Agenda item

To present the joint report of the Scrutiny Manager and  the Director of Function (Resources) and Section 151 Officer.

The report of the Scrutiny Manager was presented for the Committee’s consideration. The report outlined the context to the 2021/22 Budget setting process along with the key issues and questions for Scrutiny in evaluating the Executive’s initial revenue budget proposals taking into consideration the key messages from the public consultation exercise. The following documentation was appended to the report –

3.1       The report of the Director of Function (Resources) and Section 151 Officer on the initial proposals for the 2021/2022 revenue budget which was presented to the Executive on 18 January, 2020  and which included a position statement with regard to the Executive’s initial budget proposals;  Welsh Government’s provisional settlement for Local Government; the initial budget position for 2021/22; Council Tax; the Council’s reserves and balances; savings proposals; budget pressures; risks and the impact on the Medium Term Financial Plan.

The Portfolio Member for Finance introduced the budget report and proposals by saying that they come at the end of an unprecedented year of challenges. The Council has to balance its desire to keep Council Tax increases to a minimum with the need to build resilience into the budget in readiness for future challenges. He recognised that Council Tax is a contentious issue there being an expectation that it will rise annually; personally he found it an unfair and inappropriate system for the twenty-first century. But in light of a better than forecasted Welsh Government provisional settlement for Anglesey for 2021/22 the Council was able to go out to public consultation on the basis of a proposed 3.75% increase in Council Tax for 2021/22. However, the timing of Welsh Government’s settlement  remains an issue and is an unsatisfactory way of funding local councils with the final budget settlement not due to be announced until  2 March, 2021 - a week only before the Council is expected to finalise and set its budget for 2021/22. The budget report sets out a number of considerations in setting the 2021/22 budget with one of the key elements being the new Refuse Collection and Street Cleansing Contract effective from 1 April, 2021. The cost of the new contract is significantly higher than the current budget and in itself equates to 3% on the Council Tax. Also the Executive has identified as a priority area the need to ensure a supply of suitably qualified and experienced labour for the future and is keen to reinstate the Professional Trainee Programme to help address any potential skills shortage that the Council may face.  

The Director of Function (Resources) and Section 151 Officer provided an overview of the revenue budget process and context by way of a visual presentation and he highlighted the key aspects and considerations impacting on the level of Council Tax as follows   –

•           The initial budget for 2021/22 as projected in the Medium Term Financial Plan foresaw an increase of £6.680m based on additional provision being made for the higher cost of the new Waste and Street Cleansing Contract, investment in the Council’s IT Service, changes in pupil numbers, inflation, extra demand on the Council Tax Reduction Scheme and pressure on Adult Social Care taking the total projected budget for 2021/22 to £148.826m. The projected £6m increase in the budget would have required a 4% increase in the Council’s Aggregate External Funding (AEF) and a minimum 7% increase in Council Tax.

•           The provisional Local Government Settlement for Anglesey for 2021/22 amounts to £104.825m (an increase of 3.4% compared to an all Wales increase of 3.8%) and includes Tax base adjustment, the Teacher’s Pay Grant, and additional funding to meet increased costs. The population statistics used in the funding formula have been updated and Anglesey has as a result seen a reduction in AEF because the revised population figures for Anglesey were lower than the previous forecast. However, had the AEF since 2013/14 kept up with inflation, then Anglesey would have been in receipt of £115m AEF in 2021/22 instead of the actual £105m it has received. As it is the Council has had to cut services and increase Council Tax to meet the shortfall over this time.

•           The final budget proposal for 2021/22 (set out in detail in Table 5 at paragraph 10.10 of the report to the 18 January meeting of the Executive) based on the revised standstill budget for 2021/22 and taking into account committed changes, staffing costs (subject to confirmation of pay awards which is recognised as a risk area) and identified additional pressures in the form of funding the Professional Trainee Programme; additional capacity in Public Protection; Education Inclusion; IT Support for Schools, Management of Tourism and Tackling Climate Change amounts to £147.706m.  Adjustments for additional income from increased car park charges, freezing of school meal prices, the CTRS budget and balance to the General Contingency bring the total proposed Council Budget for 2021/22 to £147.531 of which £104.825m is funded by AEF leaving £42.706m to be funded by Council Tax. The 2020/21 Council Tax Budget adjusted for the change in the tax base amounts to £41.162m which means that the funding shortfall (before an increase in Council Tax) is £1.544m.

