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The Vale of Glamorgan Council

Cabinet Meeting: 16th November 2015

Report of the Leader

Initial Revenue Budget Proposals 2016/17

Purpose of the Report

  1. To gain Cabinet's approval for the amended revenue budget for 2015/16 and to commence consultation on the initial revenue budget proposals for 2016/17.

Recommendations

It is recommended that:

  1. The amended revenue budget for 2015/16 as set out in Appendix 1 be approved.
  2. The initial revenue budget proposals for 2016/17 be approved for consultation with the relevant Scrutiny Committees.
  3. The recommendations of Scrutiny Committees are passed to Corporate Resources Scrutiny Committee as the lead Scrutiny Committee in order for their views to be forwarded to Cabinet.
  4. A sum of £1.65m be set aside in the Schools Investment Strategy reserve and £850k be set aside in the Disabled Facilities reserve, funded by the projected underspending on revenue in 2015/16, with further details in the Initial Capital Programme Proposals 2016/17 report.

Reasons for the Recommendations

  1. To incorporate changes to the 2015/16 budget.
  2. In order to gain the views of Scrutiny Committees.
  3. In order that Cabinet be informed of the comments of Scrutiny Committees before making a final proposal on the budget.
  4. To ensure that reserves are both adequate in purpose and level.

Background

  1. The Council's budget is determined largely by the Revenue Support Grant (RSG) settlement set by the Welsh Government (WG). In previous years, the provisional RSG settlement was received from WG during October, with the final settlement being received during December. This year, however, the initial budget proposals have not yet been received.
  2. A statement on the timing of the Welsh Government's Budget for 2016/17 was released by the Minister for Finance and Government Business on 6th October 2015. It stated that the late timing of the UK Government's Spending Review presented WG with significant challenges for the preparation and publication of the Draft Budget 2016/17. WG will not know their Budget for 2016/17 until 25th November 2015. WG is facing unprecedented levels of uncertainty and consequently will not publish the Draft Budget for 2016/17 until 8th December 2015 and the Final Budget on 1st March 2016.
  3. A joint letter dated 26th October 2015 has been received from the Minister for Public Services and the Leader of the Welsh Local Government Association, outlining the outcome of their joint discussions regarding the timing of the release of the settlement. They provide a timetable which shows that local authorities will be advised of the Provisional Settlement on 9th December 2015 and of the Final Settlement on 2nd March 2016, however, the Final Budget will be debated by WG on 9th March 2016. They consider that the proposed timetable does not result in any legal or financial impediment to the budget process, however, they acknowledge that the timetable does present challenges.
  4. 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 revenue budget by the same date.
  5. Even with this lack of clarity on the funding position for 2016/17 and these unprecedented circumstances, in order 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 will need to be carried out before the initial and final RSG settlement is notified to the Council.

Revised Budget 2015/16

  1. Appendix 1 to this report sets out the Amended Budget for 2015/16, together with the necessary adjustments to be made to the original budget.
  2. Asset Rents, International Accounting Standard (IAS) 19, Transfers and Recharges - These adjustments have no overall effect on the net budget of the Council. These are accounting adjustments largely outside the control of services. They reflect charges for the use of capital assets, changes to inter-service recharges and transfers and pensions adjustments to comply with accounting standards. Also included are transfers of functions and responsibilities between Directorates as detailed below.

Education - £150k from Development Services in respect of the Arts Development.

Managing Director and Resources - £210k from Development Services in respect of Coroner Services.

  1. The Original Amended Budget has also been adjusted to reflect the reorganisation of Development and Visible Services.
  2. The following table compares the amended budget with the projected outturn for 2015/16.
 
