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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting 16th November 2011

 

Report of the Leader

 

Initial Revenue Budget Proposals 2012/13

 

Purpose of the Report

1.             To gain Cabinet’s approval for the amended budget for 2011/12 and the initial revenue budget proposals for 2012/13, so that they may be submitted to Scrutiny Committees for consultation

Recommendations

It is recommended that:

 

1.             The amended budget for 2011/12 as set out in Appendix '1' be approved.

2.             The initial revenue budget proposals for 2012/13 are approved for consultation with Scrutiny Committees.

3.             The Director of Social Services take the necessary action to bring expenditure in line with the base budget.

 

Reasons for the Recommendations

1.             To incorporate changes in projected spending.

2.             In order that Cabinet be informed of the comments of Scrutiny Committees before    making a final proposal on the budget.

3.             To bring Social Services expenditure in line with the base budget.

 

Background

2.             The Council’s budget is determined largely by the Revenue Support Grant (RSG) settlement set by the Welsh Government (WG). The provisional RSG settlement was received from WG on the 18th October 2011 (and the final settlement is likely in December/January).

3.             The Council is required under statute to fix the level of council tax for 2012/13 by 11th March 2012 and, in order to do so, will have to agree a balanced revenue budget by the same date. To be in a position to meet the statutory deadlines and the requirements for consultation set out in the Council’s Constitution, much of the work on quantifying the resource requirements of individual services needs to be carried out before the final RSG settlement is notified to the Council.

4.             SSA (Standard Spending Assessment) represents WG's view of the relative resources needed to provide a standard level of service in each local authority in Wales and its primary use is to allocate RSG to these authorities. WG has advised the Council that its provisional SSA for 2012/13 is £204.895M.

5.             The Council's provisional RSG is £114.128M and its share of the Non- Domestic Rates (NDR) is £36.744M together these figures will constitute the Council’s provisional Aggregate External Finance (AEF).

6.             The Council will also receive a sum provisionally set at £1.253M via the Outcome Agreement Grant (OAG) for 2012/13. The OAG is an unhypothecated grant (i.e. not earmarked for particular services).The Council is not guaranteed to receive the full amount of the Improvement Agreement Grant. The proportion of the grant eventually received in 2012/13 is determined by a ratings score of the Council's performance in achieving its 2011/12 Outcome Agreement targets.

 

Revised Budget 2011/12

7.             Appendix ‘1’ to this report sets out the necessary transfers to the original estimate for 2011/12, which are required to be made as follows (there is no overall effect on the net budget of the Council).

·               Asset Rents, International Accounting Standard (IAS) 19, and Recharges etc - these relate to accounting items and expenditure outside the control of Services. They reflect charges to Services for the use of capital assets, changes to inter service recharges, superannuation increases not required and adjustments in respect of pensions to comply with accounting standards.

·               Transfers - to reflect mainly transfers of functions and responsibilities between services. Primarily, this relates to

 -  transfer of £1.869M from the Education and Schools (Strategy and Performance) budget to the E&ER Directorate (Planning and Transportation) budget to ensure budgets more accurately reflect accountability and delivery responsibilities for Mainstream Transport.

 -  transfer of £204k from Catering budget to Education and Schools (Strategy and Performance) budget to simplify accounting arrangements; this budget is delegated to Secondary Schools to fund Catering provision.

 -  transfer of a post for £10k from Lifelong Learning to Education budget  .

 -  transfer of £35k from Children's Services and £74k from Service Strategy to Adult Services £109k to reflect the recharge from the Service Strategy heading to the individual budget heads.

  -  savings made by Public Protection of £30k and  Finance ICT and Property of £150k transferred to Private Sector Housing

 -  transfer of post for £24k from Finance ICT and Property to Chief Executive (Contact Centre)

-  transfer of monies to cover post for £40k from Policy to Legal and Democratic (Freedom of Information service).

8.             The following table compares the amended original budget with the projected outturn for 2011/12.

 

2011/12

2011/12

Variance

 

Amended

Original

Projected

 (+)Favourable

Directorate/Service

Budget

Outturn

 (-) Adverse

 

£’000

£’000

     £’000

Learning and Development

 

 

 

Education and Schools

89,838

89,838

0

Libraries

2,747

2,747

0

Lifelong Learning 

1,498

1,498

0

Catering

964

964

0

 

 

 

 

Social Services

 

 

 

Children and Young People

13,509

14,780

(-)1,271

Use of Provision

(210)

(+)210

Adult Services

33,004

35,404

(-)2,400

Use of Provision

(465)