•           A Council Tax increase of 3.75% meets the shortfall and balances the budget.   

•           As at 2020/21 the Council had £7.060m in General Reserves equating to 4.97% of its net Revenue Budget (£142.146m) – up from 2019/20 (£5.912m) but down on the highpoint of £8.886m in 2016/17. General Reserves provide a safety net against unexpected events or emergencies. Had Welsh Government not provided additional financial support for Covid-19, then the Council would have had to draw on its reserves to meet the costs of dealing with the pandemic. Although there is no set minimum level of reserves for local authorities, the general unofficial benchmark is around 5% of the net revenue budget depending also on each Council’s financial position and the risks they face. Taking into account actual and planned use of reserves (including to finance part of the 2021/22 capital expenditure), and  a Q3 forecast underspend on the revenue budget, the Council’s forecasted General Reserves position as at 31 March, 2021 is £7.526m .

•           Whilst there are no indications on future settlements beyond 2021/22, there are several factors that could influence future funding e.g. the ongoing effect of the Pandemic and Brexit as well as the Senedd elections in 2021 and the Local Government elections in 2022. For the future it is hoped that Welsh Government will be able to provide longer term certainty to enable local authorities to more plan ahead more effectively than the current annual budget setting process allows.

3.2 The report of the Programme, Business Planning and Performance Manager which provided an analysis of the messages from the Public Consultation exercise on the Authority’s 2021/22 initial Budget proposals as approved by the Executive conducted during the period 19 January to 2 February, 2021 (Appendix 2)

The Portfolio Member for Corporate Business reported that the consultation exercise this year followed a similar pattern to previous consultation events held in recent years but with a shortened timescale enforced on the Council by Welsh Government and the impact of the pandemic meaning that public meetings could not take place and greater emphasis was placed on gaining an electronic response. The Council received 600 responses via electronic means as well as correspondence via e-mail. Bearing in mind this year’s consultation was open for two weeks only, this is an appropriate and welcomed response by the residents of Anglesey and compares well with the number of responses to previous annual budget setting processes which have averaged in the region of 500 responses the exception being the 2019/20 budget setting process which attracted in excess of 5,000 responses.

The Programme, Business Planning and Performance Manager summarised the headline findings from the public consultation exercise as follows –

•           The majority of respondents (nearly 9 out of 10 people) did not agree with the proposal to increase the Council Tax by 1.1.% (on top of the 2.65% already earmarked as an annual rise) in order to fund the activities noted in the consultation.

•           As regards prioritising those activities and/or Council Services, the majority of those who did not wish to see a 1.1% increase in Council Tax (244 or 45.69%) thought that no investment should be made and that the Council should continue without the need for further investment.

•           In relation to proposals for generating income, the response to increasing car parking charges at coastal locations is split 60:40 against such a proposal. Correspondence received by a local Sailing and Water Sports Club raises concerns that increased car parking charges may affect Club participation numbers as well as reducing a season long income source for the Council. If new, more modern ticketing machines are introduced as proposed, then the Club suggests that a loyalty discount scheme for regular car park users be also introduced.

•           There was a slight majority (51.55%) in favour of the proposals for capital funding over the next 12 months.

•           With regard to the question of where and on what should the Council invest over the forthcoming 12 months, the largest response (69) revolved around the Council Tax increase with points made about it being unfair given the new charge on green waste and suggestions made about increasing the tax on holiday homes.

•           The response to bringing in chrome books for schools was positive as was the response to additional work for flood relief schemes. A number of respondents also wanted to see an improvement to the roads on Anglesey and many were keen to see an increase in the number of cycle and walking routes.  To a lesser extent points were made about the availability of affordable homes for first time buyers, provision of bins for dog waste on beaches, town improvement especially in relation to Holyhead; providing support for small businesses, tourism activities, investing in more job opportunities and funding improvements to the environment.

•           The Schools Finance Forum having met on the previous Wednesday was generally satisfied with the budget proposals but indicated that it would like to see the delegated schools budget increasing in 2022/23 and beyond.

