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Agenda Item No. 10(h)

 

THE VALE OF GLAMORGAN COUNCIL

 

COUNCIL MEETING: 4 MARCH 2015

 

REFERENCE FROM CABINET:  23 FEBRUARY 2015

 

C2651       FINAL PROPOSALS FOR THE REVENUE BUDGET 2015/16 (L) (SCRUTINY COMMITTEE – CORPORATE RESOURCES) -

 

Cabinet members were asked to consider the final proposals for the revenue budget, before making their recommendations to Council, in respect of the final revenue budget for the financial year 2015/16. 

 

The Council was required under statute to fix the level of Council Tax for 2015/16 by 11 March, 2015. The final decision on the budget could not be delegated and would be made at the next meeting of Council scheduled to be held on the 4 March, 2015.

 

General

 

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

 

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

 

Anticipated Outturn 2014/15

 

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

 

Revenue Settlement 2015/16

 

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

 

WG required each local authority to compare its total budget for education to its IBA (Indicator Based Assessment).  It must then report on the reasons why it may had chosen to set a budget for education that differed from its IBA (£95.759m 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 the report was attached at Appendix A to the report. 

 

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

 

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

 

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

 

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

 

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

 

Budget Strategy 2015/16

 

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

 

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

 

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

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

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

 

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

 

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

 

Proposed Budget 2015/16

 

The proposed budget for 2015/16 had been set in line with the current financial strategy and a summary of the overall position was attached at Appendix C 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 were therefore a part of the total expenditure of the Council.

 

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

 

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

 

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

 

The BWG had reviewed and updated the cost pressures. Those which could not be mitigated or reduced were included within the Net Growth figure of £3.005m. The breakdown of this sum was shown at Appendix D attached to the report.

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

 

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

 

Services

Learning and Skills

 

 

Educ./

Schools

Libraries

Adult Comm Learning

Youth Services

Catering

Total

 

 £’000

£’000

£’000

  £’000

£’000

£’000

Budget 2014/15

93,369

2,589

204

1,084

1,743

98,989

Recharges/Transf.

7

(63)

45

11

32

32

Inflation

234

26

15

16

31

322

Net Growth

929

0

0

0

0

929

Savings

(545)

(229)

(2)

(43)

(77)

(896)

Changes in Asset Rentals/IAS 19               

92

36

3

(25)

27

133

 

Budget 2015/16

 

94,086

 

2,359

 

265

 

1,043

 

 

1,756

 

99,509

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

 

WG had continued to build into the settlement protection for schools via their Minimum Funding Commitment (MFC), which was equivalent to 1% above the change in the Assembly’s block grant 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 this percentage and then adjusted for changes in pupil numbers.

 

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

 

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

 

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

 

Savings for Learning and Skills in 2015/16 total £896k.  Full details of the savings were shown at Appendix E attached to the report.

 

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

 

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

 

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 & Skills to determine the split in the light of that consultation, subject to the minimum WG target for the ISB being met.

 

Social Services

 

 

Children & Young People

Adult

Services

  Business Mgmt. &

Innovation

YOS

Total

 

£’000

£’000

£’000

£’000

£’000

Budget 2014/15

14,761

36,628

301

664

52,354

Recharges/Transf.

(543)

(262)

87

(17)

(735)

Adjustments

35

89

0

0

124

Inflation

220

633

51

10

914

Net Growth

270

1,056

0

0

1,326

Savings

(343)

(956)

(166)

(3)

(1,468)

Changes in Asset Rentals/IAS 19

97

230

46

18

391

Budget 2015/16

14,497

37,418

319

672

52,906

 

 

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

 

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

 

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

 

Savings for Social Services in 2015/16 total £1.468m.  Full details of the savings were shown at Appendix E attached to the report.

 

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

 

Financial

Year

 

Savings

Target

Use of

Fund

 

 

£’000

£’000

2015/16

 

1,468

2,075

2016/17

 

1,133

970

2017/18

 

320

650

2018/19

 

320

330

2019/20

 

330

0

 

 

 

 

Total

 

3,571

4,025

 

 

 

 

 

 

 

 

 

 

 

 

 

The Director of Social Services would continue to review the Social Services

Budget Plan and take the necessary action to achieve the level of savings required in accordance with the above timeframe. It was also essential that tight control over expenditure was achieved and that no further overspending occurs. 

