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Agenda Item No. 7(g)

 

THE VALE OF GLAMORGAN COUNCIL

 

COUNCIL MEETING: 7TH MARCH, 2012

 

REFERENCE FROM CABINET: 29TH FEBRUARY, 2012

 

 

C1637       FINAL PROPOSALS FOR THE REVENUE BUDGET 2012/13 (L) (SCRUTINY - CORPORATE RESOURCES) -

 

Cabinet received a report which set out proposals for consideration before making its final recommendation to Council in respect of the budget for the financial year 2012/13.  It also set out the savings targets for the years 2013/14.

 

The Council was required under statute to fix the level of Council Tax for 2012/2013 by 11th March 2012. The final decision on the budget cannot be delegated and must be made at a meeting of Council. This was scheduled to be held on 7th March 2012.

 

Revenue Settlement

 

WG had provided the Council with final figures for next year’s settlement. This Council’s total Standard Spending Assessment (SSA) had been notified as £205.294m, which represented an increase of £2.506m over 2011/12. Transferred out of the settlement were resources totalling £63k relating to Mapping Services with sums of £27k and £1k transferred in for Mental Health Act / Deprivation of Liberty Safeguards and Sun Bed Regulations respectively.

 

WG required each local authority to compare its total budget for education to its Education Indicator Based Assessment (IBA).  It must then report on the reasons why it may have chosen to set a budget for education that differs from its IBA (£94.028m for the Vale). The report would 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 had been prepared jointly by the Director of Learning and Development and the Director of Finance, ICT and Property and was attached at Appendix A.

 

The Council would receive from WG Revenue Support Grant (RSG) of £117.668m and Non-Domestic Rates £33.507m.  These amounts together constituted the Council’s Aggregate External Finance (AEF).  This was an increase of £543k on the 2011/12 AEF.  WG had announced that the Outcome Agreement Grant allocated to the Vale was £1.254m.  This was an unhypothecated grant (i.e. not earmarked for particular services).  The Council was not guaranteed to receive the full amount of the Improvement Agreement Grant.  The proportion of the grant eventually received in 2012/13 was determined by a ratings score of the Council’s performance in achieving its 2011/12 Outcome Agreement targets.

 

Anticipated Outturn 2011/12

 

A Revenue Monitoring report was presented to Cabinet on 1st February 2012. With regard to Social Services; Children and Young People’s Services and Adult Services needed to find net savings of £1.04m and £1.86m respectively, in order to contain expenditure within the approved budget.  This was after using provisions of £675k.  The Cabinet meeting of 16th November 2011 received a report setting out proposals of the Heads of Service within Social Services to deal with the deteriorating financial position (Minute no. C1520). 

 

The budget included a sum of about £3m for the costs of single status. A sum of £1.6m would be used to fund the one-off costs of compensation for those employees whose pay was positively affected by job evaluation and other costs of single status. The remaining balance of £1.4m was anticipated to be transferred to the provision for Equal Pay.  Where costs related to grant funded initiatives, it was expected, where appropriate, that the grant received should fund any cost implications.  Costs relating to staff directly employed by the HRA would be met from that account.

 

The updated revenue position was that there was an anticipated surplus on Council Tax collection of £1m.  In addition it was anticipated that savings of £2m would be made from capital charges (£1,485k), superannuation no longer required (£265k), housing recharge (£200k) and corporate governance £50k.  This sum was offset by £500k additional budget required for Leisure due to the delay in implementing the new Leisure partnership arrangements.  The net sum of £2.5m was likely to be required to cover Social Services to the extent to which they were unable to find the savings set out in paragraph 6.

 

The balance on the General Reserve was anticipated to be £7.358m as at 31st March 2012, which represented a budgeted reduction of £500k on the opening balance.

 

General

 

Cabinet approved the Budget Strategy and Timetable for 2012/13 on the 20th July 2011 (minute no. C1386).  Subsequently, the initial revenue budget proposals were considered by Cabinet on 16th November 2011 (minute no. C1511) and by each Scrutiny Committee during November / December.

 

The comments by each Scrutiny Committee were referred to the Corporate Resources Scrutiny Committee, which was the Lead Scrutiny Committee on the budget.  Corporate Resources resolved that the initial revenue budget proposals for 2012/13 and the recommendations thereon from other Scrutiny Committees be noted and forwarded to Cabinet and the Budget Working Party.

 

The minutes of the Corporate Resources Scrutiny Committee were referred to Cabinet on 18th January 2012 (Minute no. C1583) where they were referred to the Cabinet Budget Working Group (BWG). 

 

The BWG had noted all the Scrutiny recommendations and taken their responses into account in drafting the final budget proposals for Cabinet’s consideration.  Specific responses to Scrutiny recommendations were set out in the following paragraphs.

 

Scrutiny Committee (Social Care and Health) recommended that the ‘views of the Scrutiny Committee be forwarded to the Scrutiny Committee (Corporate Resources) and the Cabinet.’

 

The BWG had further examined the cost pressures submitted by the Director of Social Services and updated figures were included in the report.  It was also mindful of the work being progressed by the Director of Social Services in preparing the Social Services Budget Plan. The Plan would include the actions necessary to address the existing overspend, achieve savings targets and meet cost pressures in order to achieve a sustainable budget.  Account had been taken of this in the final revenue budget proposals including the period of time in which this could reasonably be expected to be delivered. Further information and a strategy for the way forward was set out in the section on the proposed 2012/13 budget for Social Services.

 

Scrutiny Committee (Housing and Public Protection) recommended that the ‘initial revenue budget proposals for 2012/13 be noted subject to the cost pressures set out in Appendix 3 of the report being prioritised as indicated below and referred to the Scrutiny Committee (Corporate Resources) for consideration:

  • Priority 1 – LPPH2 - Public Protection - Food Safety
  • Priority 2 – LPPH3 - Trading Standards
  • Priority 3 – LPPH4 – Coroners.’