(+)465

Service Strategy

297

297

0

Remedial Measures

(2,996)

(+)2,996

Total Social Services

46,810

46,810

0

 

 

 

 

Environmental and Economic Regeneration

 

 

 

Planning and Transportation                  

4,928

4,982

(-)54

Economic Development and Leisure

7,028

7,394

(-)366

Visible Services

21,224

21,054

(+)170

 

 

 

 

Legal, Public Protection and Housing Services

 

 

 

Legal, Democratic and Registrars etc

114

114

0

Public Protection

2,390

2,390

0

Private Sector Housing/Community Safety

2,771

2,771

0

 

 

 

 

 

Finance ICT and Property

 

 

 

Finance ICT and Property

(67)

(67)

0

Human Resources and Equalities

0

0

0

Building Services

0

0

0

 

General Policy

20,803

20,553

(+)250

 

 

 

 

Chief Executive

43

43

 0

Corporate Partnership

184

184

 0

Youth Offending Service

761

761

 0

 

 0

Total

202,036

202,036

 0

 

 

 

 

Met from General Reserve

(500)

(500)

          0

 

Grand Total

201,536

201,536

          0

 

 

 

 

 

9.             Education and Schools – Overall, the Education Budget is currently projected to overspend by £62,000 as at the end of March 2012. Efforts will be made to take the necessary measures to mitigate the overspend. Any residual overspend will be found from Education reserves. This is due to a projected £65,000 overspend against the Additional Learning Needs (ALN) budget offset by a £3k under spend against School Improvement due to increased income generated in year . The ALN overspend is made up of a £5k overspend against the PRU. In addition there is a projected overspend of £200k for Learning Support Assistants support, also additional Independent schools expenditure has been incurred in year of £116k. As part of the efficiency savings implemented for 2011/12 and 2012/13 £56k has been incurred for redundancies in year. These overspends have also been offset by increased Recoupment Income and reduced Recoupment Expenditure £245k, a £42k saving has been found from a vacant post in Primary Behaviour Support Team and a £25k underspend against the Secondary Behaviour Support budget has been identified. 

10.        The ALN budget is a volatile budget that is demand led, the position will be monitored closely throughout the year. It is possible that the projected overspend may reduce due to increased recoupment income or reduced out of county expenditure. If the overspend is realised it will be offset by a contribution from Education Reserves in year.

11.        In addition overspends of £75k against Rates budgets relating to schools and £35k for Private Provider Nursery placements due to an increased birth rate have been offset by under spends against Non Delegated Schools Budgets £101k and Value Added Budget £9k.

12.        Provision has been made within the budget for the annual cost of financing the School Investment Strategy of £600,000. This sum will be transferred to the School Investment Strategy Reserve. In addition to finance the School’s contributions to the Early Retirement / Voluntary Redundancy scheme Education is projecting to transfer £316,000 from Education Reserves this will be repaid by participating schools over 2012/13 and 2013/14.

13.        Lifelong Learning – It is projected that this service will outturn within budget after offsetting a projected favourable variance within the Lifelong Learning Education Training Section in respect of the Work Programme against a projected adverse variance of £55k within the Community Enterprise Centre resulting from delays in meeting 2011/12 savings.

14.        Catering – This service is anticipated to outturn within budget; however the service can be affected by external factors including snow closures and changes in meal take-up numbers.

15.        Children Services – The projected overspend position for this service is £1.3m.  An analysis of this position is shown in the table below.  This overspend can be offset by a Children’s Services provision of £210k resulting in £1.1m of savings to be found by the Service this financial year.

Area Of Spend

£000

Note

Childrens Placement

1,114

There is an increased number of high cost placements

Foster Carers

157

Increased payments to Foster Carers due to the introduction, by the Welsh Government, of the National Minimum Allowance for Foster Carers, which came into force from April 2011

GROSS DEFICIT

1,271

 

Use of Provisions

(210)

 

NET DEFICIT

1,061

 

 

 

 

16.        Adult Services – The projected overspend position for this service is £2.4m.  An analysis of this position is shown in the table below.  This overspend can be offset by an Adult Services provision of £465k, resulting in £1.9m of savings to be found by the Service this financial year.

Area Of Spend

£000

Note

Care Home Fees

465

An increase in fees required to pay Care Homes over and above the 2% inflation already included in the budget

2011/12 Savings

286

Savings identified for the year but not being achieved

Community Care Packages

2,370

This is made up of both an increase in demand and as a result of the introduction of the Welsh Government First Steps Improvement Package Initiative which introduced a £50 charge cap per week for domiciliary services.