 

Visible and Housing Services

 

 

Environment

And Visible

Parks and

Ground Maintenance

Building

Services

Council Fund Housing

Total

 

£’000

£’000

£’000

£’000

£’000

Budget 2014/15

17,912

3,528

0

1,066

22,506

Recharges/Transf.

(106)

23

(97)

352

172

Adjustment

(300)

0

0

0

(300)

Inflation

263

38

9

12

322

Net Growth

585

0

0

0

585

Savings

(1,884)

(130)

0

(212)

(2,226)

Changes in Asset Rentals/IAS 19

441

44

88

0

573

Budget 2015/16

16,911

3,503

0

1,218

21,632

 

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

 

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

 

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

 

Development Services

 

 

Public Protection

Private Housing

Planning &Transp.

Leisure

Economic Develop.

Total

 

£’000

£’000

£’000

£’000

£’000

£’000

Budget 2014/15

2,231

11,744

5,306

3,515

832

23,628

Recharge/Tranf

161

(769)

6

(111)

13

(700)

Adjustments

0

(25)

(75)

(13)

(20)

(133)

Inflation

27

209

97

10

13

356

Net Growth

(18)

0

0

0

0

(18)

Savings

(115)

(121)

(212)

(935)

(28)

(1,411)

Changes in Asset Rentals /IAS19

40

9

48

15

15

127

Budget 2015/16

2,326

11,047

5,170

2,481

825

21,849

 

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

 

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

 

Managing Director

 

 

Resources

 

General Policy

 

Total

 

£’000

£’000

£’000

Budget 2014/15

380

18,974

19,354

Recharges/Transf.

814

417

1,231

Adjustments

0

(101)

(101)

Inflation

334

28

362

Net Growth

(97)

280

183

Savings

(728)

(118)

(846)

Changes in Asset Rentals/IAS 19

260

(1,484)

(1,224)

Budget 2015/16

963

17,996

18,959

 

 

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

 

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

 

Savings for 2015/16 were detailed at Appendix E and totalled £846k. £728k was attributable to Resources and £118k for General Policy.

 

Financial Strategy for 2016/17 to 2017/18

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Cost pressures for future years had been considered and assessed by the BWG and totaled £7.48m for 2016/17 and 2017/18.  Details were attached at Appendix F to the report. This included the MFC for schools which was estimated at £985k over the 2 years. Any further cost pressures would need to be managed down or mitigated by Services in order to avoid further savings targets being required.

 

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

 

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

 

Financial Projections to 2017/18

2016/17

2017/18

Total

 

£’000

£’000

£’000

Assumed Decrease in AEF (4% and 2%)

6,099

2,928

9,027

Cost Pressures (inc MFC for Schools)

4,852

2,628

7,480

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

1,439

1,463

2,902

Net Savings Targets

(12,170)

(5,652)

(17,822)

Assumed 2% Gross Council Tax Increase

(1,197)

(1,221)

(2,418)

Adjustment for ‘One Off’ Items

505

320

825

(Surplus)/Shortfall in Savings Required

(472)

466

(6)

 

Reserves

 

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

 

The Council had always 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. 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. Early Retirement Fund. 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 Council Fund Reserve is £7m. This was considered sufficient to cover unforeseen expenditure whilst, in the short term, maintaining a working balance. Unforeseen expenditure could be substantial and several instances could occur in a year. Whilst there was no set requirement for the minimum level for the Council Fund Reserve, some commentators used 5% of the net budget as a guide. For the Vale this was currently about £10.6m. However, in view of the prudent approach the Council took with regard to Specific Reserves, £7m was considered a reasonable minimum.

 

The Council presently benefited from a reasonable level of reserves, however, 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 (i.e. whether the amount held in the fund was sufficient to requirements) and purpose (i.e. whether the need to hold the fund was still relevant).

 

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

           

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

 

It was projected that the aggregate nursery, primary and secondary balances would be £1.71m surplus at 31 March, 2015. 

 

Attached at Appendix H to the report was a schedule showing the reserves and the anticipated balances at the 31 March, 2015, 2016, 2017 and 2018.  The Appendix sets 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 2017/18

Est.  Bal.

31/3/2015

Net

Movement

Est. Bal.