The BWG has had regard to the cost pressure for food safety and had allocated £45k to meet the staffing shortfalls identified in the Food Safety Division.  The Director of Legal, Public Protection and Housing Services was urged to meet any balance required from efficiencies within the Service, re-prioritising work and developing collaborative arrangements.  In addition, the Coroners budget had been increased to reflect the £20k increase in charges for post mortem and mortuary support services. It considered that the Service should be capable of finding the £8k in respect of Trading Standards from within its existing resources (the proposed budget for Public Protection is £2,395k).

 

In arriving at the final revenue budget proposals, the views of the Schools Budget Forum had been very carefully considered.  Education was a high priority for the Council and the Individual Schools Budget for 2012/13 included the protection set by WG.  More information on the Education budget was included within the Proposed Budget 2012/13 section of the report, under Learning and Development.

 

Financial Strategy for 2012/13 to 2014/15

 

The approved Final Revenue Budget Proposals for 2011/12 included savings targets for 2012/13 and 2013/14. The 2011/12 – 2014/15 Medium Term Financial Plan approved by Cabinet on 20th July 2011 (minute no. C1386) included a proposed re-phasing of the existing approved savings, with £668k deferred from 2013/14 to 2014/15.  Whilst identifying the specific proposals for savings in 2013/14, the Plan also identified further total savings of £1.465m being required in 2014/15. This gave the following position:

 




Minimum Savings Targets

2013/14

2014/15

TOTAL

 

£000

     £000

      £000

Learning and Development (excl. schools)

244

257

501

Social Services

1,847

1,333

3,180

Environmental and Economic Regeneration

725

297

1,022

Legal, Public Protection and Private Housing

18

83

101

Finance, ICT, Property, HR

0

101

101

Chief Executive (inc. YOS)

38

62

100

Minimum Required for the Year

2,872

2,133

5,005

 

Directors identified possible areas to progress the savings required for 2014/15 as part of the 2012/13 Initial Revenue Budget Proposals submitted to Cabinet on 16th November 2011. However, more detail was still required on both these and the 2013/14 savings and it was proposed that the exact level required together with their impact from 2013/14 onwards would be considered as part of a Budget Review to be undertaken following the Council elections in May 2012. 

 

In addition, since the Medium Term Financial Plan was produced further information had been provided by WG as to the indicative settlement for future years. The SSA was forecast to be £208.65m for 2013/14 and £210.812m for 2014/15.  AEF was predicted to increase by 1.3% in 2013/14 to £153.178m and by 0.5% in 2014/15 to £153.953m.  The 2014/15 increase was lower than that anticipated in the current Medium Term Financial Plan of 2%.  As such, the savings targets of £5.005m between 2013/14 and 2014/15 should be viewed as the absolute minimum required and were likely to increase in total.

 

A strategy was required to be developed for Social Services and more detail on this was included in the following section of the report under Social Services.

 

Details on the Equality Impact Assessment (EqIA) were set out in the Equal Opportunities Implications section of this report.  It was again emphasised that progress to achieve the specific savings should have regard to maintaining the Council’s objectives and outcomes for the relevant client groups wherever possible.  Many of the approved areas for savings required forward planning and a lead time before practical implementation.

 

Proposed Budget 2012/13

 

The proposed budget for 2012/13 had been set broadly in line with the above strategy and a summary of the overall position was attached at Appendix B to the report.

 

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

 

Budget Transfers reflected the movement of functions and responsibilities between services.  The item also included the transfer from Policy of the sum required for the additional costs to services in 2012/13 relating to the implementation of Job Evaluation.  More detail on this was included in paragraph 66.

 

Other budget transfers were:

  • Transfer of £1.869m from the Education and Schools (Strategy and Performance) budget to the E&ER Directorate (Planning and Transportation) budget to ensure budgets more accurately reflected accountability and delivery responsibilities for Mainstream Transport.
  • Transfer of £204k from Catering budget to Education and Schools (Strategy and Performance) budget to simplify accounting arrangements; this budget was delegated to Secondary Schools to fund Catering provision.
  • Transfer of post from Lifelong Learning to Education £10k.
  • Transfer of £12k from Education to Catering in respect of refuse services.
  • Transfer of £35k from Children’s Services and £74k from Service Strategy to Adult Services £109k in order to reflect the recharge from the Service Strategy heading to the individual budget heads.
  • Savings made by Public Protection of £30k and Finance ICT and Property of £150k transferred to Private Sector Housing.
  • Transfer of post from Finance ICT and Property to Chief Executive (Contact Centre)  £24k
  • Transfer of business process engineering costs from Policy to Finance ICT and Property £60k
  • Transfer of monies from Policy to cover Corporate Governance costs for Legal and Democratic (Freedom of Information) £40k and to Finance ICT and Property (Training) £90k.

Recharges related to movements in charges between internal Council Services and had an overall neutral impact on the budget.

 

The adjustments related to £552k to remove the estimated April 2011 pay award for employees earning less than £21,000 p.a. which did not materialise and a further reduction of £322k to the services base estimate for superannuation increases that did not materialise.  The heading also included the use of £2.544m from the Social Services Reserve in accordance with the budget recovery plan.  More information on this was included in the section on the Social Services Budget 2012/13.  In addition the following one off growth items in 2011/12 had been removed from the individual services:

 

Planning and Transportation - Planning Fee Income £50k.

Economic Development and Leisure - Penarth Leisure Centre £150k.                      

Visible Services - Highways Service £900k.

Legal, Democratic and Registrars - Land Charges £ 20k.

