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Agenda Item No

 

The Vale of Glamorgan Council

 

Scrutiny Committee (Corporate Resources): 8th February 2013

 

Report of the Managing Director

 

Update on the Budget Review - Revenue 2013/14 - 2016/17

 

Purpose of the Report

1.            To update Committee on the progress of the Review of the Revenue Budget for the years 2013/14 to 2016/17. 

Recommendations

1.            That the Committee have regard to the contents of this report and provide any comments to Cabinet.

Reasons for the Recommendations

1.      To update Committee and provide for scrutiny of progress on the Budget Review.

Background

2.            As part of the final budget proposals for 2012/13, Council on 7th March 2012 resolved that a Budget Review would be undertaken following the Council elections in May 2012 (minute no. 951).

 

3.            Details of the methodology for the Budget Review for revenue together with an update on progress at that time was reported as part of the Initial Revenue Budget Proposals 2013/14 considered by Cabinet on 19th November 2012 (minute no. C1911).

 

4.            The results of the Budget Review will inform the Final Revenue Budget Proposals 2013/14 to be considered by Cabinet on 25th February 2013 and Council on 6th March 2013.

 

Relevant Issues and Options

 

Purpose of the Budget Review

5.            One of the main aims of the Budget Review process was to put in place a financial strategy for the Council to 2017. For revenue, the purpose of the Review was to ensure:

·         A sustainable budget was achieved within predicted funding levels.

·         The budget was aligned to the Council’s priorities as set out in the Corporate Plan.

·         Best value for money was being obtained, i.e. identifying efficiency savings, opportunities for income generation and better use of external grants

 

6.            The 2013/14 Review was supported by Cost Centre Analyses (CCAs) that provided the detail for each service area including:

·         Comparisons of the 2010/11 outturn, 2011/12 budget and actual outturn, and 2012/13 current year budget.

·         Separation of the largely controllable (e.g. salaries and wages) and uncontrollable (e.g. recharges from other departments) elements of income and expenditure.

·         Identification of the costs centres within Service Areas

 

7.            Each cost centre has been awarded a rating that measured its relative risk (based on the Council’s risk management strategy) and corporate priority. The following tables show the criteria used for the risk and corporate priority rating:

 

Possible Impact or Magnitude of Risk

 

Catastrophic

 

MEDIUM

 

MEDIUM/HIGH

 

HIGH

 

VERY HIGH

 

High

 

MEDIUM/LOW

 

MEDIUM

 

MEDIUM/HIGH

 

HIGH

 

Medium

 

 LOW

 

MEDIUM

 

MEDIUM

 

MEDIUM/HIGH

 

Low

 

VERY LOW

 

 LOW

 

MEDIUM/LOW

 

MEDIUM

Risk Matrix

Very Unlikely

Possible

Probable

Almost Certain

Likelihood/Probability of Risk Occurring

Corporate Priority

Score

Commitments and areas where the Council has no control over the expenditure, e.g. contractual and legal commitments, absolute minimum statutory service, taxes, etc.

3

Very high priority (publicly announced commitment e.g. items included in the Community Strategy, Corporate Plan etc.)

2

“Invest to Save” and preventative expenditure

2

Statutory expenditure above the absolute minimum and other priorities

1

 

 

8.            The Budget Working Group (BWG) is responsible for completing the Budget Review. The BWG has

revisited the financial information included in the Cost Centre Analyses and reaffirmed the results of the relative risk and corporate priority assessment reported originally as part of the Initial Revenue Budget Proposals 2013/14 in November 2012. The BWG will also be considering high-level information on the comparative spending levels of individual services across Wales as part of their deliberations.

 

          Final Settlement 2013/14

9.      Information previously reported as part of the Initial Revenue Budget Proposals was based upon a provisional Revenue Support Grant (RSG) settlement figure from Welsh Government (WG). On 11th December 2012, the WG provided the Council with its final RSG figure of £125.547M. Together with its share of the Non Domestic Rates Pool of £38.833M, the total of £164.380M constitutes the Council’s Aggregate External Finance (AEF) for 2013/14. The Council’s final Standard Spending Assessment (SSA) for 2013/14 is £219.212M. This is WG’s view of the relative resources needed to provide a standard level of service in each authority in Wales.

 

10.    The Council will also receive a sum provisionally set at £1.246M via the Outcome Agreement Grant (OAG) for 2013/14. The OAG is an un-hypothecated grant (i.e. not earmarked for particular services).The Council is not guaranteed to receive the full amount of the grant. The proportion of the grant eventually received in 2013/14 is determined by a ratings score of the Council's performance in achieving its 2012/13 Outcome Agreement targets.

 

11.    A number of former specific grants were transferred into the RSG settlement for 2013/14 totalling £3.348M as follows:

 

·         Blue Badge Scheme (Adult Services) - £16k

The scheme provides a range of parking concessions for people with severe mobility problems who have difficulty using public transport.

