Report to:

Cabinet

Date:

30 September 2021

By:

Chief Executive

Title of report:

Reconciling Policy, Performance and Resources (RPPR) – Update

Purpose of report:

To update Members on the latest policy context, financial context and progress with the development of a strategy for one-off investments.

 

 

RECOMMENDATIONS:

Cabinet is recommended to:

    i.       note the updated policy context as set out in paragraph 2;

 

   ii.       note the updated Medium Term Financial Plan as set out in paragraph 3 and appendix 1;

 

 iii.       subject to Council agreeing the establishment of a reserve, agree to receive further reports in November setting out proposals for one-off investments in highways and climate change.

 

 iv.       agree to continue lobbying for a sustainable funding regime to meet the needs of the residents of East Sussex.

 

 

1.         Background

 

1.1.        In July, Cabinet considered the State of the County report, a key milestone in the Council’s Reconciling Policy, Performance and Resources (RPPR) process, its integrated business and financial planning cycle. The report set out the updated demographic, economic and service evidence base; the national and local policy context; and updates on our medium term financial planning position and capital programme. It gave our latest understanding of how we will need to continue to respond to the wide range of policy, demographic and financial drivers which influence the outlook for the Council, both in the short and longer-term.

 

1.2.        The report highlighted the significant uncertainty that continues to dominate the context within which we are working. The ongoing impact of Covid-19 remains hard to predict, both in relation to further waves of infection in the short term, and in terms of the scale and nature of the undoubted far-reaching implications on our residents and businesses which will influence need, and therefore demand for our services, into the future. The financial outlook remains unclear with the outcome of a three year Spending Review awaited, key national funding reforms having been subject to further delay and the detailed impact of recent announcements on funding for Adult Social Care yet to be set out. The national policy context also continues to develop rapidly with a broad range of Government policy announcements and public service reforms, the implications of which are not yet fully clear.

 

1.3.        The RPPR process, bringing together our policy, business and financial planning and risk management, continues to provide the vehicle for navigating this uncertain environment, supporting planning for 2022/23 and beyond and maintaining focus on our four priority outcomes which were agreed by Cabinet for planning purposes as:

 

 

The priority outcome that the Council makes the “best use of resources, now and for the future” is a test that is applied to all activities to ensure sustainability of our resources, both in terms of money and the environment. It ensures that the future impact of the choices we make about using resources is actively considered across all that we do, as well as the here and now.

 

1.4.        As a result of managing our resources carefully over many years, and with additional Government Covid support, we have been able to maintain stability in service provision through the period of the pandemic and our current financial position is secure. However, the financial outlook in the medium term remains very challenging and uncertain. As reported in July, the impact of Covid-19 on service demand and the additional one-off funding we have received has provided the opportunity to reset the 2021/22 budget and release £8.855m as a one off reserve contribution. We have a limited window of opportunity now to consider how we could use the funding released to make any further preparations for future years, including any areas of one-off investment which would help us better manage future demand for services, and the costs of providing them.

 

1.5.        This report provides Members with an update on the evolvingpolicy and financial context that will continue to inform our planning for 2022/23, and includes:

·         updates on key policy context developments since July;

·         updates on the financial context and the Medium Term Financial Plan for 2022/23-2024/25; and

·         progress on the development of proposals for one-off investments that include options for further investment in highways, infrastructure and climate change.

 

2.    Policy context update

 

2.1.        The context the Council is operating in continues to change rapidly. Key areas in which there have been developments since the State of the County report, or in which further developments are expected this autumn are detailed below.

 

·         Adult Social Care Reform and Funding – the Government has long committed to national reform of the adult social care system, to ensure provision is sustainable, equitably funded and affordable to those who require it. In early September, Government announced its plans for Health and Social Care reform, to be funded by a Health and Social Care Levy (a 1.25% increase in national insurance for employees and employers and 1.25% increase in dividends rates). The majority of the funding to be raised through the levy (£36bn between 2022/23 and 2024/25) is to be used to aid recovery from the pandemic in the NHS by increasing hospital capacity and creating space for more appointments and procedures. Government has committed to allocate more of the funding raised through the levy to social care beyond this period. 

 

£5.4bn over the three years to 2024/25 has been set aside to deliver planned reforms to social care, which include: 

o   Reforms to care costs – introducing a £86k cap on personal care costs and equalisation of care costs between self-funding and local authority clients.  

o   Providing financial assistance to those without substantial assets – from October 2023, anyone with assets of less than £20k will not have to make any contribution for their care from their savings or the value of their home and those with assets between £20k and £100k will be eligible for some means-tested support.

o   Wider reform of the social care system – including investing £500m in workforce development and workforce mental health and wellbeing support. There are also plans to introduce an assurance framework to ensure local authorities are delivering on their obligations to service users.

o   Improving the integration of health and social care systems – producing a comprehensive national plan for supporting and enabling integration that builds on plans in the Health and Care Bill. This will identify a single set of system-based health and care outcomes that local systems will be asked to deliver.