 

Inflation amounted to £2.545m of which £1.078m related to 1% allowance for pay awards and £1.467m for general price increases.

 

Net growth amounted to £7.477m.  The breakdown of this sum was shown in the report at Appendix C.

 

The savings totalled £3.964m.  This sum comprised the target of £3.288m set in the Medium Term Financial Plan, approved by Cabinet on 20th July 2011 (minute C1386), and savings of £676k required in accordance with the Social Services Budget Recovery Plan. With regard to the £3.288m, Council on 28th February 2011 (minute 957) approved the detail of savings totalling £3.072m.  The additional saving required of £216k was made up of :

  • Environmental and Economic Regeneration - reduced waste recycling treatment costs  £140k
  • Finance, ICT and Property - review of office accommodation running costs £38k
  • Chief Executive - improving contact centre processes £38k.

Services

 

Learning and Development

 

 

Educ./

Schools

Libraries

Lifelong

Learning

Catering

Total

 

£’000

£’000

£’000

£’000

£’000

Budget 2011/12

91,073

2,777

1,542

1,189

96,581

Transfers

-1,647

70

-6

-78

-1,661

Recharges

52

-155

-52

-21

-176

Adjustments

-266

-21

-15

-5

-307

Inflation

820

26

34

19

899

Net Growth

1,227

5

-2

-5

1,225

Savings

-717

-74

-159

-90

-1,040

Changes in Asset Rentals / IAS 19

399

28

2

1

430

Budget 2012/13

90,941

2,656

1,344

1,010

95,951

 

Inflation for schools’ budgets (ISB) was included and covered the costs of pay awards (£434k) and price inflation (£188k). The details of the net growth were shown at Appendix C to the report and included sums for the net increase in insurance charges.

 

Savings for Central Education in 2012/13 were as approved as part of the 2011/12 budget process.

 

WG had continued to build into the settlement protection for schools, which was equivalent to 1% above the change in the Assembly’s revenue funding allocation from the UK Government. To fulfil WG’s commitment councils needed to ensure that their net Individual Schools Budget (ISB) was increased by at least 1.58% after adjusting for changes in pupil numbers. The protection had been applied in the budget proposals in the report and more information on the exact calculation for the Vale’s schools was in Appendix A to the report.

 

In view of the pressures facing the Education Service and as a result of the consultation with the Schools Budget Forum, it was proposed that the base budget for Education be increased by the proceeds of a 0.5% increase in the Council Tax.  This was equivalent to an increase of £260k of which £83k should be used to cover the costs of short term intervention at the Pupil Referral Unit.  For 2012/13, the balance of £177k should be ring-fenced to cover any additional costs that may arise from the establishment of the JES.  In future years, provided the previously approved saving for the service was achieved, this sum would be available for investment in Education and Schools.

 

It was also proposed that any savings achieved through senior management restructuring in the Learning and Development Directorate was not deducted from its budget but could be re-invested into the Education and Schools service.

 

In April 2011 Cabinet considered and endorsed a report which proposed that the Vale of Glamorgan Council should work with Consortium partners in Central South to seek to develop a Joint School Improvement Service as a first step towards a Joint Education Service.  A further report on progress was taken to Cabinet on 29th November 2011.  Cabinet approved that (1) the progress achieved be noted and (2) the Director provide a further report on the implications for the Council of the draft Business Case and the Welsh Government response.  A Business Plan had been developed for the establishment of a Joint Education Service (JES) for the Central South Consortium involving Bridgend, Rhondda Cynon Taff, Cardiff, Merthyr and The Vale of Glamorgan.  That Business Plan focused on the JES carrying out mostly statutory functions and was currently awaiting approval from WG.  It had been recognised that it may also be necessary to set up a trading arm to provide other curriculum advice and support to schools and a Business Plan for this was being prepared.  Staff employed within the School Improvement Service in the Vale currently worked in both the statutory and “trading” areas. Much detail remained to be resolved including governance, staffing, funding and transitional arrangements.  Nevertheless there was an expectation from WG that the JES would commence from September 2012.  Consequently, there was a significant risk for the Council.  The proposed budget for 2012/13 assumed that a saving of £261k would be achieved from the new arrangement (as approved by Council on 28th February 2011 as part of the budget report for 2011/12).  However, clearly in view of the uncertainty on the detail of the transfer, there was a risk this saving will not be achieved and that additional costs may arise from implementation.

 

Work was currently underway on job evaluation within schools with a view to implementing a new single status pay structure from March 2012.  In view of the importance of their adopting the Council job evaluation scheme, schools (excluding foundation schools) would be given one-off funding to cover the cost of implementation for the period to 31st March 2013 (one year plus one month).  This would cover the one-off costs of compensation (for school employees whose pay increases), one-off costs of hardship (for employees whose pay decreases) and the net cost of the initial assimilation from the old to the new grades.  The sum would be found from the single status reserve and it was estimated that £156k was likely to be required in 2011/12 and £132k in 2012/13.  The Director of Learning and Development would hold discussions with the Schools Budget Forum on the best way to apportion the sum between schools.  In addition the increase in the Individual Schools Budget proposed in the report would also cover the cost of assimilation, which meant that this on-going cost was included in the schools base budget. The cost of schools’ equal pay claims, currently estimated to total about £400k, would need to be met by individual schools.  However, in order to assist in managing this requirement, schools would be able to make arrangements to spread the costs of settling their claims over a period.  The Single Status Reserve could facilitate this and it was proposed that the Director of Learning and Development determine the precise nature of the arrangement with each school, as individual schools’ circumstances will be different.

 

The Director of Learning and Development needed to build on existing work and prepare a further medium term service and financial strategy specifically for education.  The strategy should identify the options necessary to keep the service within its likely resources and meet savings. These should include the potential for reconfiguring schools.  The Director should also set out how he will provide support to schools in planning their own budgets over the medium term and achieve their savings.

