them. 

The Interim Section 151 Officer reported that the MTFS outlines the principles and detailed assumptions which drive the Council’s budget and spending decisions, the financial context in which the Council is operating and to mitigate any financial risks and pressures going forward, at the same time taking advantage of any opportunities that may arise. 

The Interim Section 151 Officer provided Cabinet with a Corporate Financial Overview and commented that the Council’s gross budget will be around £420m while the net revenue budget is planned for 2019-20 is £270.809m.    She set out the Strategic Financial Context and informed Council that the MTFS is set within the context of UK economic and public expenditure plans, Welsh Government priorities and legislative programme.  Following the announcement of the provisional local government settlement in October 2018, the Chancellor of the Exchequer announced that the Welsh Government will receive an extra £550m over the next three years, with the Welsh Government being able to decide how to spend this allocation.  The then First Minister confirmed a package of additional funding proposals for local government, which would be incorporated in the final budget.  The Council received its final settlement from the Welsh Government in December 2018, which for this Council resulted in a reduction of 0.1% in Aggregate External Finance or £258k.  This was offset by new responsibilities with the true impact for the Council estimated to be a reduction of £1.182m or -0.61% compared to 2018-19, the real position for this Council would be reduction of -1.07% or £2.07m. 

The Interim Section 151 Officer reported that 2019-20 final Revenue Budget includes a Council tax increase of 5.4% in the draft MTFS which was reported to Cabinet in November 2018, which was deemed necessary to fund the significant pressures facing the Council, particularly significant pay, price and pensions pressures. 

The Interim Section 151 Officer reported on a comparison of budget against projected outturn as 31 December 2018, with the overall projected position being an under spend of £5.312m, comprising a £592,000 net under spend on Directorates and a £6.642m net under spend on corporate budgets, offset by net new earmarked reserves of £1.922m.  She stated that this position was better than anticipated due to the recent award of one-off grants from Welsh Government towards costs associated with supporting sustainable social services, and towards teachers’ pay for 2018-19. Bridgend’s share of the grants was £620,528 for social services and £718,701 for teachers’ pay.  Without these the net under spend would have been £3.973 million.  She also stated that the MTFS is reviewed regularly and amended as additional information becomes available, with the detail for future years being developed over the period of the strategy. 

The Interim Section 151 Officer informed Council of the outcome of the consultation on the budget entitled, ‘Shaping Bridgend’s Future 2018’ which received 5,288 interactions.  Within this there were 2,677 survey completions, demonstrating a 44% increase on last year.  She also thanked the Budget Research and Evaluation Panel in assisting facilitating the budget planning process and the Overview and Scrutiny Committees which resulted in a series of recommendations being made by the Corporate Overview and Scrutiny Committee for consideration by Cabinet.

The Interim Section 151 Officer reported on the budget reduction scenarios and that the most likely scenario was a potential net budget reduction of £35.181m over the course of the MTFS.  She also highlighted the current progress on identifying budget reduction proposals.  A number of proposals for 2020-21 onwards will require further information and analysis and are not sufficiently well developed to be included at this point in time. 

The Interim Section 151 Officer informed Council of the net budget requirement to fulfill its functions, financed from the Welsh Government settlement and Council Tax income, which would require an increase in Council Tax of 5.40%.  The Interim Section 151 Officer also informed Council of the pressures of pay, prices and demographics, with there being an estimated increase of 43% in the employer contribution rates for teachers’ pensions, which would result in a full year cost of around £3.5m.  Price inflation has been allocated to service budgets and includes contractual increases in food costs, social care provision and other commitments. 

The Interim Section 151 Officer reported that following a better than anticipated settlement in 2018-19, school budgets were protected from the proposed 1% annual efficiency target, but given the forecast pressure on Council budgets for future years.  However following the additional funding announced by the First Minister in November 2018, and the subsequent improved final settlement, along with the outcome of the public consultation and Scrutiny Committees’ recommendations, school budgets have again been protected from the 1% efficiency reduction in 2019-20.

The Interim Section 151 Officer reported on the budget pressures which total £2.191m, which represent unavoidable pressures and contractual changes.  Budget reduction proposals of £7.621m had been identified from service and corporate budgets to achieve a balanced budget.  Fees and charges would be increased by at least Consumer Price Index (at the prevailing rate, currently 2.1%) plus 1%. 

The Interim Section 151 Officer informed Cabinet of the position of the Council’s Reserves, the forecast movement to 31 March 2019 on Earmarked Reserves would be an overall reduction of £10.925m.  A further review would be undertaken at the end of the current financial year, with the forecast movement in reserves for 2019-20 being £7.891m.       