 

2015/16

2015/16

Variance

 

Amended

Projected

(+)Favourable

Directorate/Service

Budget

Outturn

(-) Adverse

 

£'000

£'000

£'000

Learning and Skills

         

   

Education and Schools

92,524

92,816

-292

Libraries

2,311

2,311

0

Adult Community Learning

263

263

                            0

Youth Service

1,030

1,030

                            0

Catering

1,788

1,788

                            0

Art Development

150

150

                           0

     

                           

Social Services

     

Children and Young People

14,540

14,090

+450

Adult Services

37,579

38,329

-750

Business Management and Innovation

304

304

                            0

Youth Offending Service

679

679

                            0

       

Environment and Housing

     

Visible Services

21,707

21,707

0

Transportation

5,178

5,178

                           0

Building Services

0

0

0

Regulatory Services

2,107

2,107

                           0

Council Fund Housing

1,116

         1,116

0

       

Managing Director & Resources

     

Resources

558

           558

                           0

Regeneration

2,562

2,562

                           0

Private Housing

11,308

11,308

                           0

Development Management

1,063

1,063

                           0

General Policy

18,088

17,496

                    +592

Total

214,855

214,855

0

Met from General Reserve

(2,500)

(2,500)

0

Grand Total

212,355

212,355

0

Learning and Skills

  1. The projected outturn for the Learning and Skills Directorate is an adverse variance of £292k when compared to the amended budget. The paragraphs below highlight variances within each service.
  2. School Improvement and Inclusion - This service is projecting an adverse variance of around £706k, however, this amount can be offset by £65k funded from the Excluded Pupils reserve and therefore an adverse variance of £641k is currently projected at year end. An adverse variance on alternative curriculum placements of £65k is projected due to increased demand for the service, however, this will be funded from the Excluded Pupils reserve. An adverse variance of £457k is anticipated on inter authority recoupment income. Increased demand for Vale pupils requiring placements in Ysgol Y Deri has resulted in fewer placements being available for other authorities to purchase. An adverse variance of £197k is projected on pupil placements in independent schools and other authorities due to an increase in the number of pupils with significant needs that are unable to be met at Ysgol Y Deri. These overspends will be offset by a favourable variance of £13k on staffing costs due to part year vacancies within teams. The Directorate is seeking ways to mitigate this overspend as part of the longer term Reshaping Services agenda.
  3. Strategy and Resources - This service is anticipating a favourable variance at year end of £326k. There are favourable variances on the transport budget of £196k, £52k on salaries due to part year vacancies, £49k due to payments to private nurseries as a result of a reduction in non-maintained nursery settings and £29k on other supplies and services. There are however significant pressures in relation to the Schools Long Term Supply scheme with an adverse variance of £270k anticipated and the Early Retirement and Voluntary Redundancy scheme also projecting an adverse variance of £196k. Both these overspends will be funded from the respective reserves. It is anticipated that there will also be transfers from the Rationalisation Reserve of £161k to fund the increased rates bill at St Cyres Comprehensive School and £115k to fund one off amalgamation costs at Llantwit Learning Community and Penarth Learning Community.
  4. Service Strategy and Regulation - It is anticipated that this service will outturn with a £7k favourable variance due to efficiencies within the Business Support section.
  5. Schools - The delegated budget relating to schools is expected to balance as any under/over spend is carried forward by schools.
  6. Children and Young Peoples Partnership - It is anticipated that this service will outturn with a favourable variance of £16k due to a part year vacancy in the team.
  7. Provision has been made within the budget to make unsupported borrowing debt repayments in relation to the Schools Investment Strategy of £698k per annum. Any favourable variance on debt repayments will be directed into the Schools Investment Strategy reserve.
  8. Libraries - The Libraries Service is projecting to outturn at budget after a transfer from the Libraries reserve of £113k to fund one off costs in relation to the implementation of the Libraries Review.
  9. Adult Community Learning - It is anticipated that the Adult and Community Learning Service will outturn at budget after a £93k transfer from the Adult and Community Learning reserve. The transfer from the reserve is required due to redundancy and notice payments to staff, which have arisen as a result of reductions in funding from Welsh Government and Cardiff and the Vale College.
  10. Youth Service - It is anticipated that the Youth Service will outturn at budget after a transfer of £40k from the Youth Service Reserve. The transfer from the reserve is required to fund ongoing NEETS and Gateway To Engagement work in schools.
  11. Catering - The Catering budget is anticipated to outturn at budget after a transfer of £222k from Catering reserves. The transfer from reserves will fund the final payment of the cashless catering system and the conversion of dining centres into kitchens in four primary schools.