 

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

 

Social Services

 

 

Children & Young People

Adult

Services

Business

Man&In

Budget Plan

Total

 

£’000

£’000

£’000

£’000

£’000

Budget 2011/12

13,617

32,751

370

 

46,738

Transfers

38

371

-62

 

347

Recharges

-511

-563

79

 

-995

Adjustments

-25

-167

-17

-2544

-2,753

Inflation

202

536

42

 

780

Net Growth

757

1,207

-52

3,220

5,132

Savings

-152

-500

-102

-676

-1,430

Changes in Asset Rentals/IAS 19

43

-1

6

 

48

Budget 2012/13

13,969

33,634

264

0

47,867

 

The details of the net growth were shown at Appendix C to the report.  The sum of £27k included in the WG revenue settlement for the Mental Health Act and Deprivation of Liberty Safeguards had been added into the Adult Services budget.  Within Business Management and Innovation there was a small reduction of £2k in respect of the transfer out of the WG settlement for mapping services, which had been procured directly by WG. There was also a reduction in the insurance charge to Social Services of £50k.

 

Net growth in Children and Young People’s Services included £157k to meet the WG national minimum allowance for foster payments. The increase in children’s out of county placements was estimated at £1.1m.  In order to address this it was proposed that additional funding of £600k be provided, with the service taking action to manage placements to meet the balance as part of the Social Services Budget Plan. 

 

The Adult Services budget had been increased by £98k to meet increasing numbers of young people with learning disabilities and £402k to meet increasing numbers of older people and people with a mental health problem. An additional sum of £300k had also been included for past demographic growth. The ongoing impact of increases in care home fees above the level of inflation was estimated at £506k and Social Services had been given growth of £250k.  Adult Services would be expected to find the remainder of just over 50% through reducing the Service’s dependence on institutionalised care. The inability to achieve savings on day care transport costs for clients in receipt of mobility allowance due to changes in regulations was provided for in the sum of £130k. 

 

The latest projected outturn for the current financial year showed a gross overspend of £3,575k.  Of this sum, £650k related to the introduction by the WG of the First Steps Initiative.  It was recommended that the Director of Social Services approach the WG to ensure that additional funding was received to fully finance its initiative, for the current and next financial year. The gross overspend only reflected the part year position for community care packages.  Assuming WG meet all the increased costs of the First Steps Initiative, the full year effect of the 2011/12 overspend rolling into 2012/13 was projected to be £4,657k.  This figure would be reduced by sums included in net growth (see Appendix C to the report) as an increase to the base budget, which were currently part of the overspend.  These total £1,437k and related to £600k for Children’s Placements, £157k for National Minimum Allowance for Foster payments, £300k for additional demographic growth, £250k for 50% of the increase above inflation for Care Home fees and £130k for the inability to save on transport for day care clients.  After taking this into account, the net overspend that needed to be recovered was £3,220k. This sum was included in the Net Growth figure.

 

The savings required to meet the £3.220m were in addition to the savings targets set in the Medium Term Plan for Social Services of £3.934m to be achieved by 2014/15.  Together these amounted to £7.154m and had been reviewed in terms of the time it would take to achieve them.

 

The greater the delay in achieving the savings, the higher the use of reserve required to fund 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 should provide a practical time-frame for recovery and would necessitate the setting up and use of a specific reserve over a four-year period as follows:

Financial

Year

Approx Phasing Profile

 

Revised

Savings

Target

Existing

Savings

Target

Additional

Savings

Target

Use of Reserves

 

%

£’000

£’000

£’000

£’000

2012/13

20

1,430

754

676

2,544

2013/14

30

2,150

1,847

303

2,241

2014/15

30

2,150

1,333

817

1,424

2015/16

20

1,424

0

1,424

0

Total

100

7,154

3,934

3,220

6,209

 

 

If the above strategy were approved the Director of Social Services must produce a Budget Plan containing specific, timed, measures that clearly demonstrate how the savings would be delivered over the period.  It was also essential that tight control over expenditure was maintained and that no further overspending occurred so that no more reserve was required than the £6.209m stated above. 

 

Ignoring the accounting changes in asset rentals and IAS 19, the net increase to the base budget was £1.081m.  This represented an increase of 2.3% on the 2011/12 budget and compared to the 0.75% increase in the overall Council budget.

 

Environmental and Economic Regeneration

 

 

Planning &

Transp.

Ec. Dev &

Leisure

Visible

Services

Total

 

£’000

£’000

£’000

£’000

Budget 2011/12

3,160

7,033

21,087

31,280

Transfers

1,901

276

199

2,376

Recharges

-215

-1248

-195

-1,658

Adjustments

-66

-214

-1,024

-1,304

Inflation

74

55

259

388

Net Growth

188

43

419

650

Savings

-70

-646

-373

-1,089

Changes in Asset Rentals/IAS 19

 

-64

478

414

Budget 2012/13

4,972

5,235

20,850

31,057

 

The adjustment for job evaluation included the impact on Leisure Centres and Dyffryn House and Gardens, as any staff would transfer on the new pay and grades.

 

Details of net growth were at Appendix C to the report and included a total reduction of £33k in respect of the transfer out of the WG settlement for mapping services, which had been procured directly by WG.  There was an overall increase in the insurance charge to the Directorate of £27k.

 

Income from planning and highway development fees was again expected to fall, estimated as £100k and £50k respectively, due to the current economic climate.  The Service would be expected to reconfigure its activities so that by 2013/14 this loss of income was covered.  However, as an interim measure, it was proposed that up to £150k of any reduced income in 2012/13 was met by the use of reserves.  Sums of £78k and £123k were included for the rising costs of supporting transport.  The sum of £78k in respect of school transport was to be ring-fenced for that purpose.

