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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting: 7th October 2013

 

Report of the Leader

 

Medium Term Financial Plan 2013/14 to 2016/17

 

Purpose of the Report

1.         To submit the draft Medium Term Financial Plan 2013/14 to 2016/17 for approval.

Recommendations

1.         That Cabinet be requested to:

·           Approve the contents of the draft Medium Term Financial Plan for 2013/14 to 2016/17.

·           Require Directors to report back to Cabinet by 18th November 2013 on progress in bringing forward areas for savings already agreed for future years together with their additional proposals for future savings and the implications for future service delivery.

Reasons for the Recommendations

1.         To facilitate the integration of medium term financial planning into the corporate planning and budget process.

 

Background

2.         The budget strategy for 2014/15 was approved by Cabinet on 15th July 2013 (Minute No. C1427). This established a baseline for services to 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. It also set out the timetable to be followed and required 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.         The purpose of the Medium Term Financial Plan is to link the Council’s strategic planning process with the budget process and to ensure consistency between them. It is a mechanism that attempts to match future predicted resources and expenditure, identify potential shortfalls and provide the financial framework for the next 3-5 years. It is not the budget setting process that allocates detailed budgets for services. Its purpose is to inform members and to suggest a way of dealing with the future financial pressures facing the Council.

4.         This Plan builds upon the work done as part of the 2012 Budget Review as detailed in the Final Revenue Budget Proposals report approved by Council on 6th March 2013 (Minute No. 943 refers). In particular, previous assumptions regarding future funding settlements from Welsh Government have been revised.

5.         The Plan forms an integral part of the Authority’s corporate framework for performance management, and should, be considered in the context of the core values and priorities set out in the Corporate Plan. These were reviewed during 2012 and reflect any changed priorities resulting from the Budget Review as well as any limitations imposed as a result of the changing financial circumstances in which the Council has to operate.

6.         This Medium Term Financial Plan, therefore, attempts 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 will be available to the Council to meet these 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.

Relevant Issues and Options

7.         The draft Medium Term Financial Plan is attached covering the period 2013/14 to 2016/17. An Executive Summary is included at pages 2 – 6 of the Plan. Welsh Government has not yet given any indication of local government funding levels for 2014/15 to 2016/17. However, the timeframe for the budget process necessitates use of the best available evidence at the time if a balanced budget is to be achieved by the statutory date. The assumptions made in the Plan are, therefore, based upon the outcome of the Chancellor’s Spending Review, its anticipated impact upon Wales and the subsequent views of key commentators (including the Welsh Local Government Association) as to the prospects for local government funding over the next few years being severely curtailed by Welsh Government.

8.         The basis of these latest assumptions, therefore, can in no way be guaranteed and any changes to the figures used could have a significant financial impact. However, every indication is that restrictions in public sector funding will continue for the foreseeable future and the failure to prepare for further reductions now could have far greater consequences for service delivery in the future.

9.         Initial projections present the following picture showing a projected additional cumulative revenue shortfall to 2016/17 of about £25.7 million.

Matching Predicted Resources to Expenditure

2014/15

£000

2015/16

£000

2016/17

£000

Real Term Decrease in Resources

8,427

8,429

9,161

Cost Pressures

6,635

4,338

3,866

Existing Corporate Savings Targets

(5,075)

(4,391)

(4,933)

Costs to be met within Schools

(793)

0

0

Additional Shortfall

9,194

8,376

8,094

 

10.      It should be noted that in arriving at this shortfall, there will inevitably be additional cost pressures arising between now and 2016/17 which are as yet unknown and little provision has been made for service development. Clearly, although savings through efficiencies will continue to remain a major expectation of future budgets, it is unlikely that the Council will seek to or be able to fund all cost pressures.

11.      A key outcome from the 2012 Budget Review was to identify the relative priorities between different services given the financial challenges which lie ahead and to set specific financial strategies for Education & Schools and Social Services.  In light of the level of savings to be found by 2016/17, a review will be undertaken to ascertain whether it is viability to continue with these approved financial strategies 

12.      Other options which are recommended within the Plan for exploration as part of the 2014/15 budget process are:

·           Further reviewing the level of cost pressures with a view to managing demand within allocated budgets and mitigating pressures.

·           Services funding their own residual cost pressures through reviewing their existing budgets and revised/alternative means of service provision.

·           Services meeting their own pay and price inflation, superannuation increase etc through reviewing their staffing structure in line with changes to service delivery and workforce planning requirements.

·           A review of the continuation of the financial strategies already in place.

·           Pursuing further forms of alternative service delivery in order to attempt to maintain the level of services while reducing the cost of provision.

13.      From a Capital Programme perspective, the expected decrease in the Council’s General Capital Funding allocation in 2014/15 and specific capital grants from WG for 2014/15 onwards, coupled with limited capital receipts, gives the Council little room for manoeuvre in progressing its priorities in this area. As such the Council looked to mitigate this situation as part of the 2013/14 Final Capital Programme proposals in so far as it was able by reappraising all schemes and looking to progress only those which are deemed to be a key corporate priority whilst also seeking to gain assurance that such schemes are delivered on time and within budget. This has resulted in a Capital Programme being agreed for the period 2013/14 to 2017/18. Any amendments will be dependent on future funding levels and for the most part are expected to relate to changes in phasing of the existing approved programme.

Resource Implications (Financial and Employment)

14.      Although the figures contained within the Medium Term Financial Plan must be treated with caution, particularly due to the uncertainty surrounding the predictions of expected resources, the Plan is currently indicating a significant increased shortfall of available funding to 2016/17 of £25.7M which with existing savings targets amounts to £40.1M over the next three years.  

15.      It will be important to ensure that appropriate consultation takes place with the trades unions in relation to the staffing implications of this report. The level of consultation may 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

16.      None as a direct consequence of this report.

Legal Implications (to Include Human Rights Implications)

17.      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

18.      None as a direct consequence of this report.

Equal Opportunities Implications (to include Welsh Language issues)

19.      None as a direct consequence of this report.

Corporate/Service Objectives

20.      The Medium Term Financial Plan is produced in support of all the Council’s objectives as set out in the Corporate Plan.

Policy Framework and Budget

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

Consultation (including Ward Member Consultation)

22.      The Medium Term Financial Plan has been drawn up following consultation with all chief officers.

Relevant Scrutiny Committee

23.      Corporate Resources

Background Papers

Vale of Glamorgan Corporate Plan 2013 – 2017

 

Contact Officer

Alan Jenkins Tel 01446 709254

 

Officers Consulted

All Chief Officers

 

Responsible Officer:

Sian Davies

Managing Director

 

 

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