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Agenda Item No

The Vale of Glamorgan Council

Cabinet Meeting 23rd February 2015

Report of the Leader

Final Proposals for the Revenue Budget 2015/16

Purpose of the Report

1. The purpose of this report is to set out final proposals for Cabinet members to consider, before making their recommendations to Council, in respect of the final revenue budget for the financial year 2015/16. 

Recommendations

That Cabinet recommend to Council the following:

 

1. Fix the budget for 2015/16 at £212.355 million including a provision of £200,000 for discretionary rate relief to rural shops and post offices and charitable organisations.

 

2. Approve the budgets for 2015/16 as set out in Appendix C, the totals as follows:



£’000

Education and Schools

94,086

Libraries

2,359

Adult Community Learning

265

Youth Service

1,043

Catering

1,756

Children & Young People

14,497

Adult Services

37,418

Business Management & Innovation

319

Youth Offending Service

672

Environment and Visible Services

16,911

Parks and Grounds Maintenance

3,503

Building Services

0

Council Fund Housing

1,218

Public Protection

2,326

Private Housing

11,047

Planning and Transportation

5,170

Leisure

2,481

Economic Development

825

Resources

963

General Policy

17,996

Council Fund Reserve

(2,500)

Grand Total

212,355

 

3. Approve the recommendations regarding Net Growth for 2015/16 as set out in Appendix D and Savings for 2015/16 as set out in Appendix E.

 

4. Set the Council Tax for 2015/16 for its own purposes (excluding police and town and community council precepts) at the following levels:


Band

Council Tax

 £

A

713.04

B

831.88

C

950.72

D

1,069.56

E

1,307.24

F

1,544.92

G

1,782.60

H

2,139.12

I

2,495.64

 

5. The proposed draft report on Education Budget and Indicator Based Assessment (IBA) at Appendix A be endorsed and the Director of Learning and Skills make arrangements for it to be forwarded to the School Budget Forum and Welsh Government.

 

That Cabinet approve the following:

 

6. The Director of Learning and Skills be given delegated powers to determine the amount of money to be allocated to the schools’ delegated budgets after consultation with the Schools Budget Forum, subject to the Individual Schools Budget (ISB) being no less than the Welsh Government’s  target.

 

7. The Director of Social Services continues to review the Social Services Budget Plan and takes the necessary actions in order to manage future service demand.

 

8. The initial savings targets for 2016/17 and 2017/18 as set out in Appendix G be approved.

 

9. A sum of £1.485m be set aside in the Schools Investment Strategy Reserve, funded by the projected under spending on revenue in 2014/15 and that the budget be amended accordingly.

 

10. The reclassification of reserves as set out at Appendix H be approved.

 

11. The Director of Learning and Skills updates her medium term financial and service plan report for the Schools Budget Forum including details of the support she will give to schools in keeping within their budgets

 

Reasons for the Recommendations

1. To set the 2015/16 budget in line with statutory requirements.

 

2. To allocate budgets to services.

 

3. To reduce risk to services and balance the budget.

 

4. To set Council Tax levels for 2015/16.

 

5. So that the report can be presented to the Schools Budget Forum and Welsh Government.

 

6. To set out delegated authority in relation to the allocation of the Education and Schools budget.

 

7. To ensure that the Social Services Budget Plan is achieved and future demand is managed.

 

8. To set minimum savings targets for achieving savings.

 

9.&10. To ensure that reserves are both adequate in purpose and level.

 

11. To put in place a coherent service and financial strategy for future years for Education and to assist schools in meeting cost pressures.  

Background

2. The Council is required under statute to fix the level of Council Tax for 2015/16 by 11th March 2015. The final decision on the budget cannot be delegated and must be made at a meeting of Council. This is scheduled to be held on the 4th March 2015.

 

Relevant Issues and Options

General

 

3. The Council’s approved Final Revenue Budget Proposals for 2014/15 included savings targets for the period 2015/16 to 2016/17 of £13.5m. These figures excluded schools which were funded 1% above the relevant percentage change in Block Grant received by Welsh Government (WG) in the form of the Minimum Funding Commitment (MFC). The savings targets took as their starting base the indicative settlement provided by WG for 2015/16 which at the time showed a projected 1.64% reduction.  No indication was provided for 2016/17 so a reduction of 1% was assumed.

 

4. The 2014/15 Medium Term Financial Plan (MTFP) approved by Cabinet on 11th August 2014 (minute no. C2432) predicted significant increases to the potential level of savings required from 2015/16 onwards. The indication from the WG Minister for Local Government and Government Business, at the time the MTFP was produced, was for substantial reductions in funding of up to 4.5%.  The MTFP was therefore produced using the assumption of a reduction in funding of 4.5% in 2015/16, a further 4% reduction in 2016/17 and a 2% reduction in 2017/18.  Savings totalling £18.2m were identified for the period 2015/16 to 2017/18, with a shortfall in funding across these 3 years of £14.2m.  The shortfall for 2015/16 was £1.294m.

 

Anticipated Outturn 2014/15

 

5. As shown in previous revenue monitoring reports, an overall net underspend of £715k has been projected for 2014/15.  Further examination of the Policy budget shows that an additional underspend of £770k could be achieved this year and, therefore, there could be an overall underspend at year end of £1.485m.   It is proposed that this sum is transferred into the School Investment Strategy reserve to finance further work to be undertaken as part of the Schools Investment Programme.

 

Revenue Settlement 2015/16

 

6. WG has provided the Council with final figures for next year’s settlement. This Council’s total Standard Spending Assessment (SSA) has been notified as £212.717m, which represents an adjusted decrease of £2.572m over 2014/15. Transferred into the settlement are resources totalling £374k of which £54k relates to the Local Government Borrowing Initiative (LGBI) for 21st Century Schools, £280k for the Integrated Family Support Service and £40k for Autistic Spectrum Disorder.  There were transfers out of the settlement totalling £125k of which £97k was for Student Finance Wales, £18k was for Feed Safety Controls and £10k related to the National Adoption Service.