Social Services

  1. The projected outturn for the Social Services Directorate is an adverse variance of £300k when compared to the amended budget.  The paragraphs below highlight any variances within each service.
  2. Children and Young People's Services - This service is anticipated to outturn £450k under budget at year end. The key issue for this service continues to be managing the demand for the Joint Budget for Residential Placements for Looked After Children, however, currently it is forecast to outturn with a £250k underspend at year end. Work has been ongoing to ensure that children are placed in the most appropriate and cost effective placements, however, it should be noted that due to the potential high cost of each placement, the outturn position could fluctuate with a change in the number of looked after children. There are potential underspends elsewhere in Children's Services of £65k on staffing budgets and £135k on alternative means of provision and accommodation costs required for the current cohort of children.
  3. Adult Services -This service is currently anticipated to outturn £750k over budget at year end. This is due to a projected overspend on Community Care Packages of £950k as a result of increased demand for services, particularly for frail older clients. There is continued pressure on this area of the service to manage demand, not only to avoid a further increase in the overspend, but also to reduce the overspend. Whilst every effort will be made to improve this position, it cannot be guaranteed that this position will not deteriorate further by year end as this budget is extremely volatile and there is a continued increase in demand for services. The annual deferred income budget for 2015/16 has been set at £739k and as at 30th September 2015 income received to date was £74k under-recovered. It is currently being projected that this budget will outturn at £50k over budget by year-end and this adverse variance is included as part of the projected overspend for care packages. It is anticipated that there will be underspends of £200k elsewhere in the budget which can offset part of this overspend with £165k from staffing, £20k from Transport and £15k from premises.

Environment and Housing

  1. The projected outturn for the Environment and Housing Directorate is a balanced budget when compared to the amended budget.  The paragraphs below highlight any variances within each service.
  2. Highways & Engineering - It is projected that the Highways & Engineering section will have a balanced budget at year end. It is projected that the employee's budget will be £338k underspent due to vacant posts currently within the service. However due to the number of vacant posts, the anticipated spend on subcontractors is over budget by £262k. As previously reported, Highways & Engineering have an estimated shortfall on car parking income, which is currently estimated to be £340k. The introduction of additional car parking charges is to be consulted on further, therefore, new charges are unlikely to be introduced within this financial year. There is also a projected overspend on street lighting energy costs of £106k, due to the slight delay in the introduction of part night lighting, which commenced in July 2015. Vehicle costs are projected to be £120k over budget which is mainly due to the increased cost of the newer Winter Maintenance fleet. It is anticipated that other income received by the Highways & Engineering section will be £374k higher than budgeted. This is mainly due to the amount of Highways capital works schemes undertaken for other departments. Departmental support costs for Highways & Engineering have also reduced by £116k.
  3. Waste Management - It is projected that the Waste Management section will have a balanced budget at year end. Employee costs are projected to be over budget by £256k. The main reason is that some of the planned savings for 2014/15 and 2015/16 have been delayed as detailed in Appendix 2. A re-routing exercise is currently underway and the service is also being reviewed by Waste Resource Action Programme (WRAP) with a view to making efficiency savings. Vehicle costs are projected to be £207k over budget, again due to the delay in planned savings. To offset these delayed savings, a considerable underspend of £577k is expected on waste disposal costs mainly due to the interim contract entered into with Viridor. The department has also projected a spend of £48k on contract monitoring costs for Prosiect Gwyrdd and £25k on the Joint Organics Procurement with Cardiff Council for which there is no budget. The service also has reduced insurance costs which are £34k under budget. Income to the section is also £75k less than budgeted, which is mainly as a result of the shortfall in income for the Special Collection service due to the level of concessions that are currently offered.
  4. Leisure - It is anticipated that the Grounds Maintenance section will achieve a breakeven position at year end. Employee costs are projected to be £92k under budget due to vacant posts within the service. However, this has been offset by increased supplies & services costs which are £119k over budget mainly due to additional works undertaken by subcontractors. Transport costs are projected to be £31k over budget, however, Parks are currently reviewing the level of vehicles they use and have identified those that are surplus to requirements. This is offset by savings of approximately £25k on the maintenance of conservation zones. The anticipated level of income from other departments is also £33k greater than budgeted. The Sports service is operating well within reduced grant funding budgets. The provision of Play Activities is being funded from various sources such as Town Councils and s106 monies and costs are being monitored closely to ensure that they are contained within the funding available. The year-end projected spend shows a nil variance against the revised budget
  5. Transportation - The expenditure on public transport is being carefully monitored in order to provide an appropriate service within the approved budget. There is an agreement with Bridgend and Cardiff Councils regarding the recharging of Cross Boundary bus services and this will alleviate pressures on fare-paying school services which are presently over budget. It is hoped that this agreement will continue into 2016/17. S106 monies are being utilised to fund the community bus service, Greenlinks, which is operating well. The year-end projected spend on Transportation shows a nil variance against the revised budget.
  6. Building Services - The Building Maintenance and Building Cleaning & Security Services are presently expected to outturn on target.
  7. Regulatory Services - This budget represents the Vale's contribution towards the Shared Regulatory Service which was formed on 1st May 2015. Although anticipated savings for 2015/16 will be slightly reduced by the one month delay in populating the staffing structure, the effect is mitigated by the reduction in anticipated staffing costs due to the number of staff leaving the Shared Service pool before going live. At this stage it is therefore projected that this service will outturn within target
  8. Council Fund Housing - The Council Fund Housing budget is likely to outturn at £250k underspent based on current trends. As previously reported, the variance is due to savings being made on the use of temporary accommodation for the homeless. Due to the uncertain pressures for the remaining part of the financial year on the homeless budget it is felt appropriate at this time to show a balanced budget.

