Agenda item

Pre-submitted Members questions are pursuant to rule 12 of the Council & Committee Procedure Rules.

 

Questions should be submitted by noon on Thursday 5 December 2024 to  Democratic Services, democratic.services@adur-worthing.gov.uk    

 

(Note: Member Question Time will operate for a maximum of 30 minutes.)

A Member asked the following question

 

I note Worthing Councils statement that it intends to write to MHCLG to request 'exceptional financial support'. Invariably if granted, this is achieved by granting a capitalisation direction which permits a local authority to meet its pressing revenue costs through using capital raised on assets that are sold, on current capital financial resources already held or on further borrowing by the authority. Clearly a lot of thought will have been applied prior to this request. So can you please explain what capital sum/s from what assets have been identified for capitalisation. 

 

Response:

 

I think it would help to provide some context which will help with the response to this question and some of the following questions from other members.

 

 

As you say exceptional funding support is provided in the form of a capitalisation direction which permits the use of capital resources to meet revenue costs. These capital resources can include capital receipts (for example from the sale of assets) and borrowing. The new Labour government has confirmed the removal of the interest premium which the Conservative government previously applied to borrowing for this purpose from the government (i.e. from the Public Works Loans Board or PWLB). So the borrowing costs will be lower that they previously would have been under a Tory government, interest rate movements notwithstanding.

 

 

We will be asking MHCLG (Ministry of Housing, Communities and Local Government) to address our central funding gap associated with homelessness and the supported accommodation subsidy.  This request is unlikely to have been reviewed before the 2025/26 budget is finalised and therefore funding support will be sought to bridge the budget gap followed by a correction to reflect the actual need to borrow.

 

 

To come to the specific question regarding the raising of sums from assets, I am sure you will appreciate this is a commercial matter so we cannot go into specifics.

 

 

You will recall that we presented our new asset strategy and draft disposals policy at the last of these meetings - these are important elements of our overall financial strategy irrespective of our conversations with MHCLG.  If we do, as we expect, receive a capitalisation directive from the government to address our funding gap then we will need to make sensible choices about where to apply our capital receipts vs when to borrow to support our revenue budget.  This will be done as part of our treasury management approach which is looking carefully at how we manage debt vs capital.

 

 

A Member asked the following question

 

The Financial Strategy and Organisational Design demonstrate that the Councils are not only redesigning services to meet significant financial challenges but also actively improving outcomes for our communities in ways that are more sustainable and cost-effective in the long term”. Given you have approached the government for exceptional financial support to balance a large budget gap, and given the scale of cuts you have had to make over the last few years, do you honestly believe that you are improving outcomes for our communities?

 

 

Response

 

1 in 4 councils have told the LGA they expect to be asking for help from the Government within the next two years. These types of cuts have been happening in local government for over 10 years now with the chronic underfunding of local government.

 

Despite significant financial challenges that have been ongoing for years for local councils, I firmly believe we are improving outcomes by transforming services to be more efficient, sustainable, and focused on prevention.

 

The Neighbourhood Model is being designed in a way that residents will start to see the difference, like we are in West Durrington, with officers in Neighbourhood teams knowing their patches and being able to progress work more quickly and with better knowledge of their areas.

 

Exceptional financial support would allow us to bridge the gap while we work on longer term changes that are necessary for us to be more sustainable and resilient, and already working on plans for improved income generation and better asset management. Balancing these current pressures is tough, but our strategy will start to deliver real benefits for our communities.

 

A Member asked the following question

 

There is a state of financial emergency in local government with a number of councils issuing formal section 114 declarations of bankruptcy in recent years. Earlier this year nineteen councils were granted Exceptional Financial Support by the government. It looks like Worthing may be next.

 

 

These "Capitalisation directions" allow capital assets to be sold or funds to be borrowed to plug holes in revenue budgets. Which of these does the Cabinet Member for Resources anticipate using? If the former, which assets does he have in mind to sell? If the latter could he please say how much will be borrowed, where from, at what interest rate and what the repayment schedule will be?

 

 

Response

 

 

We will almost certainly see a blend of the use of capital receipts and borrowing but at this stage we cannot say how much will need to be borrowed. We generally look to minimise borrowing of course. We can say that the borrowing will be from the PWLB and it is worth repeating that the new Labour government has helped here by removing the Conservative’s premium on borrowing where exceptional financial support is being sought.