 

Detail of these reforms will be set out in a White Paper for adult social care later this year. The expected impact of the planned reforms on ESCC, the local care market and our health partners is clearly significant. However, the detail, including the funding that will be provided to ESCC to deliver the reforms and new responsibilities, is uncertain. It is clear that the funding to be raised through the levy is not, particularly in the short term, intended to address existing pressures in the social care system. Government expects existing demographic and unit cost pressures to be met through Council Tax, the social care precept and long-term efficiencies and have confirmed that this funding will be determined at the Spending Review. ESCC will therefore need to continue to lobby with others in the sector for Government to address ongoing social care pressures in the Spending Review, in a sustainable way that reduces reliance on Council Tax.

 

·         Spending Review 2021 – alongside announcements for funding health and social care reform, the Chancellor has launched the 2021 Spending Review to set UK Government departments’ resource and capital budgets for 2022-23 to 2024-25. The outcome of the Spending Review will be published alongside the Autumn Budget on 27 October 2021. The launch confirmed that the Government’s priorities for the review are ensuring delivery of strong and innovative public services; levelling up; leading the transition to net zero; advancing Britain’s international standing and taking advantage of EU Exit; and delivering the ‘Plan for Growth’, Government’s national strategy for economic growth and recovery.

 

The Office for Budget Responsibility (OBR) published an update on public sector finances earlier in September which reported that the position was better than previously expected, with public sector net borrowing in the first five months of this financial year lower than previously forecast and tax receipts higher, reflecting the rebounding of the economy faster than expected. The Institute for Fiscal Studies has suggested that this may grant the Chancellor flexibility to make some short-term investment in public services in the Spending Review and there are strong calls for this to be made in a number of competing areas, including supporting education recovery and retention of the Universal Credit uplift implemented in the pandemic.

 

In the medium term, the Chancellor has set a target of a balanced national budget by 2024/25 – 2025/26, and the launch of the Spending Review confirmed Government remains committed to these plans. Delivery of this may require real-terms cuts to public spending and Government departments have been asked to identify savings and efficiencies in their day-to-day budgets to be reinvested in priorities, and to carefully prioritise bids in their submission. Therefore there remains pressure on the national finances. While the confirmation of a three year spending review is positive, and something ESCC has repeatedly lobbied for to provide greater certainty for planning, we will need to press with our partners for an adequate quantum of funding for local government that meets the needs of our residents and is not disproportionately reliant on Council Tax increases.

 

·         Levelling Up White Paper, devolution and County Deals – in July, the Prime Minister delivered a speech on Levelling Up that confirmed that a White Paper will be published later this year to set out the Government’s plan for addressing the health, social and economic inequalities between, and within, places and regions of the UK, to improve opportunity for all, raise living standards and improve public services. The White Paper is expected to be published around the same time as this year’s Spending Review (see above) and given the breadth of policy areas covered, it is expected to have implications for the work of the Council, including in how we work to drive sustainable economic growth.

 

In the speech, the Prime Minister also announced that as part of delivering the Levelling Up agenda, Government plans to offer more devolution in England, particularly beyond metropolitan areas, with a ‘new deal for counties’. This devolution is intended to empower local leaders to deliver the Levelling Up outcomes outlined above. The then Secretary of State for Housing, Communities and Local Government wrote to councils in the summer confirming the Government’s commitment to extending devolution and encouraging councils to come forward with proposals for powers and flexibilities that would help deliver local priorities and could form the basis of new devolution arrangements, known as ‘County Deals’. Councils interested in being early adopters and shaping County Deal proposals were asked to submit proposals for their areas by Friday 13 August. ESCC will continue to monitor developments closely to understand the detail of the Government’s new devolution offer and any opportunities it presents.

 

Local government’s home department, the Ministry of Housing, Communities and Local Government, will take on a new responsibility for delivering the Levelling Up agenda and has been retitled the Department for Levelling Up, Housing and Communities. The Rt Hon Michael Gove MP has been appointed the Secretary of State for Levelling Up, Housing and Communities, has established a joint Levelling Up Taskforce with the Prime Minister and has a remit to work across Whitehall to deliver this policy agenda. We can expect the Department’s broadened focus and the appointment of a new Secretary of State to have implications for a range of policy areas impacting local government and ESCC, including potentially the detail of the Levelling Up White Paper and ‘County Deal’ proposals.

