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Matter which the Chairman has decided is urgent by reason of the need to inform Cabinet of the outcome of consideration by the Scrutiny Committees

 

Agenda Item No.

 

 

THE VALE OF GLAMORGAN COUNCIL

 

CABINET: 16TH DECEMBER, 2013

 

REFERENCE FROM SCRUTINY COMMITTEE (CORPORATE RESOURCES): 10TH DECEMBER, 2013

 

  INITIAL REVENUE BUDGET PROPOSALS 2014/15 (MD) –

 

The Council’s Scrutiny Committees had previously considered the initial Revenue Budget proposals on the following dates:

 

            Scrutiny Committee (Social Care and Health): 2nd December 2013

            Scrutiny Committee (Economy and Environment): 3rd December 2013

            Scrutiny Committee (Housing and Public Protection): 4th December 2013

            Scrutiny Committee (Lifelong Learning): 9th December 2013.

 

The Council was required, under statute, to fix the level of Council Tax for 2014/15 by 11th March 2014 and in order to do so would have to agree a balanced Revenue Budget by the same date.  To be in a position to meet the statutory deadlines and requirements for consultation as set out within the Council’s Constitution, much of the work on quantifying the resource requirements of individual services needed to be carried out before the final Revenue Support Grant (RSG) settlement was notified to the Council.    The Council’s provisional settlement was announced on 16th October, 2013.  The Council’s Standard Spending Assessment (SSA) represented the Welsh Government’s (WG) view of the relative resources required to provide a standard level of service in each local authority in Wales and its primary use was to allocate RSG to these authorities.  For 2014/15 the Council’s provisional SSA was £214.384m.  

 

The Council had also been advised by the WG of its 2014/15 allocation in relation to RSG (£118.834m) and NNDR (£38.941m).  Together, these sums constituted the Council’s Aggregate External Finance (AEF) of £157.775m.  This represented a cash reduction of 4.5% (£7.4m) for 2014/15 and was a larger reduction than the 4% projected in the Council’s Medium Term Financial Plan (MTFP). 

 

The Council would also receive a sum provisionally set at £1.236m via the Outcome Agreement Grant (OAG) for 2014/15.  This grant was an unhypothecated grant (i.e. not earmarked for particular services).  It was noted that the Council was not necessarily guaranteed to receive the full amount of the OAG.  The amount for 2014/15 would be determined by a rating score of the Council’s performance in achieving its 2013/14 Outcome Agreement targets.

 

There were transfers into the RSG settlement for 2014/15 as follows:

 

First Steps Improvement Package - £119k.  Additional funding in respect of the £50 per week cap for non residential service charges.

Council Tax Reduction Scheme Administration Subsidy - £177k. This was previously received as a direct grant from the Department for Work and Pensions.

 

In addition, WG had stated that the provisional settlement for 2014/15 includes the transfer in of the Council Tax Reduction Scheme "Top Up" of £788k and an adjustment for the third year funding of the Local Government Borrowing Initiative (LGBI) for Highways of £152k.

 

It was the Council's contention that a comparative adjustment was required to account for the Council Tax Reduction Scheme "Top Up" received as part of the 2013/14 settlement.  Also, the 2014/15 AEF did not recognise the third year funding of the LGBI for Highways as an additional burden falling on the Council.  When taking both these adjustments into account, there was an actual cash reduction to the Council of 4.9%.  Pay and price inflation results in a much higher decrease in real terms. The September Consumer Price Index stood at 2.7%.  As part of the consultation process on the provisional settlement, the Leader was responding to WG on these issues.

 

WG had provided an indicative settlement figure for 2015/16 which showed a further cash reduction of 1.63% (£2.6m).  The MTFP was based on a cash reduction of 4%.   WG had not given any indication as to the level of settlement for 2016/17, however the MTFP was based on a further 4% cash reduction.  The assumptions made in the MTFP would, therefore, be reconsidered by the Budget Working Group (BWG) as part of the final budget proposals.

 

With regard to the revised budget for 2013/14, a number of employees in the Building Services section undertook a substantial amount of duties on behalf of the respective unions.  The time spent was considered to be ‘lost time’ to the section and created particular difficulties for Building Services and its trading account.  It was therefore proposed to make a 50% contribution towards these costs from Policy of £31k for 2013/14 and £32k for 2014/15. If approved, the contribution would be reviewed in 2015/16.

 

Appendix 1 to the report set out the necessary adjustments to the original estimate for this period which were required to be made as follows (there was 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.  The overall impact on the Council was nil.

