Meeting documents

To consider and make recommendations in relation to the Finance and Assets Protocol.

The LGR Joint Scrutiny Committee considered the proposed Finance and Assets Protocol in Appendix A and provided comments for the LGR Joint Committee to consider at its meeting on 4 February.

The Director of Finance and Governance at Somerset County Council introduced the item

A new unitary council would come into existence from 1 April 2023 with all of the financial resources and commitments from the predecessor councils transferred to the new Somerset Council at this date. It was considered important, therefore, that decisions and actions taken in the existing councils were made against the background of avoiding adverse financial pressures for the new Council where possible.

It was important that the financial pressures for the new Council were minimised to give the best possible start and that any residual financial pressures are identified at the earliest opportunity. In that way, effective financial planning can begin for 2023/24 and beyond.

It is envisaged that the Secretary of State is likely to issue a direction to local councils under Section 24 (Local Government and Public Involvement in Health Act 2007) after the Structural Change Order (SCO) is enacted. The purpose of such a notice is to protect the finances and interests of the new Unitary Council. This allows the Secretary of State to direct that a relevant authority may not without the written consent of a person or persons specified to: -

(a) dispose of any land if the consideration payable for the disposal exceeds £100,000;

(b) enter into any capital contract under which the consideration exceeds £1m or which includes a term allowing the consideration payable to be varied;

(c) enter into any non-capital contract under which the consideration exceeds £100,000;

(d) commit existing financial reserves by a specified amount.

It could take up to 6 months after the SCO before the Section 24 notice would be put in place and therefore exposed the new Unitary Council to a period of risk. DLUHC officers recommended that the 5 Somerset councils come together with a voluntary protocol which could be quickly put in place. It was proposed to introduce a Finance and Assets Protocol based upon the likely Section 24 notice and that each Council adopts this as part of the 2022/23 budget setting process to become effective for the 2022/23 financial year.

The principals set out in the protocol included proposals that all Councils sign up to principles during the transition period and that they come into effect from April 2022 and apply to the 2022/23 financial year. These included

· Councils remained responsible for taking their own day to day decisions for spending on service delivery within the revenue and capital budgets for 2022/23 agreed by each Council.

· Councils should not enter into any new financial or asset-related commitments (beyond those specifically agreed within their approved budgets) or create any new liabilities on behalf of the new Council - subject to agreed limits of £100,000 for revenue and £1m capital.

For the purposes of the Protocol "any new commitments" were deemed to be those that arise in addition to any existing approved 2022/23 revenue and capital budgets.

During the debate the following comments and questions were raised: -

• It was clarified that financial limits were introduced where activities were not part of an already approved budget as part of the normal budget process.
• If the financial limit set out in the report had been exceeded then this could then be considered by the Section 151 Officer, Programme Board and Joint committee.
• The limits of capital expenditure below £1million and £100k in revenue were the same figures used by central government.
• Clarification was provided in respect of asset disposals if the value of the asset exceeded £100k. This applied to any new purchases or disposals, auditors would raise questions on value for money as part of the audit process.
• All council’s remained individual sovereign bodies and had arrangements in place to set budgets.
• The LGR Joint committee budget, set out some of 22/23 budget proposals. It was an important part of policy to protect both existing and the new Councils finances.
• The section 151 officer was thanked for his report.

Recommendations:

The LGR Joint Scrutiny Committee considered the proposed Finance and Assets Protocol in Appendix A and provided comments for the LGR Joint Committee to consider at its meeting on 4 February.