 

7. WG requires each local authority to compare its total budget for education to its IBA (Indicator Based Assessment).  It must then report on the reasons why it may have chosen to set a budget for education that differs from its IBA (£95.759m for the Vale). The report will need to be made available for consideration by the Council’s Schools Budget Forum, full Council and by WG. A proposed draft of this report is attached at Appendix A. 

 

8. The Council will receive from WG Revenue Support Grant (RSG) of £116.184m and Non-Domestic Rates of £36.297m. These amounts together total £152.481m and constitute the Council’s Aggregate External Finance (AEF).

 

9. When taking into account the above, the effective reduction in AEF for the Council is 3.4% (£5.4m). This is £1.7m less than the 4.5% (£7.1m) assumed in the Medium Term Financial Plan and was sufficient to cover the shortfall for 2015/16 as outlined in paragraph 4.

 

10. WG has announced that the Outcome Agreement Grant allocated to the Vale is £1.255m. This is an unhypothecated grant (i.e. not earmarked for particular services). The Council is not guaranteed to receive the full amount of the Outcome Agreement Grant. The proportion of the grant eventually received in 2015/16 is determined by a ratings score of the Council’s performance in achieving its 2014/15 Outcome Agreement targets.

 

11. Revenue funding for collaborative initiatives of £1.35m had been anticipated from WG for 2015/16, under the continuation of the Regional Collaboration Fund (RCF). The RCF funding is being utilised to support existing initiatives associated with social care, the Regulatory Services shared service, Cyd Cymru energy, the Cardiff and Vale Sexual Assault Referral Centre and Alcohol Treatment Centre. However, WG have now advised that the level of funding for 2015/16 will be reduced to £728k.  Funding from the Intermediate Care Fund (ICF) which was used to build on effective working across health, social services and housing, to improve the planning and provision of integrated services, was only approved by WG for the year 2014/15.   WG have now announced that £20m will be made available, to take forward schemes which have a proven effectiveness across community and acute environments, linking out-of-hospital care and social care to strengthen the resilience of the unscheduled care system.  Presently, it is unclear how this funding will be allocated.  

 

12. Further details on the projections for 2016/17 and 2017/18 are addressed later in this report.

 

Budget Strategy 2015/16

 

13. Cabinet approved the Budget Strategy and Timetable for 2015/16 on 30th June 2014 (minute no. C2363). As part of this strategy, Directors were requested to review savings already approved, with a view to implementing them ahead of the target date and to consider areas for further savings.  Areas for additional savings were identified as part of the 2014/15 MTFP.

 

14. The 2015/16 initial revenue budget proposals showed a provisional shortfall against base budget of £7.761m rising to a possible £13.438m if all cost pressures were to be funded. If all assumed savings of £8.857m were achieved, this would leave a shortfall in 2015/16 of £4.581m.  The Budget Working Group (BWG) has undertaken further work to formulate the final revenue budget proposals contained in this report.

 

 

15. In particular, the BWG has had regard to the need to achieve a balanced budget both for 2015/16 and in future years. This included:

  • The results of consultation with the Schools Budget Forum, scrutiny committees and external stakeholders;
  • Ways in which cost pressures can be reasonably reduced or mitigated;
  • A further review of the proposed savings for 2015/16;
  • The progression of corporate projects on income generation, transportation costs and buildings;
  • The existing financial strategies in place for Education & Schools, Social Services and Other Services;
  • Possible increases in council tax;
  • The projected funding position for 2016/17 and 2017/18;
  • The potential to use substantial levels of reserves as part of a defined financial strategy and to allow a more thorough review of options for savings and their implications, alternative methods of service delivery and collaborative ventures.

16. During 2014/15, additional pressure has been placed on staffing budgets as a result of various changes.  The employer’s superannuation contribution for non-teaching staff increased from 21.5% to 22.7%.  This has been assessed as an additional cost of £479k per annum (excluding schools).  There will also be an increase in the employer’s superannuation contribution for teaching staff from September 2015, which will result in an increase from 14.1% to 16.4% and will cost £502k in 2015/16.  This represents an anticipated full year cost of £860k for schools.  A NJC pay award was agreed with effect from 1st January 2015.  The anticipated full year cost of this is an increase of £188k per annum over and above the 1% already provided for in the 2015/16 budget (excluding schools). 

 

17. The impact of the extension of the 2011 Single Status Collective Agreement, was reported to Cabinet on 17th November 2014, minute number C2530.  Changes to the calculation of annual leave pay for term time only employees resulted in a potential increase in costs for schools of £323k. 

 

18. These pressures on budgets have been considered by the BWG.  £561k was set aside as part of the 2014/15 budget setting process to fund the potential increase in employer’s superannuation for non-schools staff.  It is proposed that the required funding of £479k is transferred into service budgets and that the remaining balance is given up as a general saving in 2015/16.  Staff budgets have already been provided with a 1% increase for pay inflation in 2015/16 and it is considered that the £188k balance over and above can be managed by individual services.  With regard to schools, they have received an increase in funding in line with the Minimum Funding Commitment during recent years and the same is proposed for 2015/16.  The BWG considered that funding 50% of both the 2015/16 additional teachers pension costs and the Single Status Collective Agreement would, therefore, be appropriate.

 

Consultation with Scrutiny Committees

 

19. The 2015/16 initial revenue budget proposals were considered by Cabinet on the 17th November 2014 (minute no C2533) and by each Scrutiny Committee during December 2014.  In addition to noting the initial revenue proposals, the following recommendations were made by Scrutiny Committees :

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

(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)  - 2nd December, 2014 :

(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.

20. The recommendations of each Scrutiny Committee were referred to the Corporate Resources Scrutiny Committee, which is the lead Scrutiny Committee on the budget.  Corporate Resources on 9th December 2014 made the following recommendation :

(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.