 

 

For commercial reasons we cannot say at this stage which assets might be part of a disposal process.

 

A Member asked the following question

 

The recent AWC press release stated that “Worthing Borough Council has therefore begun discussions with the Ministry of Housing, Communities and Local Government to request exceptional financial support”. As you are “being open and responsible about our situation” can you provide detail about the nature of these discussions thus far and can the detail of these discussions be made public for residents?

 

 

Response

 

 

The Chief Executive and S151 officer have met with the relevant team at MHCLG to outline our financial situation and the plans we have in place to create a more resilient financial position over the course of the new financial strategy.  It is apparent that this new Labour government is listening far more than the previous Conservative government and this has been a constructive discussion. We have already sent over information as requested by the government team.  Subject to the decision on the Budget Update paper later this evening, the Chief Executive will be writing this week to formalise our request and also share this latest budget update. The letter will be shared with all Members and will not be made confidential.

 

 

A Member asked the following question

 

 

In 8.6 of the report, it says “We have launched a budget campaign with our residents and partners to help our communities better understand how we are funded, our financial challenges and how we spend our money …”  Assuming the Press Release of 2.12.24 was the launch of that campaign, when is the next stage, what form will it take, and how will it explain the nature and detail of the “exceptional financial support” being sought and the "ongoing work to push for fair, long-term funding for local councils so they can keep providing services whilst planning for the future" in an accessible way?

 

 

Response

 

 

Beyond the press release on the budget which you have referenced, we are also sharing with residents infographics on how we are funded, on our budgetary challenges and how we spend our money. These will be accompanied by a quiz to enable residents to participate in an interactive way. I have seen this and I think this will really help residents understand the challenges we are facing and also the services we are responsible for (such as bin collections) and those we are not responsible for (such as fixing potholes).

 

 

A Member asked the following question

 

The recent press release stated “Recent announcements from the government have outlined a clear intention to address the structural issues with local government finance”. Other than multi year financial settlements from 26-27, what announcements are these and how will they impact WBC’s financial situation in 25/26?

Response

 

The full Local Government policy statement is on MHCLG’s website.

 

 

The District Council Network have very helpfully produced a briefing on the statement. In addition to multi-year funding from 26/27, there are key elements that will protect district council funding:

 

 

There is a new funding floor to guarantee that no council will see a cash reduction in its Core Spending Power (CSP) assuming it increases council tax by the maximum amount permitted under the referendum principles.

Revenue Support Grant and Baseline Funding Levels will increase by CPI.

All councils will receive additional income from Extended Producer Responsibility for Packaging (EPR) payments (over and above increases to CSP). EPR payments will be guaranteed and will not be ringfenced.

Taking into account all funding allocated through the Finance Settlement and EPR payments, almost all councils will receive a real-terms increase in funding.

 

 

The government will look to build on the lessons learned from the Conservatives Fair Funding Review, which was delayed and delayed and in the end never implemented.

 

 

In addition, grants will be repurposed to produce better outcomes locally. The number of specific funding pots will be reduced to allow councils more flexibility.

 

 

There will be a consultation with Council leaders to ensure the government gets this right, with the aim of having the changes in place for the 26/27 financial year.

 

A Member asked the following question

 

 

Support provided via this EFS (Exceptional Financial Support) framework is usually provided in the form of a capitalisation direction. Capitalisation directions permit a local authority to meet revenue costs through capital resources. If this EFS allows WBC to sell assets to make up the revenue shortfall, is the council concerned about the impact of the Council’s EFS directive on the value of our capital assets?

 

Response

 

In an earlier response I referred to our asset strategy and disposals policy

 

 

In that policy we talk about a “flight to quality” where we are looking to move towards a higher quality, lower risk and more sustainable asset portfolio. The Budget Update paper explains how this involves addressing the challenges associated with managing an ageing portfolio while taking account of community and social needs. So this work is already in our plans.  

 

 

It must be stressed that any disposal process will happen in a controlled way so that we are able to obtain best consideration for any disposals, as required by the Local Government Act of 1972.