The main points of the full discussion that ensued focused on the following –

•           Councillor Alun Roberts was concerned about what research has shown to be the hidden problems of Covid 19 especially the impact of lockdown restrictions on the welfare of children and their families. He asked whether in allocating resources to Children and Families Services consideration had been given to the potential increase in referrals to children’s social care services as schools and society re-open and whether the proposed budget for Children and Families’ Services is sufficient to be able to deal with increased demand and workload.  Councillor Llinos Medi, Leader and Portfolio Member for Social Services in acknowledging the point clarified that the matter is the subject of a national discussion and is a priority area for Social Services Portfolio Members across councils in Wales who collectively are calling for a national approach to the recovery of Children and Families. As regards the adequacy of the service budget the extent of the problem in terms of how children and families have been affected by Covid restrictions cannot be quantified and its impact on the budget is difficult to predict; however, the Authority does have reserves to help it meet increased demand for services should that be required.

•           Several members raised the issue of the proposed increase in car parking charges at coastal locations. The points raised included the justification for the substantial increase in the charge for up to 12 hours parking for a car and trailer (up from £6 to £20); the merits of introducing a seasonal system where reduced or no charges at all are levied in winter, regularising tariffs across all coastal car parks so they all provide 1 or 2 hours parking, and the arrangements for enforcement.

Councillor R.G. Parry, OBE , FRAgS, Portfolio Member for Highways, Waste and property responded by highlighting that no changes are proposed to  town centre car parking charges or annual permits  which will remain at current levels. He thought the proposed increases to coastal parking are reasonable especially when benchmarked with other authorities and also in light of the fact that the Authority unlike many other authorities offers a 1 hour parking option. Whilst a higher increase is proposed for car and trailer parking, a point to consider is that some trailers due to their size take up 2 to 3 parking spaces. 

The Head of Highways, Waste and Property Services provided some context to the proposals and clarified that a Budget Challenge Panel had found that implementing  savings in the highways and building maintenance budgets was not possible and that in light of the some of the challenges facing the service specifically in connection with the  new waste collection contract the most feasible option involved looking at ways of generating additional car parking income to be led by a Steering Group for that purpose. The group considered a number of different options which in the end came down to £50k additional income from increased charges for town centre parking or £100k additional income from increased charges for coastal location parking; the group strongly supported the latter. Some of the proposals were intended to be implemented over summer 2020 but Covid 19 made adapting parking ticket machines difficult at the time. Over the phone payments are now possible. With reference to enforcement, the service has 4 Enforcement Officers 3 of which are full time with one vacant post. The vacant post will be filled by two seasonal officers to cover the spring and summer seasons thereby bringing additional flexibility to the service to enable it to better respond to evening and weekend calls. 

Whilst seasonal car parking charges have been applied in the past, at present the same charges apply throughout the year. Most coastal car parks are closed during the year and the ticket machines are either covered or are removed because otherwise they would not withstand the winter weather and the level of use is insufficient for them to pay for themselves. Parking orders in some coastal locations allow on street parking thereby reducing the demand for car parks. However, introducing seasonal charges is an option if the Council so wishes. With regard to tariffs, the 1 and 2 hour parking tariffs are operative in car parks in those coastal locations where there are also shops and other amenities and where the call for short-term parking is therefore greater. But a wider range of tariffs could be introduced elsewhere if the demand arose.

•           Whilst the proposed freeze on school meal prices was acknowledged and welcomed by several of the Committee’s members Councillor Dylan Rees wanted to know in what way the proposed budget more broadly helps the Island’s disadvantaged and less well-off residents. Councillor Rees further highlighted that the analysis of the public consultation response does not say anything about the demographic of the participants which would have been helpful, and he suggested that for the future, age profile and/or postcode area information is provided.

Councillor Robin Williams, Portfolio Member for Finance referred to the Council Tax Reduction Scheme which provides people on low income with help in paying their Council Tax which is why it is important that the Council and other organisations raise awareness of the support that is available through the scheme. The Council is in other ways providing support to the most vulnerable by investing in the services which they rely upon so they remain viable and are there for those who need them in future.

•           Councillor Bryan Owen referred to the public opposition to the proposed 3.75% increase in Council Tax (an additional 1.1% on top of the earmarked 2.65% annual raise) and he questioned whether there is scope to reduce the increase to 2.5% on the basis that many people find themselves in a difficult financial position because of the pandemic and because the increases in Council Tax implemented by the Council in recent years have been some way above inflation; failing that whether it was possible to freeze Band D payments. Whilst supporting the proposed increase in car parking charges as fair, Councillor Owen sought further clarity on the proposed investment in IT. 