 

Negotiations were continuing in respect of the transfer of Dyffryn House and Gardens to the National Trust, as set out in the report to Cabinet on 15th February 2012.  These involved payment of a grant to the National Trust which would be funded from either the Project Fund or prudential borrowing. A “one-off” sum of £120k was included in Net Growth to cover any potential increased costs of the transfer. The use of this sum was restricted to that purpose.

 

The budget assumed that should Dyffryn House and Gardens transfer to the National Trust, the costs of repayment to the Project Fund (or prudential borrowing) would be covered by the existing revenue budget, as this would no longer be required to fund the running costs of the property.

 

Visible Services Net Growth included a sum of £225k to cover the increase in landfill tax.  Energy costs for street lighting rose by 18% in 2011/12 and the budget had been increased by £80k to mitigate this.  Similarly, £30k had been allowed for increased fuel costs in Waste Management

 

Savings for 2012/13 were as approved as part of the 2011/12 budget process with an additional £140k identified as brought forward from 2013/14, as included in the Medium Term Financial Plan.  This saving was to be found from reduced recycling treatment costs.

 

The Leisure Service was currently in the process of seeking a private sector partner and a target of £1m had been set for savings from Leisure. Current indications were that this target would be met, however, the exact sum would not be known until the tender and contract negotiations were completed.  There therefore remains a risk in this saving not being achieved.

 

Legal, Public Protection and Housing Services

 

 

Legal &

Democ

Public

Protec.

Private.

Housing

Total

 

£’000

£’000

£’000

£’000

Budget 2011/12

-45

2,432

3,200

5,587

Transfers

38

55

-178

-85

Recharges

128

-109

-408

-389

Adjustments

-37

-15

-8

-60

Inflation

31

37

43

111

Net Growth

46

61

-5

102

Savings

 

-69

 

-69

Changes in Asset Rentals / IAS 19

3

3

-13

-7

Budget 2012/13

164

2,395

2,631

5,190

 

The full details of the net growth were included in Appendix C to the report and included a total reduction of £14k in respect of the transfer out of the WG settlement for mapping services, which had been procured directly by WG.  The sum of £1k in the WG revenue settlement for sun bed regulations was included.

 

A sum of £50k had been provided to Legal, Democratic and Registrars for the loss of income in land charge income arising from market conditions and legislative changes.

 

The BWG has had regard to the £20k increase in charges to the Coroner’s Service for post mortem and mortuary support services when formulating the final budget proposals.  In addition, £45k had been allocated to meet the staffing shortfalls identified in the Food Safety Division.  The Director of Legal, Public Protection and Housing Services was urged to meet any balance required from efficiencies within the Service, re-prioritising work and developing collaborative arrangements.

 

Savings for 2012/13 were as approved as part of the 2011/12 budget process.

 

General Policy and Support Services

 

 

Fin, ICT&

Prop

Human

Resrcs

Bldg Serv

Policy

Chief

Exec

YOS

Total

 

£’000

£’000

£’000

£’000

£’000

£’000

£’000

Budget 2011/12

-567

-66

0

21,805

-76

754

21,850

Transfers

385

15

11

-1,435

34

13

-977

Recharges

239

59

-15

2,761

260

-86

3,218

Adjustments

-66

-8

-2

 

-33

-5

-114

Inflation

192

19

15

39

91

11

367

Net Growth

38

 

2

330

-7

5

368

Savings

-38

-10

 

-200

-73

-15

-336

Changes in Asset Rentals/IAS 19

-47

6

 

-881

37

 

-885

Budget 2012/13

136

15

11

22,419

233

677

23,491

 

The full details of the net growth were included in Appendix C to the report  and included a total reduction of £14k in respect of the transfer out of the WG settlement for mapping services, which had been procured directly by WG.  There was an overall increase in the insurance charge of £7k.

 

A sum of £23k was included to compensate for the loss of the WG grant for administering student awards and £22k was provided to fund an additional post in Housing Benefits to assess school meal entitlement while assessing an individual’s entitlement to housing / Council tax benefit.  As well as assisting those eligible to claim this benefit, a higher take up in school meal entitlement would result in additional RSG from WG.

 

Sums for the costs of the Capital Programme (£180k) and elections (£150k) were included.

 

Savings for 2012/13 were as approved as part of the 2011/12 budget process with an additional £38k identified in respect of Finance, ICT and Property (accommodation costs) and £38k for Chief Executive’s (further C1V efficiencies).

 

The Savings for Policy include a sum of £200k for a reduction in senior management.  After allowing for the Education Service to retain the benefit of their senior management saving, the current proposal should achieve the target of £200k in a full year but, depending on the date of implementation, the full saving may not be achieved for 2012/13.

 

The costs in 2012/13 of job evaluation to the General Fund were estimated to be £1.545m.  Housing Revenue Account posts’ costs would be met from the HRA.  The costs related to hardship, the cost of assimilation and any part year increments due. The budget adjustment took into account increments that would have been payable prior to the new pay and grading structure. Trading Services had not directly been awarded additional sums for increased pay but where appropriate the client accounts for building cleaning and catering had been increased to reflect increased charges.  Where costs related to grant funded initiatives, it was expected that the grant received should fund any cost implications.  The adjustments for job evaluation were:

 

 

£’000

Education

20

Libraries

70

Lifelong Learning

4

Catering

114

Children and Young People

73

Adult Services

262

Business Management and Innovation

12

Planning and Transportation

32

Economic Development and Leisure

276

Visible Services

199

Legal, Democratic and Registrars etc

-2

Public Protection

25

Private Housing / Community Safety

2

Finance ICT and Property

109

Human Resources

15

Building Services

11

General Policy

300

Chief Executive

10

Youth Offending Service

13

Total

1,545

 

The costs for schools to 31st March 2013 would be met from the Single Status Reserve.