Underspends within Adult Services budget

(721)

This is largely due to staff vacancies

GROSS DEFICIT

2,400

 

Use of Provisions

(465)

 

NET DEFICIT

1,935

 

 

17.        Service Strategy – This budget is anticipated to outturn on target.

18.        Social Services – Overall, it is projected that the Social Services budget as a whole could overspend by £3.7m this year.  There are provisions available to offset this position to the value of £675k thus resulting in a net overspend of £3.m.  Remedial measures will need to be undertaken in order to reduce this deficit and these are identified in a separate report elsewhere on the agenda.

19.        Planning and Transportation  –The projected out turn for Planning and Transportation shows an adverse variance of £54k when compared to the amended original budget. This is because of increased supplies and services and premises cost of £76k mainly due to the inclusion of Local Road Safety Grant expenditure within the estimates. Transport costs have increased by £50k primarily as a result of the increasing costs of providing home to school transport. Customer receipts have reduced by £65k as a result of the current economic climate. This is offset by savings on employee costs of £102k as a result of holding vacant posts. There has also been an increase in grant income of £35k which is lower than anticipated due to a reduction in the Additional Planning Resources Grant. Funding of the adverse variance will be met from £54k of the savings within Visible Services.

20.        Economic Development & Leisure – The projected out turn for Economic Development and Leisure shows an adverse variance of £366k when compared to the amended original budget. There is an adverse variance in expenditure categories of £886k mainly within supplies and services and employees, including one off costs of £92k that has been incurred as a result of the proposed Leisure Centre Partnership and transfer of Dyffryn Gardens to the National Trust. This is offset by an increase in grant and internal recharge income of £422k, an increase in contributions from funds of £81k and an additional £17k in customer receipts. £250k of the adverse variance is due to the Leisure Centre Partnership estimated to be in place three months later than initially anticipated. The £250k adverse variance will be met from savings within Policy.  The remaining adverse variance of £116k will be met from savings within Visible Services.

21.        Visible Services – The projected out turn for Visible Services shows a favourable variance of £170k when compared to the amended original budget. The Visible Services Head of Service holds a budget for any pressures that may arise during the financial year. It is this budget that has been reduced by £170k to offset the pressures detailed above within Planning and Leisure.  Even though the overall budget has only been reduced by £170k there are variances within Visible Services. It is projected that the employee’s budget will be £59k overspent within the Highways & Engineers service. Premises & Repairs budgets are projected to be overspent by £663k which is mainly attributable to the level of repairs required to the highway network as a consequence of the last two severe winters plus there has been an increase of 18% in Street Lighting energy costs for 2011-12. There is a projected overspend on transport costs of £360k with the main contributing factors being the increased cost of fuel and the delay in rolling out the co-mingling service which has led to higher than budgeted transport cost. To offset these projected overspends the supplies & services budget has been reduced by £670k. The majority of this saving is in Waste Management due to savings in landfill costs due to reduced tonnage and a renegotiated contract for treatment of recycling. In total £380k of reserves is to be used to help fund the increased cost of repairing the highway and the increased cost of street lighting energy. Finally there has been an increase in the income estimate for Visible Services of £202k.

22.        Legal, Democratic and Registrars etc - the service is expected to out turn on target. However external legal fees (including counsel fees) are projected to out turn approximately £30k over budget. The underspend on employee related posts will fund any overspend.

23.        Building Services – The Service is expected to out turn on target. Overall the recharge to Building Services clients for management costs has reduced by £10k.

24.        Policy – The projected out turn for Policy shows a favourable variance of £250k when compared to the amended original budget. This underspend on loan charges will be used to fund the adverse variance shown on the Leisure Centre Partnership in the  Economic Development & Leisure Service (paragraph 20).

25.        All other budgets are anticipated to out turn on target.

26.        There is an estimated Council Tax surplus for 2011/12 in the sum of £830k.  Depending on the final year's position this will be transferred to the Council Fund.

27.        General Reserves as at 1st April 2011 amounted to £7.858 million.

Base Budget 2012/13

28.        Cabinet approved the Budget Strategy and the Medium Term Financial Plan on the 20th July 2011.

29.        The Budget Strategy for 2012/13 outlines that in order to establish a baseline, Services should prepare initial revenue budgets for next year based on the cost of providing the current level of service together with any approved policy decisions and including any net savings target. This means the cost of price increases and pay awards should be included.

30.        Increases to budgets approved during the course of a financial year can restrict the freedom the Council has to allocate its resources to priorities during the following budget cycle when it is aware of all the competing demands. Consequently:

·               Supplementary estimates will only increase the base budget if Council has given specific approval to this effect. Increases met by virement within a year will not be treated as committed growth.