 

·         Climate Change – the UK will host the UN’s Climate Change Conference – Conference of Parties (COP) 26 in November and we will continue to monitor announcements of Government funding and initiatives in advance of this to identify opportunities that could support ESCC’s work to reduce our carbon emissions. In July the Government published its Transport Decarbonisation Plan, a foundational document to the broader Net Zero Strategy which Government has also committed to publish ahead of COP26. The Plan prioritised place-based solutions to reducing emissions from transport, committed to further publication of guidance for local authorities on decarbonising transport and committed to making quantifiable carbon reductions a part of local authorities’ future local transport planning and funding. The Transport Decarbonisation Plan will inform our plans to refresh the East Sussex Local Transport Plan in the coming year to reflect the renewed national and local policy context and commitments to decarbonisation.

 

·         Resettlement of Afghan nationals – the Government has committed to providing protection for vulnerable people fleeing Afghanistan, including a new Afghan Citizens’ Resettlement Scheme (ACRS) aimed at accommodating up to 5,000 people in the first year and up to a total of 20,000 over the coming years. The new route is separate from, and in addition to, the Afghan Relocations and Assistance Policy (ARAP), which offers any current or former locally employed staff who are assessed to be under serious threat to life priority relocation to the UK. Government has sought assistance from local authorities to source accommodation and other support for those arriving in the UK. ESCC is liaising with district and borough councils and other partners to understand the likely need for support in East Sussex which is likely to include health, social care and education. For councils who support people through the above schemes, Government has provided a standard integration package supported by a core local authority tariff, plus funding for education, English language and health provision, and a housing fund to help authorities provide suitable accommodation.

 

·         Brexit – full implementation of the new trade and border arrangements between the UK and EU will continue this winter and we will continue to prepare for the full implementation of border checks at Newhaven Port next summer.

 

·         Public service reforms – as set out in the State of the County report, Government is progressing a range of public service reviews and reforms that will have implications for services delivered by the County Council. These include the national review of Special Educational Needs and Disability (SEND) services, plans to improve integration of health and social care through the Health and Care Bill and implementation of the proposals for planning reform set out in the Planning for the Future White Paper. Announcements and progress in each of these areas is expected in the coming months.

 

·         Economic outlook – the latest assessment of the economic outlook for the UK economy by the OBR was published in March, which projected that vaccinations, easing of restrictions and increased consumer activity would drive a rapid recovery of the UK economy this year, with GDP returning to its pre-pandemic output by the middle of 2022. The percentage of East Sussex residents claiming unemployment benefits fell slightly between May and July, from 5.8% to 5.2%. For 18-24 year olds the rate fell from 10.2% to 8.6%. An updated assessment will be published in October. The end of the Coronavirus Job Retention Scheme (furlough) and grants for the self-employed, combined with the end of the £20 weekly uplift in Universal Credit at the end of September may result in increased hardship that has been prevented to some extent by these schemes during the pandemic. 15.1% of East Sussex working age residents were claiming Universal Credit in July.   

 

2.2       We expect further detail of policy changes and the resulting implications for the County Council to become clearer in the coming months and will continue to factor these into planning for 2022/23 and beyond.

 

3.    Medium Term Financial Plan

 

3.1       It remains difficult to plan for 2022/23 and beyond. The level of Government funding that ESCC will receive between 2022/23 – 2024/25 is yet to be confirmed; The Spending Review (SR) 2019 and 2020 were both for a single year and therefore funding for this planning period will be announced at SR21 in the autumn. On 7 September the Chancellor published the SR21 launch letter which confirmed that it will be a multi-year spending review covering the years 2022-23 to 2024-25.  The Fair Funding Review and Business Rate Retention reform continue to be delayed and we await detail of the impact of health and social care reform also announced on 7 September (see above).  

 

3.2       The Medium Term Financial Plan (MTFP) has been updated to provide a baseline position before further refinement of pressures. This includes ongoing work with our districts and boroughs to try to get a clear picture of the reduced income from Council Tax and Business Rates. A number of scenarios based on the potential for further funding announcements are set out in section 3.6.

 

3.3       The baseline position provided at appendix 1 includes: (1) Normal updates for regularly calculated adjustments; (2) Proposed updates following review by CMT via the Pressures Protocol.

 

3.4       These movements are summarised in the table below and provide a deficit budget position by 2024/25 of £22.089m.

Medium Term Financial Plan

2022/23

2023/24

2024/25

Total

 

£m

£m

£m

£m

Cabinet 13 July 2021 DEFICIT/(SURPLUS)

1.734

9.486

7.195

18.415

Normal Updates

0.932

(0.690)

2.978

3.420

Pressures added / (removed)

0.538

0.030

(0.114)

0.254

Deficit / (Surplus) AFTER NORMAL UPDATES TO THE MTFP

3.204

8.826

10.059

22.089

3.5       A detailed MTFP after normal updates and proposed pressures is shown at appendix 1.

3.6       As set out above, our known deficit for 2022/23 is £3.2m with an aggregate deficit of £22.1m. However, we know there is uncertainty about future funding allocations. In resetting the MTFP and presenting the budget for 2022/23 and beyond, a number of scenarios have been considered that could impact the possible level of budget deficit that will need to be addressed and these are summarised in the table below, with further detail at appendix 1.