Managing Director and Resources

  1. The projected outturn for the Managing Director and Resources is a balanced budget when compared to the amended budget.  The paragraphs below highlight any variances within each service
  2. Resources - Resources is anticipated to outturn within budget although there is a possibility of a shortfall on Council Tax court income. The service will manage any shortfall from within existing resources.
  3. Regeneration - Whilst occupancy of the Authority's workshops is higher than recent years, and therefore income is higher, any underspends will be utilised to refurbish the workshop/office space stock, aiming at generating further increased occupancy levels in order to meet the higher levels of income required in the 2016/17 budgets. This service is currently projected to outturn within target. The projected outturn for Countryside Services shows a nil variance against the revised budget. Delays in relation to the decision on car parking fees within country parks will mean that targeted savings for the Division have not been achievable. A budget virement from Planning covers the shortfall on car parking and various other measures including refurbishment works on the reception area at Cosmeston, thatching works at the Medieval Village and marketing costs for the new Commercial Opportunities Officer. As such, this service is currently projected to outturn within target.
  4. Private Housing - As there has been additional demand for Disabled Facility Grants (DFGs) this year, the fee income will exceed target. Income targets for the Renewal Area have not currently been achieved so will offset the DFG increase. As such, this service is projected to outturn within target by year-end.
  5. Development Management - The year-end projected spend on Planning shows a nil variance against the revised budget. As planning income has been ahead of profile so far this year a virement has been made from Planning into the Countryside budget in order to fund several refurbishments within that service (as detailed above). Should the demand on the Planning Service so require, an additional temporary staffing resource will be considered. As such it is anticipated that the Planning Services will outturn on target.

General Policy

  1. The projected outturn for Policy is a favourable variance of £592k when compared to the amended budget.
  2. It is projected that there will be a favourable variance of £1.292m relating to capital charges and given that the collection of Council Tax continues to be effective, a positive variance of £1.5m is predicted. It is also anticipated that the sum included to support recharge imbalances for capital of £300k will not be required, as full recovery from capital schemes is projected. It is proposed that £2.5m is used to fund capital projects covering the Council's priorities. £1.65m will be transferred into the Schools Investment Strategy reserve and £850k will be transferred into the Disabled Facilities reserve to increase the funding available over the next 2 years for Disabled Facilities grants. Details of the schemes are contained in the Initial Capital Programme Proposals 2016/17 report, elsewhere on this agenda.

Savings 2015/16

  1. As part of the Final Revenue Budget Proposals for 2015/16, a savings target of £6.847m was set for the Authority. Attached at Appendix 2 is a statement showing the progress against these targets. Services are projecting to achieve the majority of their savings and where savings may not be achieved, further information is provided. The appendix shows that currently there is a £370k projected surplus against the target. This is due to the Prosiect Gwyrdd scheme which is projected to exceed its target, however, there are other savings in Visible Service which will not be achieved and which partly offset this favourable position. In addition, Visible Services also have savings from previous years which have yet to be achieved in full and it is anticipated that while some progress will be made this year in their implementation, they will not be fully achieved and a shortfall of £706k is projected. The last section of Appendix 2 details these savings from previous years.
  2. In light of the level of savings to be found in future years, it is imperative that approved savings are achieved in the required year.

