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Agenda Item No.

THE VALE OF GLAMORGAN COUNCIL

 

CABINET: 12TH JANUARY 2015

 

REFERENCE FROM SCRUTINY COMMITTEE (CORPORATE RESOURCES): 9TH DECEMBER 2014

 

“ INITIAL REVENUE BUDGET PROPOSALS 2015/16 (MD) –

 

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

 

 Scrutiny Committee (Social Care and Health): 1st December 2014

 Scrutiny Committee (Economy and Environment): 2nd December 2014

 Scrutiny Committee (Housing and Public Protection): 3rd December 2014

 Scrutiny Committee (Lifelong Learning): 8th December 2014.

 

The Scrutiny Committees (Social Care and Health) and (Economy and Environment) subsequently recommended the following:

 

Scrutiny Committee (Social Care and Health) –

 

“(1) T H A T the amended budget for 2014/15 as set out in Appendix 1 be noted.

 

(2) T H A T the initial revenue budget proposals for 2015/16 be noted.

 

(3) T H A T Scrutiny Committee (Corporate Resources) be advised that Social Services is facing significant cost pressures and increased demand for services from all areas of its work.

 

(4) T H A T Scrutiny Committee (Corporate Resources) be advised that it was the unanimous view of the Scrutiny Committee (Social Care and Health) that the cost pressures detailed at Appendix 2 be fully funded.”

 

Scrutiny Committee (Economy and Environment) –- 

 

“(1) T H A T the comments as outlined above be referred to the Scrutiny Committee (Corporate Resources) with the request that they also be forwarded to Cabinet and that further detail on the impact of the suggested savings be provided to the Scrutiny Committee Economy and Environment when available.

 

(2) T H A T the amended budget for 2014/15 as set out in Appendix 1 to the report be noted.”

 

The Council was required under statute, to fix the level of Council Tax for 2015/16 by 11th March 2015 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 the requirements for consultation set out in 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 8th October 2014.  The final settlement was likely to be received in December 2014.  The WG had advised the Council that its provisional Standard Spending Assessment (SSA) for 2015/16 was £212.270m.  The Council would receive from WG Revenue Support Grant of £115.982m and a share of the Non-Domestic Rates of £36.525m.  Together these figures constituted the Council’s provisional Aggregate External Finance (AEF) of £152.507m.  This represented a cash reduction of 3.4% (£5.4m) for 2015/16 however, when taking into account an additional burden of the Local Government Borrowing Initiative for 21st Century Schools, this actually represented a cash reduction of 3.5%.  This was a smaller reduction than the 4.5% projected in the Medium Term Financial Plan and had been taken into account as part of the initial budget proposals for 2015/16.  The Council would also receive a sum referred to as the Successor Outcome Agreement Grant of 2015/16 no amount had been advised for 2015/16, but for 2014/15 it was in the sum of £1.236m.  This grant was an unhypothecated grant (i.e. not earmarked for particular services).  It was noted that the Council was not guaranteed to receive the full amount of the grant as it depended on the extent to which the Council met its obligations under the above agreement. 

 

In addition, there were transfers to the RSG settlement for 2015/16 as follows:

 

• Local Government Borrowing Initiative (LGBI) for 21st Century Schools - £54,000

• Integrated Family Support Service - £280,000

• Autistic Spectrum Disorder – £40,000.

 

In addition to the above matters, transfers out of the settlement were as follows:

 

• Student Finance Wales - £97,000

• Feed Safety Controls - £18,000

• National Adoption Service - £10,000.

 

With regard to the revised budget for 2014/15, Appendix 1 to the report set out the revised budget for 2014/15 together with the necessary adjustments to the original budget.  These adjustments would have no overall effect on the budget and were as follows:

• Asset rent, International Accounting Standard (IAS) 19, transfers and recharges – these related to accounting items and expenditure outside the control of services. They reflected charges to Services for the use of capital assets, changes to the inter-service recharges, transfers and adjustments in respect of pensions to comply with accounting standards.  Also included, were transfers of functions and responsibilities between Directorates as detailed below:

 

Education

- £336,000 from Children and Young People in respect of the transfer of responsibility for the Children and Young People's Partnership.

- £19,000 to Children and Young People as an additional contribution towards the jointly funded Residential Placements budget for looked after children.

- £36,000 to Property in respect of school planning and buildings officers.

 

 

Environment and Visible Services

 - £52,000 from Public Protection in respect of Emergency Planning.

 

 

General Fund Housing

 - £341,000 from Corporate and Customer Services in respect of Community Safety.

