Agenda Item No.
THE VALE OF GLAMORGAN
CABINET: 9TH JULY, 2012
REFERENCE FROM SCRUTINY COMMITTEE (CORPORATE RESOURCES): 26TH JUNE, 2012
INTERIM MEDIUM TERM FINANCIAL PLAN 2012/13 TO 2016/17 AND 2013/14 BUDGET PROCESS (DFICTP) -
At the request of the Leader the Chairman of the Committee had agreed that the Interim Medium Term Financial Plan and Budget Process be discussed prior to Cabinet making a decision. The attached was for consideration by the Corporate Resources Committee.
The purpose of the Medium Term Financial Plan was to link with the Council's strategic planning process with the budget process and to ensure consistency between them. It was a mechanism that attempted to match future predicted resources and expenditure, identify potential shortfalls and provide the financial framework for the next three to five years and a budget strategy for the next financial year. The draft Plan as appended to the report constituted an interim plan as it did not attempt to provide the financial framework which would be developed through a full Budget Review to be undertaken prior to the development of the Final Budget Proposals 2013/14. The Plan formed an integral part of the Council’s corporate framework and linked with the Council’s Corporate Plan.
The Interim Plan attempted to
· identify the main financial implications resulting from the increased pressure falling upon Council services, including pay and price inflation, legislative and demographic changes
· estimate the financial resources that would be available to the Council to meet those demands
· match the predicted expenditure and resources and provide the framework to undertake a Budget Review whilst setting out the Budget Process for the next financial year.
The Plan, which contained an executive summary on Pages 2 - 6, was appended to the report. Members noted that funding levels for 2013/14 to 2014/15 were based upon indicative figures received from Welsh Government. The accuracy of those figures could not therefore be guaranteed and Members were asked to note that any changes to those figures could have a significant financial impact. Initial projections showing a projected cumulative revenue shortfall to 2016/17 of almost £19.6m. were amplified in Paragraph 8 of the report. It was also noted that there would inevitably be additional cost pressures arising between the present and 2016/17. Although savings through efficiencies would continue to remain a major expectation of future budgets, it was unlikely that the Council would seek to or be able to fund all cost pressures. The key outcome from the Budget Review would, therefore, be to identify the relative priorities between different services given the financial challenges which lay ahead.
From a Capital Programme perspective, the expected decrease in the Council's General Funding Allocation in 2013/14 and specific capital grants from the Welsh Government from 2013/14 onwards, coupled with limited capital receipts, gave the Council little room to manoeuvre in progressing its priorities in that area. As such, the Council would look to mitigate that situation insofar as it was able by reappraising all schemes and looking to progress only those which were deemed to be a key corporate priority whilst also seeking to gain assurance that such schemes were delivered on time and within budget.
As regards to the 2013/14 Budget Process, it was noted that the outcome of the Budget Review would inform the 2013/14 Final Revenue Budget Proposals to be reported to Cabinet and Council in February / March 2013. In order to establish a baseline, services were required to 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. The cost of pay increases and pay awards should be included therein.
Paragraph 13 of the report detailed the steps required to be taken should increases to budgets be approved during the course of the financial year which could subsequently restrict the freedom of the Council to allocate its resources to priorities during the following budget cycle. It was noted that the Housing Revenue Account was ringfenced insomuch as all expenditure on the service had to be financed from income generated. A major determinate in assessing the rent charges was the level of subsidy granted by the Welsh Government which was not normally released until December of each year.
Having regard to the above, it was proposed that Directors be instructed to prepare initial Revenue Budgets for 2013/14 in accordance with the timetable agreed by the Director of Resources, preparation to be on the basis laid out in Paragraph 15 of the report.
As regards Capital Schemes, Directors were responsible for co-ordinating formal capital bids for their services ensuring that only the highest priority bids were submitted in the approved format. To that end, the principles of sustainable development and better carbon management would be incorporated and evaluated. It was expected that the revenue costs of service development would need to be met from within the respective services and, as such, no revenue bids were initially to be made. It was noted, however, that services might still be asked to identify and prioritise any burgeoning cost pressures for consideration as part of the Budget Review.
Reference was also made within the report to the consultation that would be undertaken with the Scrutiny Committees in respect of the budget process and the timetable for the same was set out in paragraph 20.
In response to a question, the Head of Financial Services confirmed that departments had been given targets to meet and that, as referred to in paragraph 21, the Council’s programme for efficiency and other savings was a formal arrangement. He referred also to the work of the Budget Task and Finish Group which had looked at ways of achieving efficiency savings over the next three years. Within the Plan, reference was made to the Welfare Reform Act and a number of significant issues associated with welfare reforms which would impact upon the Council and its services. Based upon preliminary work undertaken by the Welsh Local Government Association, it had been assessed that the potential costs to the Council of welfare reform could be as much as £2.4m. per annum. That amount had been shown as a cost pressure with phasing commencing over three years with effect from 2014/15. Other issues raised during the course of subsequent discussion included consideration as to the Council’s corporate aspirations being tailored to meet the Council’s financial situation. The Head of Performance and Development confirmed at this juncture that a review of the Corporate Plan would be undertaken in tandem with the budgetary process. Members agreed that the outlook presented huge financial challenges. The Head of Financial Services indicated how council tax gearing worked and explained that if the Council wished to increase its expenditure, it would have to increase income. As grant was fixed, a 1% increase in spending would need a 4% increase in council tax. In response to a comment, he confirmed that partnership working was another means of unlocking additional resources. When asked whether he could quantify any of the areas in relation to welfare reform that could be affected, the Head of Financial Services indicated that he could in the case of some but not others. He continued by stating that there were a considerable number of possible implications relating specifically to housing and social services and that it was very difficult to predict at this time what they might be. He concluded by stating that more accurate figures and detailed information were required and that the Welsh Government would be urged to fund the additional burdens placed upon the Council through this legislation. Members also felt that it might be easier to consider the implications of the financial pressures if they were put into the context of departmental budgets. The Head of Financial Services considered that, where appropriate, this information could be referred to. Members made no comment on the budget process itself and timetable for 2013/14 or the proposals for undertaken a Budget Review.
RECOMMENDED – T H A T the above comments be referred to Cabinet on 9th July, 2012.
Reason for recommendation
To inform Cabinet of the views of the Committee.
Attached as Appendix – Report to Scrutiny Committee (Corporate Resources): 26th June, 2012