21. Corporate Resources Committee’s recommendations were referred to Cabinet on 12th January 2015, minute number C2598.  The BWG have noted all the Scrutiny recommendations and the issue raised by the Social Care and Health Committee is addressed in the Social Services section of this report and the request for future information from the Economy and Environment Committee has been addressed directly by the relevant Directors.

 

Consultation with External Stakeholders

 

22. As part of the 2015/16 initial budget proposals, consultation was also carried out with external stakeholders and the results are attached at Appendix B.  Engagement with residents and service users, as well as with the Local Service Board (LSB), 50+ Strategy Forum, Vale Viewpoint panel, Vale Council for Voluntary Services and town and community councils was facilitated by Council officers, via questionnaires and focus groups. The Vale Youth Forum also participated in answering the questionnaire.

 

23. A budget priorities survey was carried out with Vale residents to ascertain how they prioritised the services they used.  The services that were rated with the highest level of importance were Primary and Secondary Schools, refuse collection and recycling and Child Health and Disability Support.  A number of residents also supported the possibility of alternative forms of service delivery as a way of reducing cost, specifically working more closely with strategic partners and the third sector.

 

24. Residents were also asked – “The demand for our services and the cost of delivering them is increasing, however, in the future we will have considerably less money to deliver them.  What would you suggest we do differently to enable us to meet this challenge?”.  Some residents were supportive of merging with another local authority whilst others took an opposite view. Similarly, there were differing views of the potential for contracting out services.  A number of respondents said that they would like to see a reduction in both the numbers and the cost of management and councillors alike and some suggested that changes could be made to waste collection, street lights could be switched off and volunteers could be used more.

 

25. Budget priorities for the future were discussed with the 50+ Strategy Forum. The general consensus was that adult social care was considered to be a top priority and concerns were expressed about the impact of possible reductions in funding.  Public transport was also considered a high priority and public conveniences and public seating were seen as being essential to enabling older people enjoy the communities they live in.

 

26. The Vale Viewpoint Panel discussed the role of the community and volunteers.  The group generally agreed with the principle of using volunteers but that the management and specifics required further consideration.  The commissioning of services from other organisations could also have merit but the quality of service delivered should remain unaffected.  It was also suggested by some that ways of generating additional income to support services should be investigated. 

 

27. A response was received from the Cardiff & Vale University Health Board (UHB) which is attached at Appendix B, the main aspects being as follows :

  • Due regard is given to the effect of any proposed cuts on inequalities linked to deprivation.
  • Standard equality impact assessments should be applied to proposals. In particular given the predicted growth in the older people’s population.
  • Recognition of the influence of the built and natural environment as one of the wider determinants of population health.
  • Transport infrastructure is a key factor ensuring equitable access to services and facilities including health services.
  • Specific comments were made in relation to savings relating to Children’s and Adult Services, the transport review, the Public Protection collaboration and grants to the third sector. 

 28. The BWG has had regard to all of the above consultation results when formulating the final budget proposals for 2015/16 and beyond. Proposals in respect of certain of the issues raised are detailed in the appropriate service headings under the Proposed Budget section of this report.  In particular, additional scarce resources have been allocated to schools, placements for children with additional learning needs, adult social care and waste whilst existing savings targets have been deferred in respect of public conveniences and transportation.

 

29. Reducing inequality continues to be a core theme of the partnership agenda directed by the LSB of which the Council is a key partner. Every saving which has been put forward under these final budget proposals will be subject to an equalities scoping exercise and, where relevant, a full impact assessment will be carried out prior to implementation.  The BWG is aware of the pressure on both health and its own services due to the increase in the older people’s population and supports the Council’s commitment to continue working together with Health and other agencies in order to establish collaborative approaches to managing the issues that affect us.

 

30. The BWG acknowledges that alternative forms of service delivery are an important way of achieving savings and various options are being assessed as part of the Council’s Reshaping Services Programme.  These will include cross cutting areas such as working with town & community councils, demand management, effectiveness of spend and income generation. The comments raised by stakeholders regarding maintaining standards of service for future provision will also be addressed as part of the Reshaping agenda.

 

31. Any comments made regarding local authority reorganisation have now been superseded by the Welsh Government’s decision not to progress any of the voluntary merger proposals, including that of the Vale and Bridgend. The impact of WG’s future merger proposals for local government will, therefore, be considered further when known.

 

Proposed Budget 2015/16

 

32. The proposed budget for 2015/16 has been set in line with the current financial strategy and a summary of the overall position is attached at Appendix C.

 

33. Asset rentals are accounting adjustments reflecting charges to services for the use of assets. They do not constitute “real” expenditure and are reversed out and replaced by the cost of capital within Policy. Similarly IAS 19 changes are technical accounting adjustments to the costs of pension contributions, which are reversed out in Policy. Neither of these adjustments are therefore a part of the total expenditure of the Council.

 

34. Recharges/transfers relate to movements in charges between internal Council Services and the transfer of functions. Overall there is a neutral impact on the budget.  

 

35. Budget Adjustments have a net total of £410k of which £433k relates to the reversal of one-off funding previously provided to services, £101k relates to the reduction in the Fire Authority Levy less £124k for the change in the use in 2015/16 of the Social Services Fund.

 

36. Inflation (excluding schools) amounts to £2.276m of which £1.721m (2%) relates to general price increases and £555k relates to the allowance for pay inflation (1%). 

 

37. The BWG has reviewed and updated the cost pressures. Those which cannot be mitigated or reduced are included within the Net Growth figure of £3.005m. The breakdown of this sum is shown at Appendix D.

 

38. The savings have also been reviewed by the BWG and have been reprofiled over the 3 year period.  Where possible, some savings have been brought forward, while for others, it was considered that further time would be required for their implementation and amendments were required to fit in with the Reshaping Services programme.  For 2015/16 these total £6.847m and details are included at Appendix E.  