 

The following table compared the amended budget with the projected outturn for 2013/14:

 

 

2013/14

2013/14

Variance

 

Amended

Original

Projected

 (+)Favourable

Directorate/Service

Budget

Outturn

 (-) Adverse

 

£’000

£’000

     £’000

Learning and Skills

 

 

 

Education and Schools

93,879

93,879

                           0

Libraries

2,606

2,606

                           0

Lifelong Learning 

193

193

                           0

Youth Service

1,127

1,127

                           0

Catering

1,743

1,743

                           0

 

 

 

                          

Social Services

 

 

 

Children and Young People

14,660

14,660

                           0

Adult Services

36,124

36,124

                           0

Business Management and Innovation

298

298

                           0

Youth Offending Service

653

653

                           0

 

 

 

 

Visible Services and Housing

 

 

 

Environment and Visible Services                  

18,393

18,290

                     +103

Parks and Grounds Maintenance

3,477

3,580

                    (103)

Building Services

0

0

                           0

General Fund Housing

           1,150

         1,000

                     +150

 

 

 

 

Development

 

 

 

Public Protection

2,564

2,564

                           0             

Private Housing

11,270

11,270

                           0

Planning and Transportation

           5,329

         5,329

                           0

Leisure

           4,085

         4,085

                           0

Economic Development

950

950

0

 

 

 

 

Managing Director

 

 

 

Resources

              130

            130

                           0

Corporate and Customer Services

379

379

                           0

General Policy

21,224

20,344

                    +880

Total

220,234

219,204

+1,030

Met from General Reserve

-1,500

-1,500

0

Grand Total

218,734

217,704

                  +1,030

 

Budgets in respect of each service area set out the budget position below and a more detailed account of budgetary movements and variations were detailed in paragraphs 7 to 30 of the report.

 

·                Education and Schools – Overall, the Education Budget was projected to outturn on target

·                The Strategic Planning and Performance and Service Strategy and Regulation Budgets were currently projected to outturn on budget

·                Social Services – The current forecast was an overspend of £140k, however, further work was being undertaken this year to address this position and a balanced budget was forecast at year end

·                Children and Young People’s Services – The major issue was the need to manage continued pressure on the children’s placements budget.  The current projected outturn for the jointly funded Residential Placements budget for Looked After Children was an overspend of £518k

·                Adult Services – The major issue was the continuing pressure on Community Care Packages, the Division's most volatile budget and the one most dependent upon levels of service demand which were not entirely within the Council's direct control.  At present, the projected year end position was an overspend of £829k which was after the reduction in budget to accommodate the savings target for the year of £685k. This overspend was also after the approval to release £646k from the £1.5m cost pressure allocated to Social Services, as part of the budget setting process for 2013/14

·                Visible Services and Housing – The projected outturn for the Visible Services and Housing Directorate was a favourable variance of £150k when compared to the amended original budget

·                Waste Management –  It was projected that the Waste Management section would have a favourable variance of £33k

·                Support – It was estimated that there was a £152k underspend compared with the budget

·                Parks and Grounds Maintenance –  It was estimated that overall the Grounds Maintenance section would have an adverse variance of £103k

·                Building Services – The Service was expected to outturn on target

·                General Fund Housing – There was a projected year end favourable variance in the sum of £150k

·                Public Protection – This service showed a balanced budget, however, there continued to be pressure on the Coroners service in relation to mortuary fees

·                Housing Benefit / Council Tax Reduction – The year end projected position was a balanced budget

·                Planning and Transportation – The year end projected outturn for this service showed a balanced budget

·                Leisure – The projected outturn for this service showed a balanced budget

·                Economic Development – The projected outturn for this service showed a balanced budget

·                Resources – The Finance and ICT service was projected to outturn on budget

·                Policy – The projected outturn was a favourable variance of £880k

·                A sum of £1.3m was to be provided for capital works.  £650k was for Education to fund Additional Learning and Skills Building Asset Renewal Schemes, as approved by Cabinet on 9th September 2013, min no. C2015.  The remaining £650k was for Environmental and Visible Services works at Cross Common Road Bridge

·                There was an estimated Council Tax surplus for 2013/14 of £2.5m which after deducting £470k use of reserves (estimated use of reserves £1.5m less £1.03m surplus in year) resulted in an estimated General Fund Reserve as at 31st March 2014 of £11.858m.

 

The Cabinet approved the Budget Strategy for 2014/15 on 29th July 2013 and, as in previous years, required all Directors to make the following provisions:

 

·                Supplementary estimates would only increase the base budget if Council had given specific approval to this effect. Increases met by virement within a year would 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 had been given for additional funding.

·                The effect of replacing grant from outside bodies that had discontinued would not be treated as committed growth. In addition, before any project or initiative that was 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 would 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 would be expected to identify and achieve recurrent efficiency and other savings, including (but not restricted to) those identified in the Interim Medium Term Financial Plan.

·                It was envisaged that the costs of service development would need to be met from within the respective Directorates.