 

After the above transfers were made, a residual sum remained of £1.478m.  This sum was required to fund future year increments in the new pay and grading structure.  However, it was not required for the next financial year and it was proposed that this sum be transferred to the Social Services Budget Reserve in 2012/13.

 

Included within the Policy budget was income from WG for the Outcome Agreement Grant (£1.254m).  Payment of the Grant was dependent on the achievement of targets contained within the Outcome Agreement the Council has with WG.

 

Reserves

 

Reserves were 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 General Fund surplus and then set aside for other purposes or used to reduce Council tax.

 

The Council had taken a prudent approach with regard to Specific Reserves and used them to mitigate known risks (financial and service) and contingent items, e.g. Insurance Fund, Single Status. Other Reserves had 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 was important as the Council had limited capacity to realise sufficient sums from the sale of assets for capital investment. Sums had also been set aside to assist in budget management, e.g. Social Services Budget Reserve, Early Retirement.  The Housing Revenue Account Reserve was ring-fenced to Housing and the majority would be used to fund improvements to the Council’s housing stock.

 

The Section 151 Officer’s view was that the minimum level for the General Reserve was £7m.  This was considered sufficient to usually cover unforeseen expenditure whilst, in the short term, maintaining a working balance. Unforeseen expenditure could be substantial, e.g. during the current year Social Services net overspend was £2.9m, and several instances could occur in a year. Whilst there was no set requirement for the minimum level for the General Reserve, some commentators use 5% of the net budget as a guide.  For the Vale this was some £10m.  However, in view of the prudent approach the Council took with regard to Specific Reserves, £7m was considered a reasonable minimum.

 

Whilst the Council presently benefited from a reasonable level of reserves, they were not inexhaustible and had 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 was undertaken to ascertain their adequacy and strategy for use.  The reserves were examined with a view to their:

 

Level – whether the amount held in the fund was sufficient to requirements

Purpose – whether the need to hold the fund was still relevant.

 

In this respect the following reserves had been identified as either being no longer necessary or their level too high:

 

 

£’000

Housing General Fund – there was no longer a requirement for this reserve as the work on a potential stock transfer was complete and a retention strategy was in place

336

Homelessness Agreement - this reserve was no longer required as it was anticipated that any expenditure necessary could be met from revenue and no call on the fund was predicted

286

Waste Management - this reserve was no longer required as the contract issues had been resolved and no call on the fund was predicted

1,500

Finance, ICT and Property - this reserve was no longer required as it was anticipated that any remaining expenditure could be met from revenue

566

Corporate Governance – in light of recent and predicted use the level of this reserve was too high and it was recommended that it be reduced by £400k

400

Early Retirement – it was recommended that the level of this fund be reduced in view of the level of early retirement/ redundancies anticipated in the medium term.

1,500

E Government – the reserve was set up to fund the implementation of the OneVale programme and was no longer required. The bulk of the costs of implementation had now been incurred and there was no predicted movement on the fund for the immediate future. Future projects could be funded from the Computer Renewal Fund or Project Fund.

6,042

Invest to Save – the objective of this fund duplicated to a large extent that of the Project Fund and it was therefore not necessary to have a separate fund

2,090

Total sum released

12,720

 

The budget recovery plan for Social Services required an estimated £6.209m to fund revenue expenditure over the next 4 years to give the Service time to plan and implement remedial action.  As currently no such fund existed, a reserve would need to be established for this purpose.  During 2012/13 Policy will transfer £1.478m into the reserve (see paragraph 67 of the report) leaving a balance to be found of £4.731m.  It was proposed that £4.8m of the total sum released from the review of reserves be transferred into the Social Services Budget Reserve.

 

There was considerable pressure on highway maintenance and in recognition of this it was proposed that a sum of £1m be also transferred to the Visible Services Reserve.

 

The balance remaining amounts to £6.92m and it was proposed that this be transferred to the Project Fund.  This would enable the sum of £6.9m that was potentially to be paid to the National Trust for a contribution in respect of the transfer of Dyffryn House and Gardens to be advanced from the Project Fund instead of prudential borrowing.  Annual repayments of principal would be made to the Project Fund by the Economic Development and Leisure Service over a 20 year period.

 

The estimated level of General Reserve at 1st April 2012 was £7.358m.  The proposed budget for 2012/13 assumed a use of £500k General Reserve to fund revenue expenditure.  On this basis the general reserve was estimated to fall to £6.858m at the end of 2012/13.

 

It was projected that the aggregate nursery, primary and secondary balances would be £1.202m in surplus at 31st March 2012.  This included three primary schools with a combined deficit of £23k and one secondary school with a deficit of £293k.  All schools with deficit balances had submitted a robust action plan for repayment over a period of up to five years.  The action plans were rigorously monitored by Central Education.

 

Attached at Appendix D to the report was a schedule showing the reserves and the anticipated balances at 31st March 2012, 2013, 2014, and 2015.  The appendix set out the title of the reserve together with its purpose. A summary of the position was set out below:

 

Summary of Estimated Reserves Projected to 2014/15

Est.  Bal.

31/3/2012

Net

Mov’t

Est. Bal.

31/3/2015

 

£’000

£’000

£’000

General Reserve

7,358

-500

6,858

Specific Reserves

34,828

-18,623

16,205

Total General Fund (excl Schools)

42,186

-19,123

23,063

Schools Balances

1,840

 

1,840

Total General Fund Reserves

44,026

-19,123

24,903

 

The above table shows that there was a large fall in the level of reserves over the three year period as substantial calls on funds were made.  Significant uses were in respect of the Social Services Budget Plan £6.2m and the planned capital expenditure on leisure centres of about £3m (the use of £6.9m for the potential Dyffryn House and Gardens transfer was assumed to take place in the current financial year).