 

39. As previously proposed, it is intended that £2.5m of the Council Fund Reserve will be used during 2015/16.

  

Services

Learning and Skills



Educ./

Schools

Libraries

Adult Comm Learning

Youth Services

Catering

Total


 £’000

£’000

£’000

 £’000

£’000

£’000

Budget 2014/15

93,369

2,589

204

1,084

1,743

98,989

Recharges/Transf.

7

(63)

45

11

32

32

Inflation

234

26

15

16

31

322

Net Growth

929

0

0

0

0

929

Savings

(545)

(229)

(2)

(43)

(77)

(896)

Changes in Asset Rentals/IAS 19 

92

36

3

(25)

27

133

Budget 2015/16

 

94,086

 

2,359

 

265

 

1,043

 

 

1,756

 

99,509

 

40. There has been a transfer into the settlement from WG of £54k to support the Local Government Borrowing Initiative (LGBI) for 21st Century Schools and this initiative has also resulted in an additional burden for the Council of £69k.

 

41. WG have continued to build into the settlement protection for schools via their Minimum Funding Commitment (MFC), which is equivalent to 1% above the change in the Assembly’s block grant funding allocation from the UK Government. To fulfil WG’s commitment, councils need to ensure that their net Individual Schools Budget (ISB) is increased by at least this percentage and then adjusted for changes in pupil numbers.

 

42. The 2015/16 MFC of 0.6% has been applied to the net Individual Schools Budgets. The protection applied to schools in these budget proposals is, therefore, in accordance with the Minimum Funding Commitment and more information on the exact calculation for the Vale’s schools is shown in Appendix A.

 

43. The details of net growth are shown at Appendix D. This includes the net MFC increase of £263k. There have also been further increases of £251k relating to the increase in employer’s superannuation for Teaching Staff and £162k for the extension of the 2011 Single Status Collective Agreement approved by Cabinet on 17th November 2014.  It was apparent from the consultation process that residents considered schools to be a high priority service and therefore the BWG thought it appropriate to provide this additional funding over and above the minimum requirement.

 

44. In line with previous commitments, funding of £50k has been provided for the cost of children’s placements and £80k for the reducing levels of out of county income.  The Directorate will be required to manage pressures in these areas of the service in future years.

 

45. Savings for Learning and Skills in 2015/16 total £896k.  Full details of the savings are shown at Appendix E.

 

46. The Director of Learning & Skills intends to prepare a further medium term service and financial strategy specifically for Education.  The strategy will identify the options necessary to keep the service within its likely resources and meet savings.

 

47. The Director of Learning & Skills will also set out how she will provide support to schools in planning their own budgets over the medium term and achieve the savings required to meet their net cost pressures.

 

48. It is suggested that the Schools Budget Forum be consulted before any final decision is made on the split of the funding between Central Education and the Schools. It is recommended that delegated authority be given to the Director of Learning & Skills to determine the split in the light of that consultation, subject to the minimum WG target for the ISB being met.

 

Social Services

 



Children & Young People

Adult

Services

 Business Mgmt. &

Innovation

YOS

Total


£’000

£’000

£’000

£’000

£’000

Budget 2014/15

14,761

36,628

301

664

52,354

Recharges/Transf.

(543)

(262)

87

(17)

(735)

Adjustments

35

89

0

0

124

Inflation

220

633

51

10

914

Net Growth

270

1,056

0

0

1,326

Savings

(343)

(956)

(166)

(3)

(1,468)

Changes in Asset Rentals/IAS 19

97

230

46

18

391

Budget 2015/16

14,497

37,418

319

672

52,906

 

49. There have been transfers into the settlement from WG of £280k for the Integrated Family Support Service and £40k for Autistic Spectrum Disorder.  There has also been a transfer out of the settlement of £10k for the National Adoption Service.

 

50. The latest projected outturn for Social Services this financial year indicates an overspend of £100k. There remains continuing pressures on the service, particularly in relation to the cost of adult care packages which is projecting to outturn this year £800k over budget.  This overspend relates mainly to domiciliary care packages provided for frail elderly clients.  When the full year effect of this year’s commitment is projected into 2015/16, it is anticipated that this could result in an additional £1m of expenditure.   

 

51. The details of the net growth are shown at Appendix D.  The financial strategy for the service previously proposed a £75k contribution in 2015/16 towards the increase in Children and Young People Services’s costs.  However, as the Children’s Services budget for 2014/15 is anticipated to outturn with an underspend of £500k and with increasing pressure on the Community Care packages budget, it is proposed that this funding is redirected to Adults Services. Having regard to the current financial pressures and the results of the budget consultation, where concerns were raised by the Social Care and Health Scrutiny Committee, the Cardiff & Vale University Health Board and other external organisations regarding the increasing older persons’ population, the BWG acknowledges the issues in this area.  Not only is there an increase in the population, but clients are increasingly frail with complex needs.  There is a ‘knock on’ effect from pressures within Health and work is being undertaken to ensure integration between the two services. However, this will take some time to show results and make a significant impact and it is, therefore, proposed that an additional £903k should be included in the budget. However, the Service must ensure that it is providing the appropriate packages to clients.  £113k has been earmarked to meet the future growth in Young People with Learning Disabilities (transitions reaching the age of 18). As detailed earlier, the ICF grant will end in its current format in March 2015 and the RCF grant will be reduced during 2015/16. While it is recognised that there are great pressures on the Adult Services budget and that demand is very volatile, the Director of Social Services is asked to mitigate, where possible, the ever increasing demands and should review and implement alternative ways of working and managing demand.

