Agenda item

Paul Brack (Strategic Finance Manager) introduced the Budget for 2016/17. He drew attention to the assumptions underpinning it, projections for future years, and noted that adjustments may be required to reflect the final grant notification from the Department for Communities and Local Government (DCLG).

Forecast for the group indicated that there would be less grant available over the forthcoming years. Officers had estimated that it would reduce by £1.4m in 2017/18 and £1.4m in 2018/19. When the full detail of the level grant was known a more detailed plan would be produced.

Members noted that as a result of the measures taken to secure organisational and overhead savings in 2015/16 the LGA Leadership Board agreed in January 2016 to use the savings to allocate to specific reserve to provide opportunities to invest or generate additional commercial income. This would also cover potential unforeseen contingencies, and the IDeA specifically would have £1.5m surplus for the next financial year.

It was highlighted that the LGA and IDeA were operating with significant pension deficits, valued at £113m in the 2014/15 financial accounts. As a result the LGA was focussing on increasing the value of its property assets (Local Government House and Layden House) with a view to using the value of the properties to help offset the deficit and / or using the rental income to fund additional contributions.

Members expressed concern regarding the ongoing pension deficit, and sought assurance that there was a provision in the budget to address this. It was explained that as a result of borrowing, which had been taken into account in the budget, investment in Layden House would turn it into an asset worth between £55m and £60m. Borrowing for Layden House would be undertaken by LGMB, although some money would be from LGA and IDeA reserves. Company Directors do have a responsibility to ensure that measures are in place to address the deficit and, at present, annual deficit payments which are budgeted for throughout the forthcoming period, fulfil this obligation. A number of options were currently under consideration to try and reduce the burden of deficit repayments. It was anticipated that a resolution would be considered at the LGA General Assembly to seek to ensure LGA underwriting of the IDeA pension fund deficit thereby protecting IDeA directors. This would be dealt with as part of general constitutional changes.

In response to a question it was confirmed that the value of Layden House would be greater than the triennial valuation of the fund based on adjusted figures, and the IDeA remained as a going concern for 2016/17. The LGA plan to take advice on company structures and how the LGA and its various companies worked together. Members commented that they were reassured that the LGA had planned to address the pension deficit and there was a clear plan in place, with a number of options currently under consideration by officers. Further detail on the options would be considered at a future meeting. 

The Strategic Finance Manager circulated an extract from the LGA overall financial strategy which set out the potential options for management of pension liabilities. The Deputy Chief Executive and the Strategic Finance Manager offered to discuss the issue in more detail with individual members outside of the meeting if they wished to do so.

Decision

The IDeA Company Board agreed the 2016/17 budget for IDeA as set out in the overall budget for the LGA.

Action

Further detail on options to address the budget deficit to be considered by the Company Board at a future meeting.