Councillor Robin Williams, Portfolio Member for Finance highlighted that the level of Council Tax in Anglesey remains the second lowest in North Wales and is also among the lowest in Wales. However, if additional funding is made available and the final settlement allows, he would be ready to look at a 2.5% increase mindful also that protecting services versus increasing the Council Tax is a fine balancing act.

The Director of Function (Resources)/Section 151 Officer clarified that the proposed investment in the Council’s IT function is in response to the increase in demand for the use of information technology and consists of revenue investment in additional staffing resources to provide the necessary level of technical support to maintain the Council’s infrastructure and software, and capital investment to update the Council’s systems to protect the Council from ransomware attacks. The proposed provision of Chromebooks for schools is in recognition of the increase in IT as a method of teaching in schools which makes it necessary to ensure that pupils have the tools to benefit from it.

With regard to Council Tax, the Director of Function (Resources)/Section 151 Officer advised that limiting the increase in Council Tax to 2.5%, would reduce Council Tax income by £500k which would have to be funded either by reducing the budget by the same amount or by using the Council’s reserves to plug the gap. If the latter then that can only be on a one-off basis, which leaves the Council with an immediate £500k shortfall in 2022/23 which will have to be funded by a reduction in the budget or by an even higher increase in Council Tax. As there are a number of unknowns regarding the budget for 2022/23 and beyond, this would increase the financial risk to the Council. Freezing the Council Tax rate for Band D would lead to an even greater funding gap and further, due the way Council Tax is worked out, would be difficult as the other valuation bands are calculated as a proportion of Band D.

•           Councillor Alun Roberts referred to pressure on Canolfan Addysg y Bont and wanted to know whether there was scope to invest in the centre to meet increased demand. Councillor Roberts also sought clarity on the availability of additional funding for teaching /classroom support to aid Education recovery and catch up following the pandemic.

The Director of Function (Resources)/Section 15 Officer clarified that the proposed 2021/22 budget funds 120 places at Canolfan Addysg y Bont (up from 115 in 2020/21).Since the Head Teacher of Canolfan Addysg y Bont has confirmed that this is the maximum number of pupils the centre can accommodate any additional demand would have to be met by looking at mainstream schools or out of county provision. As the call for out of county placements by Children and Families Services has reduced as more looked after children are cared for locally by the Service’s own foster carers, there is some scope within this budget although out of county provision remains a high cost option.  Welsh Government has been providing additional funding over the past year to help the Council meet the costs of dealing with Covid-19 and to counter loss of income; although it is understood this support will continue, the amount and the form it will take remains to be confirmed and there has been no indication to date of a specific allocation for Education. In response to a further question about adapting mainstream schools to meet the additional needs of pupils, the Director of Function (Resources)/ Section 151 Office confirmed that the capital budget does include a £1.5m scheme over 5 years from 2017/18 to make adaptations to secondary schools to allow pupils with additional needs to continue in mainstream education.

Councillor Dafydd Roberts, Chair of the Finance Scrutiny Panel reporting from the Panel’s 12 February, 2012 meeting confirmed that the Panel supported the proposed Revenue Budget for 2021/22 deeming the figures to be robust, the assumptions made to be sound  and the response to the additional pressures reasonable. The Panel in noting the messages from the public consultation considered the possibility of introducing discounted parking for local people at coastal car parks. With regard to Council Tax, the Panel recommends that there is scope through the use of reserves to look at increasing Council Tax by less than 3.75%. In response to a request by the Chair for further clarity on the specifics, Councillor Roberts said that the Panel had not felt able to specify a figure pending confirmation also of the forecast underspend on the 2020/21 budget.

On the basis of the above, Councillor Bryan Owen, seconded by Councillor Aled Morris Jones proposed that a Council Tax increase of 2.5% be recommended to the Executive.

Councillor John Arwel Roberts in light of the discussion and recognising that there may be some latitude later on to consider alternatives, proposed that the Committee support a 3.75% increase in the Council Tax which would balance the budget. The proposal was seconded by Councillor Richard Owain Jones.

In the ensuing vote the proposal for a 3.75% increase in Council Tax was carried by a majority of the Committee’s members.

Having considered the information presented both written and verbally at the meeting, and having regard to the messages from the public consultation exercise and feedback from the Finance Scrutiny Panel, it was resolved to recommend an increase of 3.75% in the Council Tax for 2021/22 to the Executive in order to create a balanced budget.

The Committee adjourned at 11:50 a.m. for a short break and reconvened at 12:00 p.m.