 

52. Savings for Social Services in 2015/16 total £1.468m.  Full details of the savings are shown at Appendix E.

 

53. During 2012/13, the Social Services Budget Programme was established which outlined a series of savings for future years and provided the required funding for the managed reduction of the budget, via the setting up of the Social Service Fund.  The greater the delay in achieving the savings, the higher the use of funding required to cover budget shortfalls. This had to be set against the need to allow sufficient time to ensure that the savings are achievable and sustainable. The following table provides the time-frame for recovery and shows the continued use of the Social Services Fund.

 


Financial

Year

Savings

Target

Use of

Fund


£’000

£’000

2015/16

1,468

2,075

2016/17

1,133

970

2017/18

320

650

2018/19

320

330

2019/20

330

0

Total

3,571

4,025

 

 

 

 

 

 

 

 

 

 

 

 

 

54. The Director of Social Services should continue to review the Social Services Budget Plan and take the necessary action to achieve the level of savings required in accordance with the above timeframe. It is also essential that tight control over expenditure is achieved and that no further overspending occurs. 

 

Visible and Housing Services

 



Environment

And Visible

Parks and

Ground Maintenance

Building

Services

Council Fund Housing

Total


£’000

£’000

£’000

£’000

£’000

Budget 2014/15

17,912

3,528

0

1,066

22,506

Recharges/Transf.

(106)

23

(97)

352

172

Adjustment

(300)

0

0

0

(300)

Inflation

263

38

9

12

322

Net Growth

585

0

0

0

585

Savings

(1,884)

(130)

0

(212)

(2,226)

Changes in Asset Rentals/IAS 19

441

44

88

0

573

Budget 2015/16

16,911

3,503

0

1,218

21,632

 

55. Details of net growth are attached at Appendix D.  As part of the consultation process, residents considered recycling to be a high priority service and, therefore, the BWG thought it appropriate to provide £85k to support the increase in the Waste Recycling contract.  In 2013/14, £300k had been included in the budget for a period of two years for the Big Fill initiative.  The BWG have considered that further funding would benefit the Council’s highways and, therefore, it is proposed that £500k is included in the 2015/16 budget on a one-off basis.

 

56. Savings for 2015/16 are shown at Appendix E and total £2.226m.  The Prosiect Gwyrdd (PG) waste plant is due to be fully operational during 2016/17.  The site is, however, currently operational, albeit under test conditions.  The Council will be able to utilise the facility during 2015/16 but will not be able to rely on the eventual contractual terms and conditions associated with PG and the facility could close at any point during the testing period.  It is, therefore, considered that part, but not all, of the proposed 2016/17 saving will be achievable during 2015/16 and £588k has been brought forward.  The service has also confirmed that the Street Cleaning savings of £50k per annum, in both 2015/16 and 2016/17 can be increased by £200k to £250k per annum.  

 

57. Following further review of the savings by the BWG and as a result of consultation, some of the savings identified for 2015/16 have been put back by one year to 2016/17 e.g. £100k Public Conveniences.

 

Development Services

 



Public Protection

Private Housing

Planning &Transp.

Leisure

Economic Develop.

Total


£’000

£’000

£’000

£’000

£’000

£’000

Budget 2014/15

2,231

11,744

5,306

3,515

832

23,628

Recharge/Tranf

161

(769)

6

(111)

13

(700)

Adjustments

0

(25)

(75)

(13)

(20)

(133)

Inflation

27

209

97

10

13

356

Net Growth

(18)

0

0

0

0

(18)

Savings

(115)

(121)

(212)

(935)

(28)

(1,411)

Changes in Asset Rentals /IAS19

40

9

48

15

15

127

Budget 2015/16

2,326

11,047

5,170

2,481

825

21,849

 

58. There has been a transfer out of the settlement of £18k for Feed Safety Controls.

 

59. Savings for 2015/16 are shown at Appendix E and total £1.411m.  £210k relates to working with Parkwood to realise further savings from the Leisure Centres contract.  Savings in respect of transportation have been deferred both as a result of the consultation process and in order to allow the progression of the corporate work stream in respect of transportation generally.

 

Managing Director



Resources

 

General Policy

 

Total


£’000

£’000

£’000

Budget 2014/15

380

18,974

19,354

Recharges/Transf.

814

417

1,231

Adjustments

0

(101)

(101)

Inflation

334

28

362

Net Growth

(97)

280

183

Savings

(728)

(118)

(846)

Changes in Asset Rentals/IAS 19

260

(1,484)

(1,224)

Budget 2015/16

963

17,996

18,959

 

60. There has been a transfer out of the settlement of £97k for Student Finance Wales. 

 

61. The details of net growth are shown at Appendix D and include committed growth of £180k for the provision of debt charges.  Energy saving initiatives could have the potential to save the Council revenue funding in future years.  It is, therefore, considered that a sum of £100k be provided in 2015/16, on a one-off invest to save basis, for energy and other green initiatives.

 

62. Savings for 2015/16 are detailed at Appendix E and total £846k. £728k is attributable to Resources and £118k for General Policy.

Financial Strategy for 2016/17 to 2017/18

63. The 2014/15 final budget proposals were informed by a budget review exercise that included the reappraisal of the Council’s financial strategy. Consequently, separate strategies were put in place for Education & Schools, Social Services and all Other Services.

 

64. The BWG has continued to have regard to the continued appropriateness of these strategies given the significant level of savings that now have to be found, the relative size of the Education & Schools and Social Services budgets as a proportion of the Council’s net budget requirement and the results of the consultation process.

 

65. It has been assumed that the MFC for schools will remain until at least 2017/18. Education & Schools increases should at least match the overall percentage change in the Council’s budget as amended for adjustments to the council tax reduction scheme (CTRS) and the council tax base. The Council will continue to strive to ensure that the budget for Education will be the same proportion of the Council’s total budget as the Education SSA is to the total SSA where it is feasible to do so. This will be dependent on future settlements.

