The Vale of Glamorgan Council
Cabinet Meeting: 27 July, 2015
Report of the Leader
Budget Strategy 2016/17
Purpose of the Report
1. To submit the Budget Strategy 2016/17 (including the proposed Budget Process and Timetable) for approval.
1. Approve the Budget Strategy for 2016/17, including the requirement for Directors to prepare initial revenue budgets in accordance with a timetable agreed by the Head of Finance.
2. Request Directors to continue to progress the Reshaping Services Programme.
3. Approve the following timetable for the 2016/17 Budget Process, which includes the submission of the Medium Term Financial Plan to Cabinet in November 2015, to coincide with the production of the Draft Corporate Plan:
Timetable for the 2016/17 Budget Process
To be completed no later than
Cabinet consider the initial budget proposals and Medium Term Financial Plan
16th November 2015
Lead Scrutiny Committee responds to consultation and makes recommendations on budget proposals
15th December 2015
Cabinet makes its final proposals on the budget
22nd February 2016
Meeting of Council to consider budget and council tax resolution
2nd March 2016
Reasons for the Recommendations
1 - 3. To enable the 2016/17 budget process to be commenced.
2. The Medium Term Financial Plan (MTFP) is generally produced annually in July and incorporates the Budget Strategy for the next financial year. The MTFP forms an integral part of the Authority’s corporate framework for performance management, and should be considered in the context of the core values and priorities set out in the Corporate Plan.
3. The latest Corporate Plan was produced for 2013-2017. However, an updated Corporate Plan is due to be presented to Cabinet during October/November 2015. To allow for the financial implications of the updated Corporate Plan to be incorporated into the MTFP and thus aligning both plans, it is proposed that the MTFP is presented to Cabinet during November 2015. It is, therefore, necessary for Cabinet to approve the 2016/17 Budget Strategy separately, to enable the budget process to commence.
Relevant Issues and Options
4. Welsh Government (WG) has not provided any indication as to the level of future year's settlements. The Final Revenue Budget Proposals for 2015/16, therefore, used the indicative figures from the 2014/15 MTFP, which was based upon a cash reduction of 4% in 2016/17 and 2% in 2017/18.
5. Following the results of the recent General Election, the continuation of austerity measures is anticipated for the near future, with an in-year reduction to the Welsh Government budget estimated at £50 million (split £43m revenue and £7m capital) being instigated by the Chancellor of the Exchequer as part of a £3 billion savings targets for non-protected government departments. The impact of the Chancellor of the Exchequer's Summer Budget announcement on 8th July sees public services spending still expected to fall over the life of this Parliament at a rate comparable to the last, albeit some areas such as defence will see a cash increase. The establishment of a national living wage from April 2016 of £7.20 per hour together with the proposal to increase this to £9.00 per hour by 2020 will also have a significant impact on local authorities' pay bill. In addition, the consequence of further welfare cuts could well have a knock on effect for councils in terms of higher arrears, increased homelessness and greater demand for social services and other intervention.
6. Details of specific reductions in Government Department budgets will be known following the completion of the next Spending Review in the late autumn. Despite the establishment of a spending review 'floor' for Wales resulting from the St. David Day's Agreement, the actual level of reductions for Welsh local government or any protection allowed to particular services is unknown, as is any indication of the level of settlement for 2016/17 or beyond. This uncertainty does not provide any basis for sound forward planning.
7. As part of the Final Revenue Budget Proposals for 2015/16, the level of savings proposed for 2016/17 and 2017/18 respectively were £12.17m and £5.652m. With savings targets being at such a level, it was acknowledged that savings from efficiencies alone would not be sufficient and substantial savings would need to be found through the fundamental reshaping of Council services. The Council's Reshaping Services Programme was introduced and is now well underway.
8. Savings targets have been allocated into 2 tranches. For Tranche 1 savings, business cases are being developed during 2015 with planned implementation from early 2016. For Tranche 2 savings, business cases are due to be developed during 2016 with implementation planned for early 2017. The target savings total £6.6m and were included in the 2015/16 Final Revenue Budget Proposals. They will, however, need to be reviewed as part of the MTFP, to incorporate changes in the external funding environment in which the Council operates and to reflect the outcome of the work in developing the Reshaping Services business cases.
9. The current MTFP does not consider the potential settlement for 2018/19. It is assumed that there will continue to be a further cash reduction and this will be addressed in the next iteration of the MTFP. Directors will however need to consider the potential for further savings to be identified when carrying out the Reshaping Services reviews.
10. Taking into consideration the above financial situation, the Budget Strategy for 2016/17 proposes that in order to establish a baseline, services should prepare initial revenue budgets based on the cost of providing the current level of service and approved policy decisions and including the existing savings targets. This means the cost of price increases and any allowable pay awards should be included as advised by the Head of Finance.
11. Increases to budgets approved during the course of a financial year can restrict the freedom the Council has to allocate its resources to priorities during the following budget cycle when it is aware of all the competing demands. Consequently :
Supplementary estimates will only increase the base budget if Council has given specific approval to this effect. Increases met by virement within a year will not be treated as committed growth.