 

 

Planning and Transportation

- £20,000 from Corporate and Customer Services in respect of the Authority's  Publications & Media Officer.

 

 

Leisure

- £24,000 from Corporate and Customer Services in respect of the Arts Development section.

 

 

The following table compared the amended budget with the projected outturn for 2014/15:

 

 

 Directorate/Service

2014/15

Amended Original

Budget

£'000

2014/15

Amended Original

Budget

£'000

Variance

(+) Favourable

(-)Adverse

£'000

 Learning and Skills      
 Education and Schools

 93,691

 93,691

 0

 Libraries

 2,550

 2,550

 0

 Adult Community Learning

 247

 247

 0

 Youth Service

 1,069

 1,069

 0

 Catering

 1,775

 1,775

 0

 

 

   
 Social Services

 

   
 Children and Young People

 14,240

 13,940

 +300

 Adult Services

 36,512

 37,312

 -80

 Business Management and Innovation

 301

 301

 0

 Youth Offending Service

 653

 653

 0

       
 Visible Services and Housing      
 Environment and Visible Services

 18,183

 18,183

 0

 Parks and Grounds Maintenance

 3,564

 3,564

 0

 Building Services

 0

 0

 0

 General Fund Housing

 1,438

 1,438

 0

       
 Development      
 Public Protection

 2,489

 2,489

 0

 Private Housing

 11,091

 11,091

 0

 Planning and Transportation

 5,158

 5,158

 0

 Leisure

 3,526

 3,526

 0

 Economic Development

 833

 833

 0

       
 Managing Director      
 Resources

 (21)

 (21)

 0

 Corporate and Customer Services

 49

 49

 0

 General Policy

 19,483

 18,668

 +815

       
 Total

 216,831

 216,516

 +315

 Met from General Reserve

 (2,500)

 (2,500)

 0



 

Budgets in respect of each service area set out the budget position below and in a more detailed account of budgetary movements and variations were detailed in paragraphs 8 to 47 of the report:

 

• Central Education – budget anticipated to underspend by £181,000 due to a favourable variance within Strategy and Resources. 

• Repayments on the schools Early Retirement and Voluntary Redundancy Scheme - £145,000 to be transferred into the Schools Early Retirement / Voluntary Redundancy Invest To Save reserve.

• School Improvement and Inclusion – this budget would outturn on target.

• The Hospital and Home Tuition budget – anticipated to overspend by £20,000.

• Strategy and Resources – this budget would underspend by £181,000.

• Schools – this delegated budget was expected to balance as any variance would be carried forward through school reserves.

• Libraries – it was anticipated that this budget would underspend by £80,000.

• Adult Community Learning – this budget had been increased by £42,000 as a result of the transfer of the ACL ICT admin support budget from Central Education.  This service accordingly would outturn with the revised budget after transferring £63,000 from reserves to assist with funding reductions from WG and Cardiff and Vale College.

• Adult Community Learning Cost Recovery – this was showing an adverse variance of £28,000.

• Youth Service – this budget was projected to outturn with a revised budget after transferring an estimated £128,000 from reserves.

• Catering – this budget was anticipated to outturn on target.

 

The projected outturn for the Social Services Directorate was for an overspend of £500,000 when compared to the amended original budget:

 

• Children and Young People’s Services – this was anticipated to outturn £300,000 under budget at the year end.

• Adult Services – this budget was currently anticipated to outturn £800,000 over budget at the year end.

• Highways and Engineers – it was projected that this budget would be balanced at the year end.

• Highways and Street Lighting – both budgets had estimated overspends of £327,000 (potholes) and £100,000 (lighting energy costs).

• Vehicle costs – this budget was projected to overspend by £84,000.

• Visible and Housing Services had also to meet additional insurance costs of £120,000 and as previously reported the Highways division had not made the required savings from car parking income with a shortfall of £378,000.  However, anticipated income received by the Highways division would be £165,000 higher than budgeted.  To assist with these budget pressures, cabinet had previously approved a one off budget transfer of £350,000 from Policy to Highways, it was further anticipated that a central recharge budget for energy of £460,000 would not be utilised this financial year so would assist these pressures.

• Waste Management – this budget was projected to balance by the year end.  However, employee costs were projected to be over budget by £86,000 a proportion of which was due to staffing of Lifeguards on beaches for which there was no budget e.g. Rhoose Point.

• Waste Management vehicle costs were projected to be over budget by £130,000.