Budget Strategy

  1. Cabinet approved the Budget Strategy on the 27th July 2015 min no. C2865.
  2. The Budget Strategy for 2016/17 outlines 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 target. This means the cost of price increases and any allowable pay awards should be included as advised by the Head of Finance.
  3. 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 to progress the Reshaping Services Programme.

- It is envisaged that the costs of service development will need to be met from within the respective directorates.

  1. Having regard to the above, it was therefore proposed in respect of the 2016/17 Budget Strategy, that Directors be instructed to prepare initial revenue budgets for 2016/17, 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 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.

Medium Term Financial Plan

  1. The Medium Term Financial Plan (MTFP) 2015/16 to 2018/19 is to be presented to Cabinet on 14th December 2015, to coincide with the presentation of the Draft Corporate Plan.
  2. The 2015/16 Final Revenue Budget Proposals set savings targets between 2016/17 and 2017/18 of £17.822m (excluding schools). This was based on the anticipated reduction in funding from WG of 4% in 2016/17 and a further 2% in 2017/18, which was in line with the assumptions made in the latest MTFP.
  3. The latest Plan factored in a managed level of cost pressures, a notional increase in council tax of 2% each year, price inflation of 1% and annual pay awards of 1% each year from 2016/17.
  4. It assumed that the Minimum Funding Commitment (MFC) for schools, equivalent to 1% above the WG's block grant settlement would continue.

Budget Consultation with Stakeholders

  1. To ensure that the budget set for 2016/17 continues to address the priorities of Vale residents and the Council's service users, the budget setting process will incorporate in-depth, targeted engagement with a range of key stakeholders.
  2. The engagement with residents and service users will be facilitated by Council officers and conducted in line with the corporate standards set out in the Vale of Glamorgan Council Public Engagement Framework.
  3. Consultation with town and community councils, the voluntary sector and our Local Service Board partners will also take place, in order to inform the final budget proposals.

Provisional Settlement 2016/17

  1. The Council has not yet received the provisional settlement from WG. This will not be published by WG until 9th December 2015. The Council is unable to wait until this date to commence its budget preparation for 2016/17 and therefore this report has been based on the projections previously used as part of the Medium Term Financial Plan 2014/15 to 2017/18.
  2. Based on the projection of a 4% reduction in funding from the WG in real terms, the Council is projected to receive £111.537m from WG as RSG and a share of the Non- Domestic Rates (NDR) of £34.845m. Together these figures constitute the Council's projected Aggregate External Finance (AEF) of £146.382m. It should be noted that a 1% change in AEF equates to around £1.5m.
  3. At this stage, no transfers in or out of the RSG have been assumed.

2016/17 Initial Budget Proposals

  1. As part of these initial proposals, it has 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 and an updated list is shown in Appendix 3. These are not shown in any order of priority. A new cost pressure has been included for the introduction of the National Living Wage from 1st April 2016, which will provide for a minimum hourly rate of £7.20 for workers aged 25 and above. There will be further pressure in future years when it continues to increase to at least £9.00 per hour by 2020. This change also has a significant effect on services the Council commissions from external organisation. The main area affected is Social Services and a cost pressure has been included to reflect this.
  2. Details of the proposed areas for savings for 2016/17 to 2017/18 are attached at Appendix 4. The savings do not include the cost of any potential redundancies. As part of the Budget Strategy 2016/17 Directors were requested to continue to progress the Reshaping Services Programme. Detailed work on business cases is currently on-going and they will review the potential level of savings that can actually be achieved.
  3. A summary of the overall base budget for 2016/17 is attached at Appendix 5. This has been arrived at by adjusting the 2015/16 budget for items such as inflation and unavoidable growth, but does not include identified cost pressures or savings. These are shown as a note to the table and are further detailed in Appendix 3 and 4 respectively. Adjustments shown include the following:
  4. Asset Rents, International Accounting Standard (IAS) 19 - Relates to accounting items outside the control of services. They reflect charges to services for the use of capital assets and adjustments in respect of pensions to comply with accounting standards.
  5. Recharges/Transfers - Relates to changes in inter-service and inter Directorate recharges. The Original Budget has been adjusted to reflect the reorganisation of Development and Visible Services. Included are transfers of functions and responsibilities between Directorates as detailed below:

