Agenda item

·        To present the report of Audit Wales – national report.

·        To present the report of Audit Wales – Isle of Anglesey County Council local report and management response.

The reports of Audit Wales regarding the financial sustainability of local government in Wales were presented for the committee’s consideration. A national report which assessed the financial sustainability of the councils in Wales collectively was presented along with a local report which focused on the Isle of Anglesey County Council. The Audit Wales review examined the strategies to support councils’ long-term financial sustainability, councils’ understanding of their financial position and councils’ reporting arrangements to support regular oversight of their financial sustainability.

Mr Alan Hughes, Performance Audit Lead for Audit Wales reported on the key messages from the national review which found that there are significant risks to the sustainability of local government finances which are likely to increase over the medium term without action to mitigate them although the pressure on local government funding has affected councils and services differently. The review highlighted the need for councils to develop more robust long term financial plans to address future funding gaps and to ensure financial sustainability and to adopt longer term transformation strategies to deal with the financial challenges they face. The review of the Isle of Anglesey County Council specifically concluded that the Council has good arrangements to respond to financial challenges in the short to medium term but has not formalised the planning and oversight of its longer term financial sustainability. The review recommended that the Council develop a longer term financial strategy that supports its understanding of its future financial position and informs its transformation and prioritisation of services.

The Director of Function (Resources)/Section 151 Officer advised that the one year funding settlement provided by Welsh Government as well as rising costs and increasing demand which are difficult to forecast and which are beyond the Council’s control means that longer term planning and strategic use of reserves is a challenge. Councils have raised concerns about the timing of the funding settlement as well as the short term nature of the settlement and it is hoped that Welsh Government will respond by providing in future an indication of funding over multiple years rather than for one year at a time to enable the Council to plan for the longer term. The Council has used its reserves to balance the budget for the past two years as a way of avoiding deep cuts in services that may prove unnecessary if the financial landscape improves whilst also ensuring that it retains sufficient reserves to be able to respond to challenges were the financial situation to deteriorate. The Section 151 Officer confirmed that the Council is developing a longer term financial strategy subject to Welsh Government providing information about the funding outlook for the next few years.

Points of discussion by the committee were as follows –

·      The committee acknowledged that planning for the long-term in the current financial climate is challenging for the Council especially given there is no certainty about funding beyond the immediate year. The expectation that the Council develop a longer term funding strategy spanning more than two to three years was felt by members to be unrealistic until or unless Welsh Government can provide assurances regarding future funding and multi-year settlements.

·      The committee also acknowledged that despite the challenges, the Council can make some inroads into planning for the long term by exploring different ways of delivering services more cost-effectively, using demographic data to make informed decisions, collaborating with other councils and organisations to share resources and expertise, and using technology to reduce costs.

·      The committee recognised the economic and investment opportunities that may arise from the Anglesey Freeport and potential development of Wylfa which could mitigate the financial challenges facing the Council in future.

·      The committee sought clarification of how Audit Wales proposes the Council uses its reserves strategically to plan for the longer term in the current circumstances.

Mr Alan Hughes, Audit Wales advised that while reserves can be used to meet a funding shortfall they can also be used to support long-term transformation projects to improve the efficiency and sustainability of services. Within the scope of the review the assessment of the twenty-two councils in Wales showed that councils are at different stages of adapting to the financial challenges they face with some more advanced than others. While it is acknowledged that planning for the long-term is challenging and that it is understandable that councils would want to try to avoid cutting services in the hope of better settlements to come, there are risks in not taking timely action including the depletion of reserves to a critical point. Councils face a difficult balancing act in continuing to provide services at the current level while managing their financial sustainability.

The Director of Function (Resources)/Section 15 Officer advised that reserves will only take the Council so far in seeking to transform services and without the provision of increased capital funding by Welsh Government, which is not covered by the Audit Wales review, the Council is limited in what it can do to improve its physical assets and consequently, service delivery. The Section 151 Officer gave examples of how the Council has used the capital resources available to it to enhance services and improve efficiency through the development of extra care housing for older people and the use of technology within that provision to reduce costs and building new modern schools to replace a number of smaller schools thereby reducing the schools estate and associated maintenance costs. Increased capital funding would enable the Council to further invest in upgrading its buildings e.g. leisure centres to improve efficiency and to better serve the island’s residents and communities. If the opportunities which may arise from the Anglesey Freeport and the development of the Wylfa site are realised, it could improve the Council’s financial position especially from a capital funding perspective.

In further discussion it was confirmed that the Council along with other councils in Wales through the WLGA have been lobbying Welsh Government for some time for adequate funding for local government including improved capital funding and for better funding arrangements. Councillor Robin Williams, Deputy Leader and Portfolio Member for Finance and Housing highlighted that for much of his time as holder of the Finance portfolio the Council had been firefighting immediate pressures leaving little scope for long-term planning.

Having considered the reports, it was resolved to confirm that the Governance and Audit Committee takes assurance from the Council’s response that it understands its financial position and is developing a longer-term financial strategy, subject to a longer term indication of future funding from Welsh Government.

(Councillor Aled M. Jones abstained from voting)