 

The total budget shown at Appendix B to the report was £203.056m.  After adjusting for discretionary rate relief of £150,000, it was £2.388m below the Council’s SSA of £205.294m.  The 2011/12 budget was £1.402m below the SSA.

 

The most significant reason for the growth in the disparity between budget and SSA was that whilst the Council’s SSA was increased by £2.506m the amount of related funding received from WAG (AEF) only increased by £543k. The Council Tax increase required for the Council’s budget to match its SSA was 6.4%.

 

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

 

If the Council decided to budget at £203.056m, deducting from this Revenue Support Grant of £117.668m, redistributed non-domestic rates of £33.507m produced a requirement of £51.881m to be met from Council Tax.  Dividing this by the Council Tax Base of 55,190, gave a level of Council Tax for this Council’s purposes (excluding Police and Community Council precepts) for Band D properties of £940.05.  This was an increase over the current year of £16.2 or 1.75%.

 

The average of the Council Tax set by Council’s in Wales for 2011/12 at Band D was £968.03, whilst the Vale’s was £923.85.  The BWG view was that the proposed increase in Council Tax at 1.75%, which was below the current level of inflation, was a reasonable compromise between the pressure on services and the financial pressures facing Council taxpayers.

 

The proposed budget used £500k of General Reserve.  The estimated balance on the General Reserve at 31st March 2013 was £6.858m.  This was slightly below the recommended minimum level of £7m and whilst it was considered adequate for 2012/13, the Medium Term Financial Plan would need to address the issue.

 

The use of reserves for funding recurrent expenditure was clearly not sustainable.  Consequently, the strategy set out in the next Medium Term Financial Plan would address further the use of reserves to balance the revenue budget.

 

In order for the Council not to be exposed to unacceptable risk it was essential that all Services maintained their expenditure within budget and that this was a major priority for Directors, Heads of Service, and all Managers.

 

There were risks in the budget and the most significant of these were set out in the report including within the sections on each Directorate.

 

There was particular risk in Social Services as the budget was currently overspending.  Further unforeseen circumstances could lead to increased demand for services which could worsen the current deficit.  Provision had been made in the budget for a 2% increase in community care providers’ fees from 2011/12 and each 1% increase above this incurred additional costs of about £200k per annum.

 

The budget also assumed that the WG would fully fund the costs of its First Steps initiative.  In 2011/12 the cost to the Vale in excess of the sum allowed in the 2011/12 revenue settlement was estimated to be £650k and this could increase.  Should the WG refuse to fully fund the cost, this Council would need to find the additional sum required.  In the short term for 2012/13 this sum could be found from the general reserve but for future years it would have to be found from additional cuts.

 

The report set out a strategy for Social Services to recover expenditure to the base budget over a 4 year period. This was in order to allow time for the proper planning and implementation of considered, safe and sustainable savings.  However, this strategy used a significant portion of reserves, £6.209m.  It was of the utmost priority and essential that the Director of Social Services take the action necessary to produce and implement his Budget Plan so that the Service’s spending was within its base budget by year 4, no additional overspending occurred and that the use of the reserve does not exceed £6.209m over the period.

 

The economic climate was also affecting the level of income received by services e.g. planning fees, land charge fees, leisure centre charges etc. It could also have an adverse impact on Council Tax income. The budget assumed a collection rate of 97%, for each fall of 1% in this rate the Council would lose about £519k of revenue.

 

A risk facing the Council remained Single Status and Job Evaluation. The degree of risk had reduced since the Council has now entered into a Collective Agreement to implement a new pay and grading structure with effect from 1st March 2012.  The proposed budget included the costs of implementation.  However, costs could rise as a result of the appeals process, which would need to be found from Services’ budgets.

 

A number of equal pay claims had been received from employees and a report to Cabinet on 15th February 2012 set out a settlement strategy for some groups.  It was not possible to exactly quantify the final impact of settlement but currently, including legal fees, it was not anticipated to exceed £7m.   Schools would be expected to meet the costs of settling their claims but, as set out in paragraph 38 of the report, assistance could be given to enable the cost to be spread over a number of years where appropriate.  In this case the initial payment would be funded from the Single Status Reserve.  The sum of £7m included schools and could be met initially from the existing provision for equal pay claims of £4.988m and the balance from the Single Status Reserve.

 

Not all claims would be dealt with by the proposed settlement and during the next year work would progress on the remaining claims.  The balance on the Single Status reserve after funding the above and allowing for legal costs was anticipated to be £1.732m.  Should this sum be insufficient to settle or contest the remaining claims some reserves would need to be “unearmarked”. Alternatively the Council could seek to capitalise the costs although any application may not be agreed by the WG. There remained a risk therefore from equal pay which could result in reduced services and jobs.

 

The amount of savings required to balance the budget was challenging and a further risk was that price inflation had generally been provided at a rate of 2%. The Consumer Price Index for the year to January 2012 showed the annual increase to be 3.6%.

 

The Council received about £80m each year in specific grant. The budget proposals assumed that any reduction in specific grant would be matched by a reduction in expenditure.  Details on all specific grants had not yet been finalised and there was a risk that should grants be cut and it not be 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 were 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 was sufficient in reserves to cover for this contingency in the short term.

 

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

 

The reduction for 2012/13, excluding schools, was estimated as 37.3 in full-time equivalents (fte) with an estimated potential 14 redundancies. These figures do not include any potential job losses from the transfer of the School Improvement Service to the Central South Consortium Joint Education Service.  Nor did they include potential posts lost from the additional savings required from Social Services in their Budget Plan.  In both cases proposals were not yet developed sufficiently to estimate the impact.  Consequently the total number of redundancies in 2012/13 may exceed the number estimated. The impact on individuals was likely to be mitigated as a proportion of the reduction may be found from vacant posts and others from natural wastage. 