 

Having regard to the above, it was, therefore, proposed in respect of the 2014/15 Budget Strategy 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

·                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

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

 

As a result of the reduction in the provisional settlement, the Authority would now have to identify additional savings to those originally approved for 2014/15.  It had also been necessary to revisit the cost pressures facing services in order to build up a complete and up to date picture of the financial position of the Council.  The updated list of cost pressures for this Committee was shown in Appendix 2 to the report.  These were not shown in any order of priority.

 

When approving the Budget Strategy for 2014/15, Directors were asked to consider bringing forward the implementation of future years' savings ahead of the scheduled date.  This message was reinforced by Cabinet when approving the MTFP, where Directors were also asked to identify additional areas for savings.

 

The 2013/14 budget included approved savings targets for the years 2014/15 to 2016/17.  Directors have assessed future year savings in order to establish those that can be brought forward to supplement the 2014/15 savings.  In doing so, regard had been given to those savings which are time bound and cannot be accelerated.  Details of the approved areas for savings for 2014/15 for this Committee, together with proposals for savings to be brought forward were attached at Appendix 3 to the report.  The savings did not include the cost of potential redundancies.

 

A summary of the overall base budget for 2014/15 was attached at Appendix 4 to the report.  This had been arrived at by adjusting the 2013/14 budget for items such as inflation and unavoidable growth, but did not include identified cost pressures or savings.  These were shown as a note to the table and were further detailed in Appendices 2 and 3 respectively.  The total cost pressures for 2014/15 for the Council were £5.984m.

 

Asset Rents, IAS 19 and Recharges etc. related to accounting items and expenditure outside the control of the relevant Services.  These reflected charges to Services for the use of capital assets and adjustments in respect of pensions to comply with accounting standards.

 

Recharges/Transfers – Relate to changes in inter-service recharges and from the transfer of functions and responsibilities between services.  Included was the previously approved transfer of £320k from Education to Children's Services in respect of the joint budget for residential Looked After Children.

 

Budget Adjustment – Included in Policy was a sum of £880k as a provision for the incremental effect of job evaluation.  These costs had been largely funded. The Authority's policy was for Directorates to fund their own increments and, therefore, the £880k had been removed from Policy's estimates as it was no longer required.  There was also an adjustment of £119k for the First Steps Improvement Package as it was previously included in the base estimate.   The £167k reduction in the use of the Social Services fund for 2014/15 was also included under this heading.

 

Inflation – The total figure for inflation of £2.252m related to general price increases (£1.649m) and a 1% allowance for pay awards (£603k). These figures did not include schools inflation which amounted to £489k for pay and £336k for prices.

 

Committed Growth – This totalled £1.042m of which £198k reflected the minimum funding commitment for schools, £216k related to Landfill Tax, £152k to LGBI and £180k to capital charges.  It also included the transfers into RSG of £177k for Council Tax Reduction Scheme Administration Subsidy and £119k for First Steps Improvement Package.

 

Once the base budget for 2014/15 for the Council as a whole had been established, it must then be compared to the funding available to identify the extent of any shortfall.  With a provisional AEF of £157.775m and Council Tax at a current level of £53.567m, total available funding would be £211.342m.  When compared to a base budget of £221.196m, this would result in a funding shortfall for 2014/15 of £9.854m.  This shortfall was mainly attributable to the reduction in funding from WG, an increase in pay and price inflation and the requirement to fund committed growth.

 

If all identified cost pressures were funded for the whole of the Council, this would increase the shortfall to £15.838m.  If all proposed savings were achieved for the whole of the Council, the shortfall would be reduced to £8.539m as shown in the table below.

 

Projected Budget Shortfall 2014/15

 

 

£000

Funding Available

 

Provisional AEF

157,775

Council Tax

53,567

Provisional Funding Available

211,342

 

 

Base Budget

221,196

 

 

Provisional Shortfall Against Base Budget

9,854

 

 

Assume all Cost Pressures funded

5,984

 

 

Provisional Shortfall with Cost Pressures funded

15,838

 

 

Assume all Savings Achieved

(7,299)

 

 

Provisional Projected Shortfall for 2014/15

8,539

 

This level of shortfall was unprecedented.

 

Further work would be undertaken by the BWG when formulating the final budget proposals for 2014/15, which would include a review of the use of reserves, a possible increase in Council Tax, a review of all cost pressures, possible savings and the current financial strategies, in order to achieve a balanced budget.  The BWG would also look at the impact on the 2015/16 budget.

 

It would be extremely difficult in the short term to meet all of the budget shortfall through further savings next year.  This may require consideration of the use of substantial levels of reserves in 2014/15, thus allowing a more thorough review of options for savings and their implications, alternative methods of service delivery and collaborative ventures.

