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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting: 29 July 2013

 

Report of the Leader

 

Budget Strategy 2014/15

 

Purpose of the Report

1.         To submit the Budget Strategy 2014/15 (including the proposed Budget Process and Timetable) for approval.

Recommendations

That Cabinet:

1.         Approve the Budget Strategy for 2014/15, including the requirement for Directors to prepare initial revenue budgets for 2014/15 in accordance with a timetable agreed by the Director of Resources.

2.         Request Directors to review savings already approved, with a view to implementing them ahead of the target date and to consider areas for further savings.

3.         Approve the following timetable for the 2014/15 Budget Process:

 

Timetable for 2014/15 Budget Process

To be completed no later than

Cabinet consider the initial budget proposals

 

18th November 2013

Lead Scrutiny Committee responds to consultation and makes comments on budget proposals

13th December 2013

Cabinet make its final proposals on the budget

 

24th February 2014

Meeting of Council to consider budget and council tax resolution

 

5th March 2014

 

Reasons for the Recommendations

1 -3    To enable the 2014/15 budget process to be commenced.  

Background

2.         The Medium Term Financial Plan is normally produced annually in July and incorporates the budget strategy for the next financial year.  During the 2010 Spending Review period, the Welsh Government (WG) published indicative allocations for the 3 following years, including 2014/15.  These indicative allocations have been the basis for future planning, however, it has become apparent that the indicative level for 2014/15 is now unrealistic and will be revisited, as WG need to find further savings.  The Minister for Local Government and Government Business has stated that the indicative allocation can no longer be considered as a basis on which to plan.  It is anticipated that funding levels for Local Government will reduce, but it is not known to what extent.  WG has previously indicated that it needs to find savings of £81m in its 2014/15 budget.  The current assumed change in funding from WG, used as part of the 2013/14 Budget Review, for the year 2014/15 was an increase of 0.7%.

3.         The latest central government Spending Review reported on 26th June 2013 and provided detailed spending plans for 2015/16, with the outcome being a continuation of austerity measures in the public sector for 2015/16 and the foreseeable future.  The impact on the way in which the WG allocates its reduced resources between local government, health and other sectors is not yet known.

4.         WG have previously established a minimum funding commitment for schools, equivalent to 1% above the block grant settlement that WG receive from the Treasury, for each year to 2014/15.  It is uncertain whether this position will be extended further or whether this position will be reviewed for 2014/15 in light of increased savings to be found.  It is also not known whether Social Services budgets will continue to be protected.

5.         A similar message to the revenue position applies to the Council’s aspirations for its capital programme, where on-going reductions in support from WG relating to General Capital Funding and the future funding basis for schemes such as the 21st Century Schools are uncertain.

6.         The current level of uncertainty as to future settlements does not provide a basis for forward planning.  A 1% change to the Council's Aggregate External Finance from WG, which includes the Revenue Support Grant and the Non Domestic Rates redistribution, equates to £1.6m and therefore any change in the actual level of reduction could have a major impact on the Council's budget and the level of service provided.  It has therefore been decided to wait until more reliable information, is available before the Medium Term Financial Plan is updated.  It is therefore anticipated that the Plan will be reported to Cabinet in October of this year. It is, however, still necessary for Cabinet to approve the Budget Strategy in order that the 2014/15 budget process can be progressed within the statutory timeframe.

Relevant Issues and Options

7.         The Budget Strategy for 2014/15 proposes that in order to establish a baseline, services should prepare initial revenue budgets for 2014/15 based on the cost of providing the current level of service and approved policy decisions and including any net savings target. This means the cost of price increases and any allowable pay awards should be included as advised by the Director of Resources.

8.         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 be 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 achieve savings already approved by Cabinet as part of the 2013/14 final budget proposals and Directors are asked to consider bringing forward the implementation of these savings ahead of the scheduled date and also to consider areas for further savings.

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

9.         Having regard to the above, it is, therefore, proposed in respect of the 2014/15 Budget Process that Directors be instructed to prepare initial revenue budgets for 2014/15, in accordance with a timetable agreed by the Director of Resources. 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 2013/14 Final Revenue Budget report including detailed Cost Centre Analyses.

·               Budgets to be broken down subjectively and objectively in as much detail as deemed appropriate by the Director of Resources.