·               Directors should find the cost of increments and staff changes from their base budget unless the relevant specific approval has been given for additional funding.

·               The effect of replacing grant from outside bodies that has discontinued will not be treated as committed growth. In addition, before any project or initiative that is to be met either wholly or partly by way of grant may proceed, the exit strategy must be approved.

·               Certain items of unavoidable committed growth will continue and these include the effect of interest changes and the financing cost of the capital programme, increases in taxes, increases in levies and precepts charged by outside bodies and changes to housing benefits net expenditure.

·               Services will be expected to identify and achieve recurrent efficiency and other savings, including (but not restricted to) those identified in this Medium Term Financial Plan.

·               It is envisaged that the costs of service development will need to be met from within the respective directorates.

31.        Having regard to the above, it is, therefore, proposed in respect of the 2012/13 Budget Strategy that Directors be instructed to prepare initial revenue budgets for 2012/13, in accordance with a timetable agreed by the Director of Finance, ICT and Property. Preparation should be on the following basis:

·               Capital charges, central accommodation costs and central support costs to be estimated centrally;

·               Services to prepare baseline budgets on current service levels as set out in the 2011/12 final revenue budget report;

·               Budgets to be broken down subjectively and objectively in as much detail as deemed appropriate by the Director of Finance, ICT and Property;

·               Budget reports to include revised estimates for 2011/12;

·               Full account to be taken of the revenue costs, other than debt charges, of new capital schemes coming into use.

32.        A summary of the overall base budget for 2012/13 is attached at Appendix '2'. This has been arrived at by adjusting the 2011/12 budget for items such as inflation and unavoidable growth.

33.        Asset Rents, IAS 19, and Recharges etc - these relate to accounting items and expenditure outside the control of Services. They reflect charges to Services for the use of capital assets, changes to inter service recharges, superannuation increases not required and adjustments in respect of pensions to comply with accounting standards.

34.        Transfers - to reflect mainly transfers of functions and responsibilities between services. Primarily, this relates to:-

-transfer of £1.869M from the Education and Schools (Strategy and Performance) budget to the E&ER Directorate (Planning and Transportation) budget to ensure budgets more accurately reflect accountability and delivery responsibilities for Mainstream Transport.

-transfer of £204k from Catering budget to Education and Schools (Strategy and Performance) budget to simplify accounting arrangements; this budget is delegated to Secondary Schools to fund Catering provision.

- transfer of post from Lifelong Learning to Education £10k.

- transfer of £12k from Education to Catering in respect of refuse services.

- transfer of £35k from Childrens Services and £74k from Service Strategy to Adult Services £109k in order to reflect the recharge from the Service Strategy heading to the individual budget heads.

- savings made by Public Protection of £30k and Finance ICT and Property of £150k transferred to Private Sector Housing.

- transfer of post from Finance ICT and Property to Chief Executive (Contact Centre)  £24k

-transfer of monies from Policy to cover Corporate Governance costs for  Legal and Democratic (Freedom of Information) £40k and  to Finance ICT and Property  (Training) £90k.

35.        Adjustment -  this is made up of an adjustment of £378k to remove the estimated April 2011 pay award for employees earning less than £21,000 which did not materialise (excluding Schools) from the individual services, and included in General Policy. In addition the following one off growth items in 2011/12 have been removed from the individual services and included in General Policy:-

                Planning and Transportation - Planning Fee Income £50k.

                 Economic Development and Leisure - Penarth Leisure Centre £150k.                      

                 Visible Services - Highways Service £900k.

                  Legal, Public Protection and Housing Services - Land Charges £ 20k.

                       

36.        The total figure for inflation of £2.798m relates to general price increases (£1.720m) and a 1% allowance for pay awards (£1.078m).

37.        Committed Growth totals £1.455m of this £56k relates to insurance charges due to increased premiums and change in methodology to reflect a greater emphasis on claims value / number. The balance of £1.399m relates. to the following items:

·               Individual Schools Budget - £844k made up as follows:

Teachers Threshold

£223K

 Teachers Leadership

 £60k

 Teaching Increments

 £143k

 Non Teaching Increments

 £185k

 Rates

 £163k

 Pay Award not required

 (£174k)

 Superannuation increase not required

 (£57k)

 Other Growth

 £301k

 

 

·               Visible Services – £225k for Landfill Tax annual increase.

·               General Policy –   £180k increased cost of funding the capital programme and £150k for Council elections.