 

 

Scenarios

Estimate (£m)

 

2022/23

2023/24

2024/25

Total

DEFICIT/(SURPLUS) AFTER NORMAL UPDATES

3.204

8.826

10.059

22.089

 

 

 

 

 

Local Considerations

(1.630)

1.630

 

 

DEFICIT/(SURPLUS) AFTER LOCAL CONSIDERATIONS

1.574

10.456

10.059

22.089

 

 

 

 

 

Likely Updates

(3.171)

(0.709)

(0.716)

(4.596)

DEFICIT/(SURPLUS) AFTER LIKELY UPDATES

(1.597)

9.747

9.343

17.493

 

 

 

 

 

Less Likely Updates

0.633

0.546

0.574

1.753

DEFICIT/(SURPLUS) AFTER LESS LIKELY UPDATES

(0.964)

10.293

9.917

19.246

 

3.7       Although at this point in the RPPR process it is not possible to present a balanced MTFP due to the considerable level of national funding uncertainty, there are no plans to seek to identify further savings. We continue to benchmark our services against other local authorities to ensure these provide best value for money and to learn from others. Over the coming months, we will work to refine the budget to update for the impact of the Local Government Settlement, in whatever form that takes, whilst reflecting updated assessments of budget pressures, including Council Tax and Business Rates. If there is a deficit on the 2022/23 budget, and in line with our robust financial management policies and procedures, the plan at this point will be to bring grant funding forward and/or use reserves to mitigate this position until the medium-to-longer term funding position is clarified.        

4.    One-off investment

 

4.1       As reported at State of the County in July, and further detailed in the Quarter 1 monitoring report elsewhere on this agenda, the impact of Covid-19 has provided the opportunity to review and reset the 2021/22 budget and release additional funding to reserves. The Quarter 1 report recommends that Cabinet recommends to County Council that a reserve of £8.855m be set up within the existing Priority Outcomes and Transformation Reserve, and that the Terms of Reference for this reserve be extended to include funding “programmes that meet the Council’s priority outcomes” which will include highways and climate change. Further reports will be brought to Cabinet in November that set out proposals to spend this one off funding on highways and climate change.  Alongside this the RPPR process will be used to identify any other areas for one off investment.

 

5.    Capital Programme

 

5.1       At State of the County in July 2021, areas of work were outlined that are being developed in priority basic need areas, including highways, Environmental and Social Governance (ESG), school places and Special Educational Needs and Disability (SEND) provision. The programme is already supported by borrowing of £227.9m to 2029/30 which has an associated revenue impact. These will be presented for consideration as part of the RPPR process together with their impact on the revenue budget.

 

6.    Lobbying and Communications

 

6.1       Our track record of running our services effectively and efficiently, coupled with the impact of Covid-19 and additional one-off Government support during the pandemic, has given us a short-term opportunity to prepare for renewed challenges ahead and invest for the future.

 

6.2       However, the medium term outlook remains highly challenging. We face a significant financial gap, the uncertain impact of national reforms in major service areas and await clarity on long-term funding arrangements, particularly for existing pressures in Adult Social Care, which continues to make planning difficult. Fundamentally, without further Government support or sustainable reform of local government finances we will not have the funding we need for the future.

 

6.3       In the context of this ongoing uncertainty, and the current Spending Review which will underpin our financial position in the medium term, our lobbying will continue to call for sustainability of future funding for local government, and funding that is appropriately reflective of local need. This will be essential to ensuring we secure adequate resource to deliver what will be required to support East Sussex residents, communities and businesses with the core services they need. We will continue to work individually, with our partners across the region and with the sector nationally to make this case.

 

7.    Next Steps

 

7.1.        This report confirms the high level of uncertainty within which planning for 2022/23 is taking place. Much is to be determined around national spending allocations and priorities for 2022/23 onwards, the impact of national reforms, and the longer term impact of the coronavirus pandemic.

 

7.2.        Thanks to our sound financial management and clear focus on priorities we are in a stable financial position for the current and next financial years. This provides a window of opportunity to invest now in areas that will help prepare us for challenges ahead. Further reports will be brought to Cabinet later in the autumn that set out plans for deploying one off funding on highways and climate change.  Alongside this, the RPPR process will be used to identify any other areas for one off investment.

 

7.3.        Work will continue throughout the autumn and winter to understand the  detailed funding picture as it emerges and the implications of national policy developments. This analysis will feed into our ongoing business and financial planning.  

 

7.4.        Members will continue to be involved in developing plans through Cabinet, County Council, Scrutiny Committees, and specific engagement sessions throughout the 2021/22 RPPR process.

 

 

BECKY SHAW

Chief Executive