The Interim Section 151 Officer reported on the Capital Programme and Capital Financing Strategy for 2018-19 to 2028-29, which has been developed in line with the MTFS principles and the proposed Capital Strategy and reflects the Welsh Government capital settlement for 2019-20.    Capital funding of £7.665m, of which £3.938m is provided through un-hypothecated supported borrowing and the remainder of £3.727m as general capital grant.  This includes the 2019020 share (£30m) of the additional £100m of general capital funding announced by the Welsh Government in the provisional settlement.  The Council has already received £2.215m as its share of the £50m allocation for 2018-19.  The Interim Section 151 Officer outlined the proposed allocations of capital funding.  She also informed Council that the intervention rate for the funding of Band B of the School Modernisation Programme under the Mutual Investment Model had increased from 75% to 80% and a further report would be presented to Council on the funding of Band B schools.        

The Deputy Leader in commending the MTFS stated that finance is the lifeline to keep the organisation alive and stated that the proposals within the MTFS had been consulted on more widely than ever.  He commented that there is a requirement to fund a 43% increase in teachers’ pension contributions with the authority continuing to lobby the UK Government in order that the Treasury fund this increase.  He thanked the Budget Research and Evaluation Panel for its work in the budget planning process.  He stated that in order to fund additional budget pressures and to cover a funding shortfall of £7.62m, it was necessary to increase Council tax by 5.4%.

The Leader thanked the Overview and Scrutiny Committees for providing a number of recommendations on the budget and to the cross-party Budget Research and Evaluation Panel for its non-partisan and constructive engagement which had helped the shaped the budget.  He stated that of the £4.6m increase in Council Tax, it was proposed to spend £4.5 on schools.  He also stated that all 22 local authorities in Wales are faced with increasing Council Tax in order to front line services. 

A Member of Council expressed concern that £4.6m of savings are rated as either high or medium risk, with £1.9m, 25% being high risk with plans not fully developed and £2.7m, 35% being medium risk with plans in development but doubt around delivery, resulting in £4.6m savings, 60% which are deemed to be a risk.  The Member commented that the Council is already forecasting that £7.9 m will be needed from general reserves to fund the Council in the next financial year and if the savings are not delivered the worst case scenario is that the Council will need to draw £12.5m from reserves leaving £24.2m, leaving potentially, only 2 years of reserves left.  The Member further commented that this will be a difficult situation when trying to find further savings.  However, in the corporate world it would not be acceptable to have a plan where 25% of savings are high risk and 35% medium, with 10% high risk and 20% medium risk being more acceptable.  The Member considered that the Council does not have a balanced budget.  The Leader commented that the Council is in a similar to last year, but it was projecting to have an under spend this year as was the case in the previous year.  He stated that the use of Reserves would be on Capital Reserves and there would be no draw down on General Reserves.  He informed Council that the process of planning for next year’s budget would commence immediately and that it would be ensured that risks are managed.  The Interim Section 151 Officer informed Council that to have 25% high risks was not an ideal position, however the risk in relation to MREC could potentially change quickly.  She commented that the Council has a good track record of delivering savings      

A Member of Council commented that the reduction in nursery provision is under consideration with budget reductions of £817k in 2020/21 and £584k in 2021/22 and questioned when consultations will start on this so that in the next year, those proposals will be green and low risk.  The Leader commented that the Council is in dialogue with the Welsh Government on the continuation of nursery education and consultation will take place on nursery education.

It was moved and seconded that a recorded vote be taken on the proposals contained in the report, but firstly, an electronic vote was required to see that there was a consensus of Members for this.

Therefore an electronic vote was taken, the result of which was as follows:-

For (recorded vote)                   Against               Abstain

49                                              3                         0

As the vote for a recorded vote was carried, this was then undertaken, the result of which was as follows:-

For                                            Against               Abstain

32                                             11                       10       

RESOLVED:            That Council approved the MTFS 2019-20 to 2022-23   including the 2019-20 revenue budget and the Capital Programme 2018-19 to 2028-29 and in particular approved the following specific elements:

·       The MTFS 2019-20 to 2022-23;

·       The Net Budget Requirement of £270,808,634 in 2019-20;

·      A Band D Council Tax for Bridgend County   Borough Council of £2,470.87 for 2019-20;

·       The 2019-20 budgets as allocated in accordance with Table 9 in paragraph 3.3 of the MTFS;

  The Capital Programme 2018-19 to 2028-29, attached at Appendix G of the MTFS.