1. Budget Briefing : 9/2/17Sustaining a balanced budget over the medium term Terry Collier Deputy Chief Executive (Chief Finance Officer)

2. Session to cover • Context • Funding update- Revenue Support Grant and New Homes Bonus • Business rates • Revaluation, transitional relief • Pressures and risk including staffing, assets, housing, recycling, • Ongoing Strategies to address medium term gap • Commercial asset investment strategy • Housing strategies • Balanced Budget 2017-18

3. Grant Reductions: Revenue Support Grant (RSG)

4. Projected New Homes allocations Future projected allocations have been revised down significantly A 60% fall projected from 16-17 to 20-21 4 : 01 January 2020

5. Combined RSG and NHB funding 5 : 01 January 2020

6. Business Rates impact on the Council • Spelthorne keeps 6% of £49m collected • Increasing reliance on business rates increases risk and volatility • £39m rateable value linked to appeals going back to 2010 – Valuation Office taking years to process and in meantime we have to make provisions based on how much to allow for successful appeals which we will have to repay. –with 100% retention appeals may be managed nationally • If an economic downturn we would take a 40% hit from businesses going into administration etc • Knowle Green offices bill to increase by 42% in April 2017 £80k and total bill for all our assets increase of £180k

7. Business Rates • Provisional multipliers for 2017-18 47.9p and 46.6p • Revaluation takes effect from 1 April 2017 • Overall increase in Rateable Value across Borough 14% • Spelthorne does not keep any of the extra business rates • Transitional Relief Similar to 2010 and 2005 transition scheme • •Increases phased in by percentage limits for 5 years • •Paid for by phasing in decreases • •Small properties up to RV £20,000 (£28,000 in London) • •Medium properties up to RV £100,000 • •Large properties above RV £100,000

8. Transitional Relief Protection • YEAR SMALL MEDIUM LARGE • 2017/18 105 112.5 142 • 2018/19 107.5 117.5 132 • 2019/20 110 120 149 • 2020/21 115 125 116 • 2021/22 115 1 25 106 • Small RV = £20,000 or less • Medium RV = £100,000 or less • Large RV = above £100,000

9. Small Business Rates Relief • Changes announced in March 2016 budget • •Subject to regulations • •100% relief up to RV £12,000 • •Tapered relief up to RV £15,000 • •Lower multiplier applies automatically to all properties below RV £51,000 except empty properties and properties subject to mandatory relief

10. How the BP rental income cake is sliced up: first full financial year (2017-18) 10 : 01 January 2020

11. Budget Pressures and Growth (1) • Provisionally £2.5m of growth/pressures are being built into the draft budget for 2017-18. These include • Investment in staff - recruitment, development and retention • Local Pay award £200k • Provision for market supplements £200k • Increased provision for Legal £100k • Investment in assets • Elmsleigh lifts £457k – one off • Increased maintenance provision £250k • Business rates valuation increase £180k

12. Budget Pressures and Growth (2) • Housing • Additional resources to meet statutory pressures £294k • Reducing Housing Benefits overpayments credit £300k • Streetscene – including reduced recycling income £294k

13. Impact on Projected Budget Gaps: Managing expectation • Before After • 2016-17 Balanced 2016-17 Balanced • 2017-18 £1,500k funding gap2017-18 Balanced • 2018-19 Further £1,800k (cumulative £3,300k) 2018-19 £300k • 2019-20 Further £1,600k (cumulative £4,900k) 2019-20 Further £1368k (cumulative £1,668k) • 2020-21 Further £100k (cumulative £5,000k) 2020-21 Further £246k (cumulative £1,912k) 14 : 01 January 2020

14. Current Deficit assumptions and factors driving gap • Band D Annual council tax increase of £5 per annum • Interest rates may not rise before early 2018 • Stock condition of assets – backlog maintenance of £3.6m to be programmed in over next 4 years • Staff annual pay award –move back to local agreement linked to national pay (as a minimum) – assumed 2% for 2017-18 and 1.75% thereafter • Benefits overpayment income of £0.5m per annum phased out by 2019-20 with Universal Credits

15. Budget Pressuresincluding housing and recycling • Continuing demand for B&B temporary housing accommodation now approx. 74 families spend recently slightly eased but awaiting to see full impact of new benefit cap in November 2016 • Triennial local govt pensions revaluation take effect from 17-18 anticipated to rise by £50k steps per annum • Roll out of Universal Credit will continue which will mean by 2019-20 loss of the £0.5m overpayments net credit we have been achieving- delay in process benefits SBC • Risks to recycling income with moves by SCC to reduce waste management costs and move to a single Surreywide approach- potential net increase of £200k to £300k per annum • Funding of Thames Flood Relief Scheme

16. Council Tax • Spelthorne to continue to protect its council tax base and put up by maximum amount allowed ie £5 per annum on band D or 2.7%. • 1% increase equates to £75k • 2.7% increase = £194k • SCC - 5% increase (3% + 2%)

17. Towards a Sustainable Financial Future closing the £1.9M gap • Income Generation • Maximising investment returns • Financial investments • Commercial properties • Obtain value and ongoing income from assets • Grow the council tax and business rates taxbase • Reducing office accommodation footprint and costs and generating housing rental income on current site • Alternative delivery models for services • Eg Public Service Mutuals, partnerships and Local Authority Trading Companies • Emergency Planning mutual set up and winning contracts

18. Investments- Growing our income • Interest rates available from counterparties to councils are low • To mitigate impact of the above put in place diversified investment strategy • Equity backed funds • Corporate bond funds • Property backed funds • Housing associations • Can only deposit for relatively short periods reducing returns • On our core £9.5m pooled funds Council earned average return of 4.89% for 15-16 plus capital gain of £0.7m • Return of 5% provides benchmark for evaluating income generation proposals

19. Spelthorne Means Business

20. Questions ?