Agenda and minutes

www.swansea.gov.uk/disclosuresofinterests

Cllr J Jones and Cllr M Jones both made a declaration of interest regarding Item 7

No declarations were made

To receive the minutes of the previous meeting(s) and agree as an accurate record.

The Panel considered minutes from previous meetings and agreed the minutes of the meeting on 17^th February 2021 as an accurate record of that meeting. 

Questions must be submitted in writing, no later than noon on the working day prior to the meeting.  Questions must relate to items on the agenda.  Questions will be dealt with in a 10-minute period.

No questions were submitted by members of the public.

Item 5 & 7 discussed concurrently

• Capital financial requirement will go up by hundreds of millions of pounds. Measured as a percentage of the revenue budget.
• In every scenario, officers see budgets going up. Cash budgets likely to go up in public sector. Although complex interplays.
• Chief Finance Officer would have liked to have externalised borrowing already, but restricted by law and code of practice, cannot borrow in advance of need.
• Currently relatively low interest rates.
• There is a risk inflation will go up, subsequently interest rates; if bottom of curve has been achieved, will want to externalise borrowing soon and to lock in at good rates.
• Officers explain that whilst these are dry technical documents, if these are wrong we would rapidly run out of resource cover given long term funding commitments to capital.
• Appendix 4, item 6, general fund capital expenditure – now £115M general requirement - panel queried why such a huge difference in original estimate / outturn.
• Officers explained that this is due to a direct consequence of building out the Arena, fuelled by the field hospital expenditure. Inevitability demonstrates the sheer amount of capital spend that is underway.

Ben Smith attended to present this item to the panel. It was noted that:

• Swansea Council was in receipt of council tax funding of £2.6M, council tax reduction scheme funding of £0.7M for the year.
• In Q3 the Council submitted a loss of income claim to Welsh Government, for which we now have a reply notifying us of the position – confirmed £2.2M worth of loss of income for Q3.
• Now submitted Q4 loss of income claim – all other in year claims were submitted retrospectively, but £5M is indicative for Q4 - whether awarded the full amount remains to be seen. Plausible sum in addition likely received – this indicative claim will then settle in early May.
• Local Government and Housing Minister announced further sums totalling £50M allocated on pro-rata fair share basis – we anticipate £3.75M.
• Also announced £42.5M extension to hardship fund, including free school meals to Easter holidays, our share may be circa £3M.
• In addition, related to capital budget, £50M school capital fund, of which our share will be £3.6-£3.7M which needs to be spent in-year.
• There is likely a further tranche of business grant money – possibly up to £15M before year end - subject to First Minister announcements around mid-March. But this money will come in and straight out to businesses, no gain to Council.
• £206M extension of the hardship fund for first 6 months of next year. Council will not know what Swansea’s share will be yet – bid basis - but fair share another £15m.
• Q4 outcomes will be known in early May.
• Budget included assumptions over aggregate external finance. Welsh Government will debate its own budget this week.
• Business rates relief holiday (variation to England’s announcement) announced by Welsh Government.
• Panel queried whether Council is in a good position financially.  Officers explained that during February we received 3 days of notifications, each of over £3M and the continued announcements on funding improves our position. The Council also started with a significant underlying underspend, excluding Covid-related impacts, at beginning of year.
• Council has continued to get majority of sums back from Welsh Government; seeing the pace, scale and frequency of announcements has improved position significantly.
• The panel queried whether we can expect another underspend by end of year. Officers responded that whilst not certain, it would be likely to end up with material underspend position.
• Decision is for members as to where money goes – general reserves would need to go up slightly, majority may go to earmarked reserves. Much debate on earmarked reserves – Chief Finance Officer will continue to give the advice that any decision taken must have due regard to previous decisions taken and the future longer-term consequences – e.g. funding the large scale borrowing to come.
• Outlook for public sector finances is likely bleak.
• Panel discussed Appendix A, P37, taking £4M out of ear marked reserves, do we anticipate that £4m is no longer required?  Officers confirm yes, the position at Q3 required that draw, however now certain this anticipated draw would not be needed. Welsh Government have distributed substantial sums to all 22 authorities. Q1 a projected overspend, this rapidly came in, now Q4 likely to be in underspend position. Cannot speculate on amount, although certainly will be a very material sum.
• Panel discussed Revenue Budget summary – contingency fund of £5.9M not currently utilised – given funding levels, why are we not taking money out of this fund? Officers confirmed that this report was written in Q3 and this picture has now changed. This may indeed not all be needed as result of substantial amounts announced due.
• Financing Charges – reduction noted from £36M to £28M. Panel queried whether this is due to MRP. With this extra borrowing over next few years, will we end up with capital financing charges of nearer £40M? 
• Officers explain it is difficult to know what the exact figure may be. MTFP that went to Council sets out millions of pounds additional costs going onto capital financing, when council agreed to borrow £180M additional borrowing (borrowed £90M thus far) MRP currently beneficial, longer term will have higher MRP costs.
• 50 year consequence – best assumption at time, officer advice is lots of the savings are temporal, we’ve not yet borrowed the full amount, at some point the MRP will reverse.
• Assumptions over what will benefit council over next 7 years re City Deal. After Year 7 further burden added to capital financing. Tempting to draw from capital equalisation reserve, however, the Well-being of Future Generations Act requires sufficient to fund over life cycle.
• Capital Equalisation Reserve – panel notes large sums going in, will this continue? Officer advice is that, if there is a temporal underspend on capital financing, add it into the CER. Peak was borrowing anticipated in 2025/26, city deal funding changes may extend that to 2028-29. Cannot be absolutely certain.
• Commitment to fully fund school ICT infrastructure reserve in budget proposals, all to be funded from Capital Equalisation Reserve.

Action point agreed - more detailed information needed about the expected increase in repayments due to the increase in the borrowing requirements.

Ben Smith – Section 151 Officer and Chief Finance Officer

Treasury Management Strategy Statement,  Prudential/Treasury Indicators, Investment Strategy and Minimum Revenue Provision Policy Statement 2021/22