 

66. The BWG considers that the principles applied above to Education & Schools also continue to apply to Social Services. It is proposed that the financial strategy for all Other Services remains in place. This will require services to manage downwards or meet the bulk of their cost pressures through additional savings.  However, the Council is still mindful of its corporate priorities aimed at reducing poverty and increasing prosperity. Where practical, therefore, the Council will strive to maintain those Other Services that also contribute to this agenda.  For the purpose of these projections, it has been assumed that the financial strategies set out in this report for Education & Schools and Social Services will continue to be applied.

 

67. WG has not provided the Council with indicative settlement figures for 2016/17 onwards.  The MTFP was based upon a cash reduction of 4% in 2016/17 and 2% in 2017/18. Each 1% change in AEF affects the Council by approximately £1.5m.  It is assumed that the same levels of reduction are used for these projections.

 

68. Pay and price inflation (excluding schools) is estimated at £2.902m based upon a 1% uplift for both areas over the two years.  Previously, in the MTFP and the initial revenue proposals for 2015/16, general price inflation for 2016/17 and 2017/18 had been included at a rate of 2%.  However, with the reduction in CPI, the BWG has considered that this level should be reduced to 1%.  This provides a total saving of £1.77m for 2016/17 and 2017/18.

 

69. In August 2014, Cabinet agreed in principle to instituting a Reshaping Services strategy and change programme.  This programme is the Council’s proactive response to central government’s austerity drive that has created a period of unprecedented financial pressure in the public sector.  A report on the Reshaping Services Programme was presented to Cabinet on 26th January 2015, which identified service areas to be considered as part of Tranche 1 and Tranche 2 of the programme.  For Tranche 1 savings, business cases will be developed during 2015 with planned implementation from early 2016.  For Tranche 2 savings, business cases will be developed during 2016 with implementation planned for early 2017.  The initial savings targets that have been identified as part of the alternative service delivery and efficiency service reviews for both tranches are £2.25m in 2016/17 and £3.65m in 2017/18.  It is anticipated that a further £700k could be identified from additional projects within the corporate work streams, thus providing total savings through the programme of £6.6m.  It must be noted that targets are subject to change and will be informed by the next iteration of the Medium Term Financial Plan and developments in the external funding environment in which the Council operates.  Appendix G shows the proposed savings targets for 2016/17 and 2017/18 which includes both the updated savings targets proposed as part of the initial budget proposals for 2015/16 and the additional savings targets identified through the Reshaping Services Programme.  Savings targets now set total £17.822m over the two years.

 

70. Cost pressures for future years have been considered and assessed by the BWG and total £7.48m for 2016/17 and 2017/18.  Details are attached at Appendix F. This includes the MFC for schools which is estimated at £985k over the 2 years. Any further cost pressures will need to be managed down or mitigated by Services in order to avoid further savings targets being required.

 

71. There is also an assumed reduction in the use of the Council Fund Reserve over the period.  The projections include a £1.5m use of the Council Fund Reserve in 2016/17 with no further call on the reserve thereafter, thus the required £7m minimum balance considered necessary by the Council’s Section 151 Officer should be maintained. 

 

72. Assuming a council tax increase in each of the two years of 2% and adjustments for ‘one-off’ items flowing from the 2015/16 budget, the table below shows a balanced position for the period. It must however be emphasised that these projections are based upon information available at the time and they will be subject to change e.g. changes in AEF.  The projection is also based upon the assumed achievement of a high level of savings.  If these savings are not achieved or are not implemented in the year required, or additional cost pressures are not mitigated, then the balanced position will need to be reassessed and replacement savings identified. 


 Financial Projections to 2017/18

2016/17

2017/18

Total


£’000

£’000

£’000

Assumed Decrease in AEF (4% and 2%)

6,099

2,928

9,027

Cost Pressures (inc MFC for Schools)

4,852

2,628

7,480

1% Pay and 1% Price Inflation (excl. schools)

1,439

1,463

2,902

Net Savings Targets

(12,170)

(5,652)

(17,822)

Assumed 2% Gross Council Tax Increase

(1,197)

(1,221)

(2,418)

Adjustment for ‘One Off’ Items

505

320

825

(Surplus)/Shortfall in Savings Required

(472)

466

(6)

Reserves

73. Reserves are a way of setting aside funds from budgets in order to provide security against future levels of expenditure and to manage the burden across financial years. Funds no longer required may be transferred to the Council Fund surplus and then set aside for other purposes or used to reduce council tax.

 

74. The Council has always taken a prudent approach with regard to Specific Reserves and uses them to mitigate known risks (financial and service) and contingent items, e.g. Insurance Fund. Other Reserves have been established to fund Council priorities, e.g. Visible Services and in particular the Capital Programme, e.g. School Investment Reserve, Project Fund, Building Fund. This is important as the Council has limited capacity to realise sufficient sums from the sale of assets for capital investment. Sums have also been set aside to assist in budget management, e.g. Early Retirement Fund. The Housing Revenue Account Reserve is ring-fenced to Housing and the majority will be used to fund improvements to the Council’s housing stock.

 

75. The Section 151 Officer’s view is that the minimum level for the Council Fund Reserve is £7m. This is considered sufficient to cover unforeseen expenditure whilst, in the short term, maintaining a working balance. Unforeseen expenditure can be substantial and several instances can occur in a year. Whilst there is no set requirement for the minimum level for the Council Fund Reserve, some commentators use 5% of the net budget as a guide. For the Vale this is currently about £10.6m. However, in view of the prudent approach the Council takes with regard to Specific Reserves, £7m is considered a reasonable minimum.

 

76. The Council presently benefits from a reasonable level of reserves, however, they are not inexhaustible and have taken years of careful financial management to develop to their current level.

 

77. As part of the usual Budget process, an examination of the level of reserves was undertaken to ascertain their adequacy and strategy for use. The reserves were examined with a view to their level (i.e. whether the amount held in the fund is sufficient to requirements) and purpose (i.e. whether the need to hold the fund is still relevant).