Directors should find the cost of increments and staff changes from their base budget unless the relevant specific approval has been given for additional funding.
The effect of replacing grant from outside bodies that has discontinued will not be treated as committed growth. In addition, before any project or initiative that is to be met either wholly or partly by way of grant may proceed, the exit strategy must be approved.
Certain items of unavoidable committed growth will continue and these include the effect of interest changes and the financing cost of the capital programme, increases in taxes, increases in levies and precepts charged by outside bodies and changes to housing benefits net expenditure.
Services will be expected to achieve savings already approved by Cabinet as part of the 2015/16 final budget proposals and Directors are asked to continue work on achieving their Reshaping Services savings targets.
It is envisaged that the costs of service development will need to be met from within the respective directorates.
12. Having regard to the above, it is, therefore, proposed in respect of the 2016/17 Budget Process that Directors be instructed to prepare initial revenue budgets in accordance with a timetable agreed by the Head of Finance. 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 2015/16 Final Revenue Budget report.
Budgets to be broken down subjectively and objectively in as much detail as deemed appropriate by the Head of Finance.
Budget reports to include revised estimates for 2015/16.
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 2015/16 Final Revenue Budget report. Any savings made directly by services over and above individual service targets to count towards future saving targets or to meet unavoidable service cost pressures.
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 part of the Final Capital Budget Proposals for 2015/16 to 2019/20, a 5-year programme was set for the Council. This will, however, have to be reviewed and formal bids must be made for all capital schemes, irrespective of whether they may be present in the current Capital Programme. It will be the responsibility of each Director to co-ordinate capital bids for their services and to ensure that, in view of the limited resources that will be available, only the highest priority bids are submitted in the approved format in accordance with the Council’s approved project management methodology (including business plans where applicable). To this end the principles of the well-being of future generations including sustainable development and better carbon management will be incorporated and evaluated.
As stated previously, it is expected that the revenue costs of service development will need to be met from within the respective services (in particular, from the savings made). As such, no revenue bids are initially to be made. However, services may still be asked to identify and prioritise any burgeoning revenue cost pressures for consideration.
13. The proposed timetable for the 2016/17 Budget is for Cabinet to make its initial revenue and capital budget proposals in November 2015 along with the Medium Term Financial Plan. The capital bids considered and prioritised will include those recommended to the Corporate Management Team by the Corporate Asset Management Group. Each Scrutiny Committee will be consulted and will receive the relevant initial proposals of the Cabinet in November/December 2015.
Scrutiny Committees will be asked to make recommendations on the proposals. Corporate Resources Scrutiny Committee will act as the lead scrutiny committee in this respect.
The budget will then be considered by the Cabinet Budget Working Group, which will submit its recommendations to Cabinet by February 2016. Cabinet will formulate its final proposals and submit them to a meeting of full Council to be held in March 2016, having first taken any response from the lead Scrutiny Committee into account. It may be necessary for Scrutiny Committees, Cabinet and Council to hold special meetings in order to ensure that the budget may be approved within the statutory deadline.
Membership of the Cabinet Budget Working Group will consist of the Leader, Deputy Leader, Managing Director and Head of Finance.
Resource Implications (Financial and Employment)
14. As part of the Final Revenue Budget Proposals for 2015/16, the level of savings proposed for 2016/17 and 2017/18 totalled £17.822m, which includes savings targets set as part of the Reshaping Services programme.
15. There is still considerable uncertainty surrounding the predictions of expected resources and anticipated reductions in public sector funding. The current MTFP is based on a reduction of 4% in 2016/17 and 2% in 2017/18. The next MTFP will take into account a predicted reduction for 2018/19. Every 1% reduction in Aggregate External Finance (the funding received from WG through Revenue Support grant and the Non Domestic Rates Pool) reduces funding by approximately £1.5m for the Vale. This clearly has major implications for the Council.
16. It will be important to ensure that appropriate consultation takes place with the Trade Unions in relation to the staffing implications of the budget process. The level of consultation will increase over the coming months.
Sustainability and Climate Change Implications
17. The budget process will have regard to the well-being of future generations when allocating scarce resources.
Legal Implications (to Include Human Rights Implications)
18. The Council is required under statute to fix the level of council tax for 2016/17 by 11th March 2016 and in order to do so will have to agree a balanced budget by the same date.
Crime and Disorder Implications
19. There are no crime and disorder implications.
Equal Opportunities Implications (to include Welsh Language issues)
20. There are no equal opportunity implications.
21. The budget strategy is produced in support of all the Council’s objectives as set out in the Corporate Plan.
Policy Framework and Budget
22. This report is a matter for Executive decision. However, Council must approve the final 2016/17 budget proposals.
Consultation (including Ward Member Consultation)
23. The Budget Strategy has been drawn up following detailed consultation with all chief officers.
Medium Term Financial Plan 2014/15 -2017/18
Alan Jenkins Head of Finance
Corporate Management Team
Section 151 Officer