 

 

Also previously reported there was an increase in treatment costs for co-mingled waste of approximately £80,000 over the current budget.  The department had also projected to spend £36,000 on procurement costs relating to Prosiect Gwyrdd for which there was no budget.  The department had also budgeted a spend of £50,000 on the Joint Organics Procurement with Cardiff Council, however this could be met from £50,000 grant funding. 

 

To offset overspends indicated above, Waste Management was likely able to make significant savings of circa £500,000 this financial year from the interim contract for waste disposal with Viridor.  This had been offset slightly by an increase in costs for Household Waste Recycling Centre due to all residual waste that passed through the site now being sorted to take out recycling, prior to being sent to landfill.  The additional cost over the available budget was approximately £168,000. 

 

• Grounds Maintenance – it was anticipated that this budget would achieve a break even position at year end.

• It was estimated that there would be a £30,000 saving on waste disposal due to change of contractor.  However there were additional costs for insurance - £35,000 and higher repair costs at Jenner Park which was projected to overspend by £20,000.

• Building Services – the Building Maintenance and Building Cleaning and Security Services were expected to outturn on target.

• General Fund Housing – this budget was likely to outturn at £390,000 underspend based on current trends.

• Public Protection – this service was projecting a nil variance against the revised budget.

• Private Housing – this budget was projecting an outturn of a favourable variance of £400,000.

• Planning and Transportation – this service was projecting a nil variance against the revised budget. 

• Leisure, including Countryside – this service was projecting an outturn of a nil variance against the revised budget.

• Economic Development – this budget was projected to outturn within target.

• Resources – Finance and ICT – this budget was anticipated to outturn within budget.

• Corporate Customer Services – this budget was expected to outturn within target at year end.

• General Policy – this was projected to outturn with a favourable variance of £815,000. 

• Council Tax – there was projected to be an anticipated Council Tax surplus of £2.1m for financial year 2014/15.  It was proposed that this surplus would be used to fund additional capital projects covering the Council’s priorities of highways, regeneration and schools. 

 

The Cabinet approved the Budget Strategy for 2015/16 on 30th June 2014 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 included 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 achieve savings already approved by Cabinet as part of the 2014/15 final budget proposals and Directors were asked to consider bringing forward the implementation of these savings ahead of the scheduled date and also to consider areas for further savings.

- 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 2015/16 Budget Strategy that Directors be instructed to prepare initial revenue budgets for 2015/16, in accordance with a timetable agreed by the Managing Director with collaboration 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 2014/15 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 Managing Director.

- Budget reports to include revised estimates for 2014/15.

- 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 2014/15 Final Revenue Budget report. Any savings made directly by services over and above individual service targets to count towards future saving targets.

- Directors 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 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.

 

Matters relating to the Council’s Medium Term Financial Plan for 2015/16 and budget consultation with stakeholders was set out in paragraphs 53 to 59 of the report.

 

As a result of the anticipated reduction in future year’s settlements, the Medium Term Financial Plan identified additional savings to those originally approved for 2015/16 as part of the 2014/15 budget setting process.  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.  An updated list of cost pressures for this Committee was detailed in Appendix 2 to the report and was not shown in any order of priority.

 

On approving the budget strategy for 2015/16, Directors were asked to review savings already approved with a view to implementing these ahead of the target date and to consider areas for further savings.  Details of the proposed areas for savings for 2015/16 to 2017/18 were detailed in Appendix 3 to the report and the savings did not include the cost of any potential redundancies. 

 

A summary of the overall base budget for 2015/16 was set out at Appendix 4 to the report.  This had been arrived at by adjusting the 2014/15 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 2015/16 for the Council was £5.677m.

 

Matters relating to Asset Rents, IAS 19 and recharges were set out in paragraph 69 of the report.  Transfers related to the transfer of function / responsibilities between Directorates in respect of the following matters:

 

Education

- £336,000 from Children and Young People in respect of the transfer of responsibility for the Children and Young People's Partnership.

- £19,000 to Children and Young People as an additional contribution towards the jointly funded Residential Placements budget for looked after children.

- £86,000 to Property in respect of school planning and buildings officers.

 

 

Environment and Visible Services

- £124,000 from Public Protection in respect of Emergency Planning.

 

 

General Fund Housing

 - £341,000 from Corporate and Customer Services in respect of Community Safety.

 

 

Planning and Transportation

- £36,000 from Corporate and Customer Services in respect of the Authority's  Publications and Media Officer

 

 

Leisure

- £52,000 from Corporate and Customer Services in respect of the Arts Development section.