 

The General Fund Reserve as at 31st March 2014 was projected to stand at £11.858m.  The 2014/15 base budget proposal included the use of £1.5m from the General Fund reserve.  Cost pressures for 2014/15 include £500k for a reduction in the use of reserves, in line with the existing financial strategy.  A further reduction of £500k was also scheduled for 2015/16.  In light of the unprecedented funding shortfall, this strategy needed to be reviewed.  At this stage, it was proposed that a use of reserves to a maximum of £3.5m could be used in 2014/15.  The Section 151 Officer believed that the minimum balance on the General Fund Reserve should be no less than £7m.

 

The use of reserves to fund recurring expenditure can only be countenanced as part of a specific strategy to achieve a balanced budget in future years.  The consequence of such actions will be to increase the level of savings required in 2015/16 onwards.

 

In terms of the role of the Cabinet Budget Working Group, this Group would be holding a series of meetings with the relevant Cabinet Members and officers to consider the budget proposals.  Any recommendations from this Group would be submitted so that the Cabinet could make its final budget proposal by no later than 24th February 2014; before making its recommendation the Cabinet Budget Working Group would consider the comments made by all the Council’s Scrutiny Committees.

 

The Cabinet’s final budget proposals would be considered by Council on 5th March 2014.  

 

External consultation was proposed to be carried out with Vale Viewpoint, the Citizens Panel for the Vale, to ascertain the public’s priorities in order to inform the budget process. The Local Service Board, Town and Community Councils and Vale businesses would also be consulted.

 

Brief discussion centred on Parks and Grounds Maintenance expenditure and in particular on the future maintenance of Rhoose Point with Councillor H.J.W. James reiterating his points made at the meeting of the Scrutiny Committee in October regarding the need to establish a budget for this site.  He further commented on the ongoing cost of the maintenance of bowling greens and referred to two specific sites in the Vale.  He also made reference to proposals to reduce “Bring Sites†with the risk of increased fly tipping if implemented.  To clarify, Councillor N. Moore, who spoke on the matter with the consent of the Committee, indicated that it was proposed to withdraw “Bring Sites†which were currently located at supermarket sites and where management issues of the site had been identified.

 

The Committee also expressed disquiet in regard to the savings proposal C3 (Communications Team) which was particularly relevant given the need to effectively communicate to the public the potential impact on services affected as a consequence of reduced funding from the Welsh Government.

 

Having regard to the above and related issued it was

 

RECOMMENDED –

 

(1)       T H A T the amended budget for 2013/14 as set out in Appendix 1 to the report be noted.

 

(2)       T H A T the initial Revenue Budget proposals for 2014/15 be noted and that the Cabinet be informed of the outcome of the Scrutiny process on the matter subject to recommendations (3) and (4) below and subject to the below cost pressures being prioritised and referred to Cabinet for further consideration.

 

(3)       T H A T the recommendation (2) of the Scrutiny Committee (Social Care and Health) of 2nd December, 2013 on the initial Revenue Budget proposals as set out below be noted and referred to Cabinet for further consideration:

 

“(2)      T H A T the Initial Revenue Budget Proposals for 2014/15 be noted together with the cost pressures in the Social Services Directorate as amended at the meeting.  It was the view of the Scrutiny Committee (Social Care and Health) that these cost pressures would need to be fully funded in view of the ever increasing demand for Adult Services’ Community Care Packages and the difficulties in predicting the requirement for children’s residential placements.â€

 

(4)       T H A T the recommendation (2) of the Scrutiny Committee (Housing and Public Protection) of 4th December, 2013 on the initial Revenue Budget proposals as set out below be endorsed and referred to Cabinet for further consideration:

 

“(2)      T H A T the initial Revenue Budget proposals for 2014/15 including cost pressures and savings proposals be noted, subject to the Scrutiny Committee (Corporate Resources) being requested to ask the Cabinet to investigate the feasibility of utilising charities / third sector organisations to assist in the procurement of furniture in respect of savings proposals V11 and V12 for 2014/15.“

 

(5)       T H A T the Scrutiny Committee would wish to make the Cabinet aware of the need to effectively communicate to service users and the public of the implications of the funding reduction from Welsh Government which may be impaired when taking account of the suggested saving proposals for 2014/15 in respect of the Council’s Communication Team (C3).

 

(6)       T H A T it be noted that a contribution of £31k for 2013/14 and £32k for 2014/15 is to be made from Policy to Building Services towards employee costs in carrying out union duties.

 

(7)       T H A T it be noted that Vale Viewpoint would be consulted to ascertain the public's priorities in order to inform the budget process, as well as consultation being undertaken with the Local Service Board, Town and Community Councils and Vale businesses.

 

Reasons for recommendations

 

(1)       In acknowledgement of the Scrutiny Committee’s responsibility for monitoring the budget.

 

(2-5)    To inform Cabinet of the outcome of the scrutiny process.

 

(6)       To be aware of the contribution to the costs of union duties within Building Services.

 

(7)       To obtain the comments of external consultees before Cabinet makes a final proposal on the budget.

 

 

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