·               Budget reports to include revised estimates for 2013/14.

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

·               Minimum savings targets to be met initially as detailed in the 2013/14 Final Revenue Budget report. Any savings made directly by services over and above individual service targets to count towards future saving targets.

·               Individual services will continue to draw up Service Plans that set out the aims and objectives for the service and any possible future developments and efficiencies.

·               As part of the Final Capital Budget Proposals for 2013/14 to 2017/18, a 5 year programme was set for the Council.  This will however have to be reviewed therefore, formal bids must be made for all capital schemes, irrespective of whether they may be present in the current Capital Programme. It will be the responsibility of each Director to co-ordinate capital bids for their services and to ensure that, in view of the limited resources that will be available, only the highest priority bids are submitted in the approved format in accordance with the Council’s approved project management methodology (including business plans where applicable). To this end the principles of sustainable development and better carbon management will be incorporated and evaluated.

·               As stated previously, it is expected that the revenue costs of service development will need to be met from within the respective services (in particular, from the savings made). As such, no revenue bids are initially to be made. However, services may still be asked to identify and prioritise any burgeoning revenue cost pressures for consideration.

·               Some of the consultation work carried out for the Community Strategy/Corporate Plan will assist in informing the budget decision-making process. Services may conduct their own consultation arrangements when deciding on their own capital bids and priorities or use the data from previous exercises. Scrutiny Committees may wish to refer to these consultations when considering the budget or conduct consultations of their own.

10.      The Medium Term Financial Plan will be produced in October 2013.  The proposed timetable for the 2014/15 Budget is for Cabinet to make its initial revenue and capital budget proposals in November 2013. The capital bids considered and prioritised will include those recommended to the Management Team by the Corporate Asset Management Group. Each Scrutiny Committee will be consulted and will receive the relevant initial proposals of the Cabinet in November/December 2013.

·               Scrutiny Committees will be asked to make comments on the proposals. Corporate Resources Scrutiny Committee will act as the lead scrutiny committee in this respect.

·               The budget will then be considered by the Cabinet Budget Working Group, which will submit its recommendations to Cabinet in January/February 2014. Cabinet will formulate its final proposals and submit them to a meeting of full Council to be held in March 2014, having first taken any response from the lead Scrutiny Committee into account. It may be necessary for Scrutiny Committees, Cabinet and Council to hold special meetings in order to ensure that the budget may be approved within the statutory deadline.

·               Membership of the Cabinet Budget Working Group will consist of the Leader, Deputy Leader and Managing Director (Director of Resources).

Resource Implications (Financial and Employment)

11.      There is still considerable uncertainty surrounding the predictions of expected resources and anticipated reductions in public sector funding as a result of the June 2013 comprehensive spending review.  As part of the Final Revenue Budget Proposals for 2013/14, Directorates are currently required to save £14.4m between 2014/15 and 2016/17.

12.      It will be important to ensure that appropriate consultation takes place with the trades unions in relation to the staffing implications of the budget process. The level of consultation will increase over the coming months as the more detailed change proposals within service areas emerge. Such consultation will help to explore ways of reducing any adverse implications for staff

Sustainability and Climate Change Implications

13.      There are no direct implications arising from this report.

Legal Implications (to Include Human Rights Implications)

14.      The Council is required under statute to fix the level of council tax for 2014/15 by 11th March 2014 and in order to do so will have to agree a balanced budget by the same date.

Crime and Disorder Implications

15.      There are no crime and disorder implications.

Equal Opportunities Implications (to include Welsh Language issues)

16.      There are no equal opportunity implications.

Corporate/Service Objectives

17.      The budget strategy is produced in support of all the Council’s objectives as set out in the Corporate Plan.

Policy Framework and Budget

18.      This report is a matter for Executive decision. However, Council must approve the final 2014/15 budget proposals.

Consultation (including Ward Member Consultation)

19.      The Budget Strategy has been drawn up following detailed consultation with all chief officers.

Background Papers

Vale of Glamorgan Corporate Plan 2012 – 2017

 

Contact Officer

Carolyn Michael, Senior Group Accountant

Tel No. 01446 709778

 

Officers Consulted

Head of Accountancy & Resource Management

 

Responsible Officer

Clive Teague

Head of Financial Services (Section 151 Officer)

 

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