 

The above figures did not include the staffing implications relating to budget pressures within schools as the details needed to be considered by individual Governing Bodies and supported by the Director of Learning and Development.  Individual schools would also be impacted by whether they have growing or falling pupil numbers.  There were, however, likely to be staff reductions and redundancies depending on each school’s circumstances. The Director of Learning and Development would need to establish the impact of the budget on employees in schools.

 

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

 

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

 

In light of the staffing implications it was essential to ensure that consultation with the trade unions was carried out in accordance with the Council’s Avoiding Redundancy Policy  and related legal requirements.  A “change forum” has been set up with the trade unions to help co-ordinate the consultation process and deal with cross Directorate issues.  A similar approach, involving the Director of Learning and Development, needed to be considered in relation to schools to progress consultation in individual schools.

 

The numbers of potential redundancies over the next few years has required strengthening of the Council’s redeployment processes and tightening of the Council’s vacancy control processes.  Where appropriate it may involve a targeted search for voluntary redundancies / reduced hours.

 

Statement of Section 151 Officer on Robustness of Estimates

 

The Local Government Act 2003 required that the Director of Finance, ICT and Property must report on the robustness of the estimates, which were to be approved by Council. This section constituted that assurance.

 

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

 

Savings were regarded as achievable and had been carefully examined with risk and measures to mitigate identified.  It was important to stress the importance of the mitigating actions being implemented and the need to consider equality impact assessments.

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

 

A measure to guard against this would be to monitor the budget during the year, to identify problems as they arose and put in place remedial action.  Key to this would be the delivery of savings required under the Social Services Budget Plan. Cabinet, Scrutiny and Managers continued to have a key role in reviewing and maintaining budgetary performance.

 

Reserves had been reviewed and were adequate to cover contingencies and the risks stated in the report.

 

Part of the report was for Executive decision, the remainder required adoption by the Council.

 

RESOLVED -

 

(1)       T H A T the following be referred to Council:

 

(i)         Fix the budget for 2012/13 at £203.056 million including a provision of £150,000 for discretionary rate relief to rural shops and post offices and charitable organisations.

 

(ii)        Approve the budgets for 2012/13 as set out in Appendix B to the report, the totals as follows:

 

 

£’000

Education and Schools

90,941

Libraries

2,656

Lifelong Learning

1,344

Catering

1,010

Children and Young People

13,969

Adult Services

33,634

Business Management and Innovation

264

Planning and Transportation

4,972

Economic Development and Leisure

5,235

Visible Services

20,850

Legal, Democratic and Registrars

164

Public Protection

2,395

Private Housing / Community Safety

2,631

Finance, ICT and Property

136

Human Resources

15

Building Services

11

General Policy

22,419

Chief Executive

233

Youth Offending Services

677

General Fund Reserve

-500

 

(iii)       Approve the recommendations regarding Net Growth set out in Appendix C to the report.

 

(iv)       Set the Council Tax for 2012/13 for its own purposes (excluding Police and Town and Community Council precepts) at the following levels:

 

Band

Council Tax

          £

A

626.70

B

731.15

C

835.60

D

940.05

E

1,148.95

F

1,357.85

G

1,566.75

H

1,880.10

I

2,193.45

 

(v)        The proposed draft report on Education Budget and IBA at Appendix A to the report be endorsed and the Director of Learning and Development make arrangements for it to be forwarded to the School Budget Forum and Welsh Government (WG).

 

(vi)       The Director of Learning and Development 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.

 

(vii)      The Director of Social Services produces a Social Services Budget Plan and takes the necessary action to achieve the level of savings required in accordance with the approved timeframe.

 

(viii)     The minimum savings targets for 2013/14 and 2014/15 as set out in the 2011/12 Medium Term Financial Plan, adjusted for the Social Services Budget Plan,  be approved as follows: 




Minimum Savings Targets

2013/14

2014/15

TOTAL

 

£000

     £000

    £000

Learning & Development (excl. schools)

244

257

501

Social Services

1,847

1,333

3,180

Social Services Budget Plan

303

817

1,120

Environmental & Economic Regeneration

725

297

1,022

Legal, Public Protection & Private Housing

18

83

101

Finance, ICT, Property, HR

0

101

101

Chief Executive (inc. YOS)

38

62

100

Minimum Required for the Year

3,175

2,950

6,125

 

 

(ix)       The exact level of savings required together with their impact from 2013/14 onwards to be considered as part of a Budget Review to be undertaken following the Council elections in May 2012.

 

(x)        The reclassification of reserves as set out at Appendix D to the report be approved.

 

(2)       That the following be approved:

 

(i)         …………..

 

(ii)        …………..

 

(iii)       …………..

 

(iv)       …………..

 

(v)        …………..

 

(vi)       …………..

 

Reasons for decisions

 

(1)       (i)         Set 2012/13 budget in line with statutory requirements.

 

(ii)        Allocation of budget to services.

 

(iii)       Reduce risk to services.

 

(iv)       Set Council Tax levels for 2012/13.

 

(v)        So that the report can be presented to the Schools Budget Forum and Welsh Government.

 

(vi)       Set out delegated authority in relation to allocation of Education and Schools budget.

 

(vii)      To ensure that the Social Services Budget Plan is achieved.

 

(viii&ix) To set minimum savings targets for achieving savings and to ensure that the impact of these savings are fully considered.

 

(x)        To ensure that reserves are both adequate in purpose and level.

 

(2)       (i)         …………..

 

(ii&iii)  …………..

 

(iv)       …………..

 

(v)        …………..

 

(vi)       …………..”

 

 

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