31/3/2018

 

£’000

£’000

£’000

General Reserves

11,460

(4,000)

7,460

Specific Reserves

49,580

(26,036)

23,544

Total Council Fund Reserves(excl. Schools)

61,040

 

(30,036)

31,004

Schools Balances

2,210

(1,200)

1,010

 

 

 

 

Total Council Fund Reserves

63,250

(31,236)

32,014

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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.  Any further cost pressures would need to be managed down or mitigated by Services.

 

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

 

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

 

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

 

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

 

In 2014/15, the Council would receive around £71m in specific grant and subsidy. 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 was not possible to reduce expenditure correspondingly, the Council could overspend. This risk should be mitigated by the fact that Services should had 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, but only 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 2015/16, excluding schools, was estimated to be around 45 in full-time equivalents (FTE).  Although the impact on individuals was likely to be mitigated as a result of natural wastage and the deletion of vacant posts, it was, nevertheless, expected that there would be a number of redundancies. 

 

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

 

The Council had 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 trades 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 trades unions was carried out in accordance with the Council’s Avoiding Redundancy Policy  and related legal requirements. A Change Forum met regularly with the trade unions to help co-ordinate the consultation process and deal with cross- directorate issues.

 

The number of potential redundancies over the next few years had required strengthening of the Council’s redeployment processes, the tightening of the Council’s vacancy control processes and the pursuit of other measures as set out in the Council’s Workforce Plan. Where appropriate this could 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 Section 151 Officer (currently the Head of Finance) must report on the robustness of the estimates, that 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, the delivery of services. This had been recognised and referenced within the report, where relevant, together with actions that could be taken to manage that risk.

 

Savings were regarded as extremely challenging but achievable and had been carefully examined with risk and measures to mitigate them 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 report. 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 and to identify problems as they arose and put in place remedial action. Key to this would be the delivery of savings including those required under the Reshaping Services programme. Cabinet, Scrutiny and Managers continued to have a key role in reviewing and maintaining budgetary performance.

 

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

 

At the meeting the Leader gave thanks to all Officers for their hard work so far in this process, however, he was mindful that further savings would have to be made.

 

He further commented that the budget would have to be continually monitored to ensure that the budget continued to be on track during the years ahead.

 

This was a matter for Executive and Council decision

 

RESOLVED –

 

That the following be recommended to Council:

 

(1)       T H A T the budget for 2015/16 at £212.355 million be fixed including a provision of £200,000 for discretionary rate relief to rural shops and post offices and charitable organisations.

 

(2)       T H A T the budgets for 2015/16 as set out in Appendix C attached to the report, and the totals as set out below be approved:

 

 

£’000

Education and Schools

94,086

Libraries

2,359

Adult Community Learning

265

Youth Service

1,043

Catering

1,756

Children & Young People

14,497

Adult Services

37,418

Business Management & Innovation

319

Youth Offending Service

672

Environment and Visible Services

16,911

Parks and Grounds Maintenance

3,503

Building Services

0

Council Fund Housing

1,218

Public Protection

2,326

 

 

Private Housing

11,047

Planning and Transportation

5,170

Leisure

2,481

Economic Development

825

Resources

963

General Policy

17,996

Council Fund Reserve

(2,500)

Grand Total

212,355

 

(3)       T H A T the recommendations regarding Net Growth for 2015/16 as set out in Appendix D attached to the report and the Savings for 2015/16 as set out in Appendix E attached to the report be approved.

 

(4)       T H A T the Council Tax for 2015/16 be set for its own purposes (excluding police and town and community council precepts) at the following levels:

 

Band

Council Tax

          £

A

713.04

B

831.88

C

950.72

D

1,069.56

E

1,307.24

F

1,544.92

G

1,782.60

H

2,139.12

I

2,495.64

 

 

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

 

That the following be approved by Cabinet:

 

(6)       ..........

 

(7)       ..........

 

(8)       T H A T the initial savings targets for 2016/17 and 2017/18 as set out in Appendix G attached to the report be approved and forwarded to Council.

 

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

 

(10)     T H A T the reclassification of reserves as set out at Appendix H as attached to the report be approved and forwarded to Council.

 

(11)     ..........

 

Reasons for decisions

 

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

 

(2)       To allocate budgets to services.

 

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

 

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

 

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

 

(6)       ..........

 

(7)       ..........

 

(8)       To set minimum savings targets for achieving savings.

 

(9&10)To ensure that reserves were both adequate in purpose and level.

 

(11)     ..........

 

 

[View Cabinet Report

 

 

 

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