Education - £113k from Development Services in respect of the Arts Development

Managing Director and Resources - £210k from Development Services in respect of Coroner Services

  1. Budget Adjustment - There is a net total of £505k and relates to £600k for the reversal of one off funding previously provided to services, less the £1.105m reduction in the use of the Social Services Fund in 2016/17.
  2. Inflation - The total figure for inflation of £1.613m relates to general price increases (£1.005m) and a 1% allowance for pay awards (£608k). These figures do not include schools inflation which amounts to £649k for pay and £389k for prices.
  3. Committed Growth - This totals £2.557m and £477k reflects the Minimum Funding Commitment for schools, £930k relates to the increase in employers national insurance (excluding schools), £1m relates to the reduction in use of the Council Fund and £150k has been allocated for capital charges.
  4. Once the base budget for 2016/17 has been established, it must then be compared to the funding available to identify the extent of any shortfall. With a projected AEF of £146.382m and Council Tax at a current level of £59.874m, total available funding would be £206.256m. When compared to a base budget of £217.030m, this would result in a funding deficit for 2016/17 of £10.774m. This deficit is mainly attributable to a reduction in funding from WG and an increase in pay and price inflation.
  5. If all identified cost pressures were funded, this would increase the shortfall to £18.601m. If all proposed savings were achieved, the shortfall would be reduced to £6.431m as shown in the table below.
 

Projected Budget Shortfall 2016/17

 

 

£000

Funding Available

 

Projected AEF (Assumes 4% reduction)

146,382

 

Council Tax (Assumes no increase) *

59,874

 

Projected Funding Available

206,256

 

   

Base Budget

217,030

 

   

Projected Shortfall Against Base Budget

10,774

 

   

Assume all Cost Pressures Funded

7,827

 

   

Projected Shortfall with Cost Pressures funded

18,601

 

   

Assume all Savings Achieved

(12,170)

 

   

Projected Shortfall for 2016/17

6,431

 

* This assumes no increase in Council Tax at this stage.

  1. This shortfall is already based on the requirement to achieve a high level of savings in 2016/17 and there is still uncertainty about the continuation of the MFC for schools beyond that date.
  2. The above projections include an assumed pay award of 1% for 2016/17 and the impact of the National Living Wage. It also includes the increase in employers National Insurance which takes effect from April 2016. If any further changes are agreed to pay conditions, they will be assessed as part of the Final Budget Proposals report.
  3. Further work will be undertaken by the Budget Working Group (BWG) in order to achieve a balanced budget for the final budget proposals for 2016/17. This will include a review of the use of reserves, a possible increase in council tax, a review of all cost pressures, possible changes to the approved saving targets, a review of the inflation assumptions and the current financial strategies. The BWG will also consider the results of the budget engagement process in determining priorities for future savings and service delivery and the impact of the revised Corporate Plan.
  4. There will be difficulties in maintaining the quality and quantity of services in the future without exploring opportunities for collaboration and alternative forms of service delivery. The Council has already commenced a programme of reshaping and transforming services, as approved by on Cabinet on 11th August 2014.

Next Steps

  1. The next stage is for the estimates to be submitted to Scrutiny Committees for consultation. Committees are asked to review the level of cost pressures with a view to suggesting ways in which these could be managed downwards and/or mitigated. Corporate Resources Scrutiny Committee is the lead Scrutiny Committee and will consider both the Initial Revenue Budget Proposals and any recommendations that other Scrutiny Committees have made. The responses of Scrutiny Committee must be made no later than the 15th December 2015.
  2. The BWG will hold a series of meetings in November 2015 with the relevant Cabinet Members and officers to consider the budget proposals and they will submit their recommendations so that the Cabinet may make its final budget proposal. Before making its recommendation, the BWG will consider the comments made by Scrutiny, together with the results of consultation. The final proposals to Cabinet will include a review of the financial strategies required to achieve a balanced budget, which is sustainable in future years. Currently, the approved timetable requires Cabinet to approve the final budget proposals by no later than the 22nd February 2016 and that Cabinet's final budget proposals will be considered by Council at a meeting to be held on 2nd March 2016.
  3. As the Final Settlement will not be received from WG until 2nd March 2016, this timetable is now under review and will have to be revised based on achieving the deadline for setting Council Tax on 11th March 2016.