 

78. The requirement for each specific reserve has also been considered in light of the Council's priorities and it has been deemed necessary to move funding from lower priority areas to higher priority areas.  As a result, it was proposed as part of the Initial Revenue Budget proposals for 2015/16, that £3.5m of specific reserves were unearmarked and transferred to the Schools Investment Strategy Reserve to allow for the continued investment in school buildings and their development.  It is now proposed that in addition, £1.485m be transferred to the Schools Investment Strategy Reserve, funded by the projected under spending on revenue in 2014/15.

 

79. The estimated level of the Council Fund Reserve at 1st April 2015 is £11.46m. The proposed budget for 2015/16 assumes a use of £2.5m from the Council Fund Reserve to fund revenue expenditure. On this basis the reserve is estimated to fall to £8.96m at the end of 2015/16. The strategy for 2016/17 and 2017/18 assumes the further use of £1.5m of the Council Fund Reserve to fund the revenue budget in 2016/17 leaving a balance of £7.46m as at 31st March 2017.

 

80. It is projected that the aggregate nursery, primary and secondary balances will be £1.71m surplus at 31st March 2015. 

 

81. Attached at Appendix H is a schedule showing the reserves and the anticipated balances at the 31st March 2015, 2016, 2017 and 2018.  The Appendix sets out the title of the reserve together with its purpose. A summary of the position is set out below:


Summary of Estimated Reserves Projected to 2017/18

Est. Bal.

31/3/2015

Net

Movement

Est. Bal.

31/3/2018


£’000

£’000

£’000

General Reserves

11,460

(4,000)

7,460

Specific Reserves

49,580

(26,036)

23,544

Total Council Fund Reserves(excl. Schools)

61,040

(30,036)

31,004

Schools Balances

2,210

(1,200)

1,010


 

 

 

Total Council Fund Reserves

63,250

(31,236)

32,014

 

82. The above table shows that there is a large fall in the level of reserves over the 3 year period as substantial calls on funds are made. However, these are still deemed to be adequate as known risks are largely covered and the Council Fund Reserve is at a reasonable level (not expected to fall below £7m).

Resource Implications (Financial and Employment)

83. The total budget shown at Appendix C is £212.355m. After adjusting for discretionary rate relief of £200k, it is £562k below the Council’s SSA of £212.717m. The 2014/15 budget was £0.910m below the SSA.

 

84. The Council’s SSA (IBA) is an indication of the relative resources needed to provide a standard level of service. It is based on statistical data and formulae, any of which can be flawed in assessing need. It is used primarily as a method of distributing AEF. It is not an absolute indicator of a required spending level for a particular service in a particular area. It is for local councils to best determine their own spending priorities in light of local circumstances.

 

85. If the Council decides to budget at £212.355m, deducting from this Revenue Support Grant of £116.184m, redistributed non-domestic rates of £36.297m produces a requirement of £59.874m to be met from council tax. Dividing this by the council tax base of 55,980, gives a level of council tax for this Council’s purposes (excluding police and community council precepts) for Band D properties of £1,069.56. This is an increase over the current year of £40.14 or 3.9%.

 

86. The average of the Council Tax set by councils in Wales for 2014/15 at Band D was £1,042.58, whilst the Vale’s was £1,029.42. The BWG’s view is that the proposed increase in Council Tax at 3.9% is a reasonable compromise between the pressure on services, particularly in light of the significant reduction in AEF and consequent level of savings required and the financial pressures facing council taxpayers.

 

87. The proposed budget uses £2.5m of the Council Fund Reserve. The estimated balance on the Council Fund at 31st March 2016 is £8.9m. The use of reserves for funding recurrent expenditure is clearly not sustainable. Given the level of savings already identified and the lead time for their implementation, it is, however, anticipated that repayments to the Council Fund Reserve will not commence until 2016/17. With the proposed strategy, it is currently estimated that by 2017/18 no use of the Council Fund Reserve will be required.

 

88. The 2014/15 MTFP projected a shortfall in funding over the next 3 years of £14.2m even after the identification of £18.2m of savings, thus resulting in the potential requirement for £32.4m of savings. This £14.2m shortfall in funding has now been identified through various sources, including a lower than anticipated reduction in the WG settlement of £1.7m, a reduction in the level of inflation to be provided to services of £2.2m, an increase in Council Tax above the assumed figure of 2% plus a change in the Council Tax base totalling £2.1m, a review of cost pressures resulting in a reduction of £1.7m (including changes to one off adjustments) and an increase in identified savings of £6.5m.  The savings target for the next three years is, therefore, £24.7m.

 

89. The projections have been based on the assumed cash reduction in AEF from WG of 4% in 2016/17 and 2% in 2017/18.  No indications have yet been provided from WG for these years and therefore the MTFP will revise future year projections when further indication is provided. Each 1% change in AEF affects the Council by approximately £1.5m.

 

90. In order for the Council not to be exposed to unacceptable risk it is essential that all Services maintain their expenditure within budget and that this is a major priority for Directors, Heads of Service and all Managers.  Any further cost pressures will need to be managed down or mitigated by Services.

 

91. There are risks in the budget and the most significant of these are set out in this report. Social Services care packages budget is currently overspending.  Even though additional funding has been proposed for 2015/16, further action will need to be undertaken by the Director of Social Services to achieve a balanced budget.

 

92. The budget recovery plan for Social Services requires an estimated £4.025m from the Social Services Fund to cover revenue expenditure over the next 4 years to give the Service time to plan and implement remedial action, in order to bring their expenditure within their base budget.

 

93. Savings of £24.669m need to be achieved over the next 3 years.  This figure is extremely challenging and will need to be delivered in full and on time.

 

94. Pay and price inflation is a further risk.  In 2016/17 and 2017/18, provision has been made in the budget at a rate of 1% for each element. The Consumer Price Index has been gradually reducing and for the year to December 2014 was 0.5%.  Services will need to manage spending if inflation rises about the 1% included in their budgets. 