38.        The total of the Committed Growth in the Individual School Budget (ISB) amounts to £844k. Together with a provision for pay awards and inflation of £622k, this constitutes the minimum increase in ISB required by WG (1.58% increase)

39.        The Medium Term Financial Plan includes savings targets for Services for 2012/13.to 2014/15.

Annual Efficiency Savings Targets

2011/12

2012/13

2013/14

2014/15

TOTAL

 

     £000

     £000

     £000

     £000

     £000

Learning & Development (excl. schools)

       642

    1,040

       244

       257

    2,183

Social Services

    1,634

       754

    1,847

    1,333

    5,568

Environmental & Economic Regeneration

   1,744

    1,089

       725

       297

    3,855

Legal, Public Protection & Private Housing

      590

         69

         18

         83

       760

Finance, ICT, Property, HR

      830

         48

           0

       101

       979

Chief Executive (inc. YOS)

      349

       288

         38

         62

       737

Total Required for the Year

   5,789

    3,288

    2,872

    2,133

  14,082

 

40.        The savings of £3.288m for 2012/13 as shown above are included in the estimates. The initial savings approved by Council on the 28th February 2011 (minute 957) were in the sum of £3.072m. The additional saving required of £216k is made up of:-

·               Environmental and Economic Regeneration - changes to waste collection and disposal arrangements £140k.

·               Finance ICT and Property - review of Office Accommodation running costs   £38k.

·               Chief Executive - reviewing Contact Centre processes   £38k.

41.        A list of 2012/13 cost pressures as identified by Services is attached at Appendix 3. These are not shown in any order of priority. Altogether these total £7.044m and some will need to be met for some services. They exclude the cost of redundancies, which may be incurred in order to maintain the budget within the resources available. These costs could be significant.

42.        Attached at Appendix '4' are the proposed 2014/15 savings shown over Directorates. More detail is required on these savings and their impact will be considered as part of the budget review following the elections in May 2012.

Next Steps

43.        The next stage is for the estimates to be submitted to Scrutiny Committees for consultation. Corporate Resources Scrutiny Committee is the lead Scrutiny Committee and will consider both the Initial Revenue Budget Proposals and any comments that other Scrutiny Committees have made. The responses of Scrutiny Committee must be made no later than the 20th December 2011.

44.        It is also proposed to consult on the initial budget proposals with Local Service Board partners.

45.        The Cabinet Budget Working Group will hold a series of meetings in November 2011 with the relevant Cabinet Members and officers to consider the budget proposals. They will submit their recommendations so that the Cabinet may make its final budget proposal no later than the 29th February 2012. Before making its recommendation, the Budget Working Group will consider the comments made by Scrutiny.

46.        Cabinet’s final budget proposals will be considered by Council at a meeting to be held by the 7th March 2012.

Resource Implications (Financial and Employment and Climate Change, if appropriate)

47.        It is important that Directors balance their budgets. In particular Social Services need to take immediate action.

48.        Each year the purpose, nature and level of earmarked reserves are reviewed and will again be reviewed as part of the 2012/13 Budget Process. Appendix '5' sets out the Authority’s estimated reserves as at 31st March 2012.

49.        The pressure on spending totals £11.297m, comprising net Inflation (£2.798m), net growth (£1.455m) identified and cost pressures (£7.044m). Each 1% increase in Council Tax will yield approximately £509k additional income.

Legal Implications (to Include Human Rights Implications)

50.        The Council is required under statute to fix its council tax by 11th March 2012 and in order to do so will have to agree a balanced revenue budget by the same date.

Crime and Disorder Implications

51.        The obligations of the Council with regard to Section 17 needs to be fully considered in the budget decision making process.

Equal Opportunities Implications (to include Welsh Language issues)

52.        Additional finance improves the Council’s opportunities for assisting disadvantaged members of society

Corporate/Service Objectives

53.        Contributes to the corporate priority of Corporate Resources by the provision of sound financial management.

Policy Framework and Budget

54.        This report is following the procedure laid down in the Constitution for the making of the budget and so does not need to be referred to Council. However, the final 2012/13 budget will require the approval of full Council

Consultation (including Ward Member Consultation)

55.        The Corporate Management Team has been consulted on this report. The initial budget proposals will be the subject of consultation with Scrutiny Committees. The Trade Unions and Schools forum will also be consulted.

Relevant Scrutiny Committee

56.        The lead Scrutiny Committee is Corporate Resources.

Background Papers

Finance Department Papers

 

Contact Officer

Robert Ingram

Principal Accountant

 

Officers Consulted

The Corporate Management Team has been consulted on this report

Responsible Officer:

Sian Davies Director of Finance, ICT and Property

01446 709202