Resource Implications (Financial and Employment)

  1. Based on the assumption that all cost pressures will be funded in full, the estimated funding shortfall for 2016/17 will be £18.601m.
  2. WG is not intending to issue details regarding the level of funding post 2016/17, however, it is anticipated that there will be further reductions in funding for Local Government going forward. It is therefore important that Directors achieve approved savings and look to mitigate further cost pressures through alternative means of service delivery and collaborative ventures.
  3. 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 and then set aside for other purposes or used to reduce council tax.
  4. 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 Strategy Reserve, Project 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.
  5. The Council Fund Reserve as at 31st March 2016 is projected to stand at £10.041m. As agreed by Cabinet as part of the Final Revenue Budget Proposals 2015/16, the 2016/17 base budget includes the use of £1.5m from the Council Fund Reserve in 2016/17. The Section 151 Officer currently believes that the minimum balance on the Council Fund Reserve should be no less than £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 about £10.8m. However, in view of the prudent approach the Council takes with regard to specific reserves, £7m is considered a reasonable minimum.
  6. 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. As part of the usual Budget process, an examination of the level of reserves is undertaken to ascertain their adequacy and strategy for use. 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) has been taken. The requirement for each specific reserve has also been considered in light of the Council's priorities. No transfers between reserves are proposed at present.
  7. Appendix 6 sets out the Authority's actual reserves as at 31st March 2015 and shows the estimated reserves balance for each year up to 31st March 2019. The Council is forecasting the use of general and specific reserves, excluding HRA and schools, totalling £39.363m from 1st April 2015 onwards, which represents approximately 54% of the balance as at 31st March 2015. These levels of reserves are still deemed to be adequate as known risks are largely covered and the Council Fund Reserve does not fall below £7m.
  8. The Council is planning to use a considerable amount of its specific reserves over the coming years, however, as reserves are a non-recurring means of funding, they can only be used as part of a specific financial strategy. The use of all reserves will be reviewed further, by the BWG, as part of the final budget setting process.
  9. Not all the identified savings relate to staffing, however, the impact on staffing levels could be a potential reduction of up to 197 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. The trade unions will be consulted on the details of any possible redundancies once known. This figure does not include the staffing implications relating to budget pressures within schools, as details need to be considered by individual governing bodies.

Sustainability and Climate Change Implications

  1. 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)

  1. The Council is required under statute to fix its council tax by 11th March 2016 and in order to do so will have to agree a balanced revenue budget by the same date.

Crime and Disorder Implications

  1. The obligations of the Council with regard to Section 17 of the Crime and Disorder Act 1998 needs to be fully considered in the budget decision making process.

Equal Opportunities Implications (to include Welsh Language issues)

  1. These initial budget proposals have due regard to the requirements of the Council's Strategic Equality Plan including the Equalities Act 2010 and Public Sector Equality Duty for Wales. The subsequent development of individual strategies for achieving savings will require the completion of Equality Impact Assessments. This involves systematically assessing the likely (or actual) effects of policies on individuals who have a range of protected characteristics under the Act.

Corporate/Service Objectives

  1. Contributes to the corporate priority of Community Leadership by the provision of sound financial management.

Policy Framework and Budget

  1. This report is following the procedure laid down in the Constitution for the making of the budget and so does not need to be referred to Council. However, the final 2016/17 budget will require the approval of full Council.

Consultation (including Ward Member Consultation)

  1. The Corporate Management Team has been consulted on this report. The initial budget proposals will be the subject of consultation with Scrutiny Committees. The Trade Unions and Schools forum will also be consulted.

Relevant Scrutiny Committee

  1. The lead Scrutiny Committee is Corporate Resources.

Background Papers

Medium Term Financial Plan 2014/15 to 2017/18

Budget Strategy 2016/17

Contact Officer

Carolyn Michael

Operational Manager - Accountancy

Officers Consulted

Corporate Management Team

Responsible Officer:

Carys Lord

Section 151 Officer

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