 

95. In 2014/15, the Council will receive around £71m in specific grant and subsidy. The budget proposals assume that any reduction in specific grant will be matched by a reduction in expenditure. Details on all specific grants have not yet been finalised and there is a risk that should grants be cut and it is not possible to reduce expenditure correspondingly, the Council could overspend. This risk should be mitigated by the fact that Services should have in place “exit” plans for any specific grant ceasing and are usually aware of likely developments in the level of grant. Regular revenue monitoring should provide a warning should there be problems. In the first place each Service would be expected to fund any shortfall from its revenue budget. Ultimately, there is sufficient in reserves to cover for this contingency, but only in the short term.    

 

96. The budget proposals will have implications for the Council’s 6,000 employees (4,000 in full-time equivalents) and there will be a loss of jobs. 

 

97. The reduction for 2015/16, excluding schools, is estimated to be around 45 in full-time equivalents (FTE).  Although the impact on individuals is likely to be mitigated as a result of natural wastage and the deletion of vacant posts, it is, nevertheless, expected that there will be a number of redundancies. 

 

98. The above figures do not include the staffing implications relating to budget pressures within schools as the details need to be considered by individual Governing Bodies and supported by the Director of Learning & Skills. Individual schools will also be impacted by whether they have growing or falling pupil numbers. There are, however, likely to be staff reductions and redundancies depending on each schools circumstances. The Director of Learning & Skills will need to establish the impact of the budget on employees in schools.

 

99. The Council has an Avoiding Redundancy Procedure that will be followed and includes a requirement for the Council to search for suitable alternative employment. The numbers of employees referred to are those impacted in the budget. There could be further staff implications from other restructuring exercises during the year.  

 

100. The trades unions will continue to be consulted on the details of any potential redundancies once known, as will the Government Department for Business Innovation and Skills in accordance with the Council’s own local procedures and statutory requirements.

 

101. In light of the staffing implications it is essential to ensure that consultation with the trades unions is carried out in accordance with the Council’s Avoiding Redundancy Policy  and related legal requirements. A Change Forum meets regularly with the trade unions to help co-ordinate the consultation process and deal with cross- directorate issues.

 

102. The number of potential redundancies over the next few years has required strengthening of the Council’s redeployment processes, the tightening of the Council’s vacancy control processes and the pursuit of other measures as set out in the Council’s Workforce Plan. Where appropriate this may involve a targeted search for voluntary redundancies/reduced hours.

 

Statement of Section 151 Officer on Robustness of Estimates

103. The Local Government Act 2003 requires that the Section 151 Officer (currently the Head of Finance) must report on the robustness of the estimates, which are to be approved by Council. This Section constitutes that assurance.

 

104. In view of the uncertainties of the current and future economic climate there is increased risk facing the Council’s financial position and, as a consequence, the delivery of services. This has been recognised and referenced within this report, where relevant, together with actions that can be taken to manage that risk.

 

105. Savings are regarded as extremely challenging but achievable and have been carefully examined with risk and measures to mitigate them identified. It is important to stress the importance of the mitigating actions being implemented and the need to consider equality impact assessments.

 

106. Estimates in the budget report are robust subject to any reservations/ qualification or other commentary contained in the report. All services’ expenditures are under pressure and there is always a risk that a service may overspend, particularly in light of unforeseen circumstances.

 

107. A measure to guard against this will be to monitor the budget during the year and to identify problems as they arise and put in place remedial action. Key to this will be the delivery of savings including those required under the Reshaping Services programme. Cabinet, Scrutiny and Managers continue to have a key role in reviewing and maintaining budgetary performance.

 

108. Reserves have been again reviewed and are considered adequate to cover contingencies and the risks stated in the report.

Sustainability and Climate Change Implications

109. The promotion of sustainability and action to arrest climate change is central to the work of the Council and a key consideration when allocating scarce resources to meet the needs of the present without compromising the ability of future generations to meet their own needs.

Legal Implications (to Include Human Rights Implications)

110. The Council is required under statute to fix its council tax for 2015/16 by 11th March 2015 and in order to do so will have to agree a balanced revenue budget by the same date.

Crime and Disorder Implications

111. Provision within the budget for Community Safety and other expenditures could have a beneficial effect on the reduction of crime.

Equal Opportunities Implications (to include Welsh Language issues)

112. Councils are required to comply with the Equalities Act 2010 and in particular the Public Sector Equality Duty for Wales.

 

113. The Council has an existing process for undertaking equality impact assessments and the Equality Impact Assessment (EIA) for the overall budget set out in this report is included at Appendix I.  Carrying out an EIA involves systematically assessing the likely (or actual) effects of policies on people in respect of disability, gender, sexuality (including gender identity), age, Welsh language, and racial equality.

 

114.  EIA scoping assessments will be undertaken for each of the approved individual savings for 2015/16 and, where relevant, full assessments will be completed and appropriate consultation undertaken before the savings are implemented.

Corporate/Service Objectives

115. Funds allocated in the budget contribute to the wide range of Corporate/Service Objectives as set out in the Corporate Plan.

Policy Framework and Budget

116. This report is following the procedure laid down in the Constitution for the making of the budget and needs to be referred to Council to make the final decision.

Consultation (including Ward Member Consultation)

117. Scrutiny Committees and Corporate Management Team have been consulted on the initial budget proposals. Trade Unions have been consulted informally on the potential implications of the proposals. External stakeholders were also consulted on the budget priorities.

Relevant Scrutiny Committee

118. The lead Scrutiny Committee is Corporate Resources.

Background Papers

Local Government Final Revenue Settlement letter dated 10th December 2014.

Contact Officer

Alan Jenkins

Section 151 Officer

01446 709202

Officers Consulted

Corporate Management Team

Responsible Officer:

Alan Jenkins

Section 151 Officer

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