 

In regard to budget adjustments – there was a net total of £410,000 and related to £433,000 for the reversal of one off funding previously provided to services, £101,000 relating to the reduction in the Fire Authority Levy less the £124,000 reduction in the use of the Social Services Fund in 2015/16.

 

 

In respect of inflation – a total figure for inflation of £2.276m related to general price increases (£1.721m) and a 1% allowance for pay awards (£555,000).  These figures did not include schools’ inflation which amounted to £2.010m for pay and £269,000 for prices. 

 

Committed growth totalled £761,000 and £263,000 reflected the Minimum Funding Commitment for Schools, £69,000 related to the cost of borrowing for the LGBI 21st Century Schools initiative and £180,000 had been allocated for capital charges.  This also included the net transfer into the RSG of £249,000. 

 

Once the base budget for 2015/16 for the Council as a whole had been established, it must then be compared to the funding available to identify any shortfall.  With a provisional AEF of £152.507m and Council Tax at the current level of £56.690m, total available funding would be £209.190m.  When compared to a base budget of £216.958m, this would result in a funding deficit for 2015/16 of £7.761m.  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, this would increase the shortfall of £13.438m.  If all proposed savings were achieved, the shortfall would be reduced to £4.581m as set out in the table below:

 

 Projected Budget Shortfall 2015/16  
   £000
 Funding Available  
 Provisional AEF  152,507
 Council Tax  56,690
 Provisional Funding Available  209,197
   
 Base Budget  216,958
   
 Provisional Shortfall Against Base Budget  7,761
   
 Assume all Cost Pressures Funded  5,677
   
 Provisional Shortfall with Cost Pressures funded  13,438
   
 Assume all Savings Achieved  (8,857)
   
 Provisional Projected Shortfall for 2015/16  (4,581)


 This shortfall was already based on the requirement to achieve a high level of savings in 2015/16 and despite the continuation of the MFC for schools, there was still uncertainty about the level of a number of WG grants and the impact of 11 grants relating to Education amalgamating into a single Education Improvement Grant for Schools.  The above projections also included an assumed pay award of 1% for 2015/16 and the implications of the award had not yet been assessed and would be included in the Final Budget Proposals report. 

 

The Chairman thanked the Head of Finance for his appraisal of the budget situation. 

 

A Member, in referring to the report and in particular to the collection rates in respect of the Council Tax Base, enquired as to why the collection figure was not higher than that proposed in the report.  In response, the Head of Finance considered that the percentage collection target rate of 97% as indicated in the report was considered to be a prudent level and if set too high, could have the potential to cause problems for the Council in the future.  Another Member of the Committee referred to paragraph 21 of the report alluding to Adult Services and sought clarification in regard to the percentage of the overspend relating to Community Care Packages.  In response the Head of Finance indicated that he would provide the answer to Members of the Committee via e-mail.

 

Further work would be undertaken by the Budget Working Group (BWG) when formulating the final budget proposals for 2015/16 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.  The BWG would also consider the result of the budget engagement process in determining priorities for future savings and service delivery. 

 

It was noted that the Council had already commenced a programme for reshaping and transforming services and previously approved by the Cabinet at its meeting held on 11th August 2014.

 

In terms of the role of the Cabinet BWG, the 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 proposals by no later than 23rd February 2015.  Before making its recommendations, the BWG would consider the comments made by Scrutiny, together with the results of the budget engagement process.

 

The Cabinet’s final budget proposals would be considered by Council on 4th March 2015. 

Having regard to the above and related issues, it was

 

RECOMMENDED –

 

(1) T H A T the amended revenue budget for 2014/15 as set out in Appendix 1 to the report be noted.

 

(2) T H A T the initial Revenue Budget proposals for 2015/16 be noted and that the Cabinet be informed of the outcome of the Scrutiny process on the matter subject to the references which include the comments from the Scrutiny Committee (Social Care and Health) and (Economy and Environment) being forwarded on to the Cabinet and the Budget Working Group for further consideration.

 

(3) T H A T the transfer of £3.5m from specific reserves to the School Investment Strategy Reserve to fund future development in schools be noted.

 

(4) T H A T the additional revenue contribution of £2.1m to be used to fund capital schemes in 2014/15, as detailed in the Initial Capital Programme Proposals 2015/16 report be noted.

 

Reasons for recommendations

 

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

 

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

 

(3) To note the funding set aside for the School Investment Programme.

 

(4) To note the use of revenue funding to carry out additional capital schemes.”