 

·         Appetite for Life Grant (Catering) - £104k

This grant supported dietetic/nutritional posts in collaboration with Cardiff Local Health Board, staff training in nutritional requirements and new equipment. The funding could also support trials offering new foods.

 

·         School Counselling Grant (Education & Schools) - £201k

The specific grant funds were accessible for counselling services for secondary school pupils, year 6 pupils in primary school and 16-18 year olds

 

·         School Breakfast Grant (Catering) - £621k

This grant funded the Breakfast Club Initiative within 31 primary schools, increasing to 36 partaking schools by the end of 2012/13.

 

·         Local Government Borrowing Initiative (Highways) - £304k

The objectives of the scheme are to boost the Welsh economy and improve the local highway asset. The WG will provide an annual amount over 22 years to meet revenue pressures in order to free up the Local Authority’s own resources to undertake prudential borrowing for capital highway improvement investment over the 3-year period 2012/2015.

 

·         Post 16 SEN in Mainstream (Education & Schools) - £38k

Transfer of responsibilities for additional learning support for post 16 pupils with special educational needs in Mainstream schools and other related provision previously funded by a specific grant

 

·         Post 16 SEN Special School Out of County (Education & Schools) -£829k

Transfer of responsibilities for post 16 Education in the Vale’s three Special Schools and also for specialist placements out of county and at independent schools previously funded by a specific grant.

 

·         Learning Disabilities Resettlement Grant (Adult Services) - £1.235M

This grant was used for supporting clients with learning difficulties in the community

 

12.       New responsibilities transferred to the Authority in the final settlement is Council Tax Support of £7.947M. The existing Council Tax Benefit Scheme will cease on the 31st March 2013 and the overall funding has transferred from the Treasury to the Welsh Government.  Subsequent WG amendments to the Council Tax Reduction Scheme for 2013/14 increased the maximum level of support that eligible claimants can receive from 90% to 100%. As a result, a further £788k has been allocated by WG to the Council bringing the total Council Tax Support for 2013/14 to £8.735M.

 

         Specific Grant Funding

13.       In addition to the above, the Council is heavily reliant on specific grant funding both via WG and other public bodies (e.g. Home Office for the Youth Offending Service) to continue delivering certain functions. For 2013/14 Welsh Government funding specific funding alone stands at over £21.23M, details of which are attached at Appendix A.

 

14.       Options to maximise grant funding opportunities within the Council are currently in place. However, the BWG will also consider whether further grant can be levered through partnerships and collaborations with other public bodies and the third sector. One such area is that of the Regional Collaboration Fund.

 

          Regional Collaboration Fund

15.       From the total amount of funding available to local authorities, the Minister for Local Government and the Communities has set aside a sum of £10.174M for all of Wales as a Regional Collaboration Fund. This is equivalent to 0.25% of the total RSG excluding transfers and new responsibilities. 

 

16.       This Fund will be available for authorities to access when they come forward with viable proposals for delivering collaborative projects on a regional basis.  These projects may be between some or all of the local authorities in a region and may also include the local health boards, police or fire service and third sector organisations in that region.  They must be significant, transformative and deliverable quickly so as to put authorities in a better place to meet future financial constraints.

 

17.       The Fund has been allocated over 6 regional areas with £1.485M set aside for Cardiff and the Vale.  Initial bids were requested by the Minister for discussion with the Reform Delivery Group with formal submissions to be requested from each region in February. Submitted bids are listed below with details of each bid and the partner organisations involved attached at Appendix B. A further bid on Transport may also be made for the final submission.

 

Priority

 

Bid

Bid Value

2013/14

2014/15

2015/16

1

Health and Social Care Service Integration

  £650,000

 £750,000

   £650,000

2

Regionalising Regulatory Services across Cardiff, Bridgend and the Vale of Glamorgan

  £250,000

 £250,000

   £250,000

3

LDP  -  Collaborative Land-use and Transport Planning

    £80,000

 

 

4

Cardiff & Vale of Glamorgan Joint Local Service Board

    £50,000

 

 

5

CYD Cymru -Wales Together 

   £100,000

   £40,000

     £40,000

6

Sexual Assault Referral Centre

   £140,000

  £140,000

   £140,000

7

Alcohol Treatment Centre

   £266,656

  £270,000

   £270,000

 

Annual Totals

£1,536,656

£1,450,000

£1,350,000

 

Use of Reserves

18.       In addition to the above, regard will be given in the Budget Review to the anticipated level of Reserves as at 31st March 2013. Reserves are an appropriation from revenue and are a voluntary means of setting aside money for future requirements, either capital or revenue. Certain reserves are ring fenced and may only be utilised for an explicit purpose (e.g. HRA, schools balances). Others have been earmarked for specific purposes with the continued need for and level of such reserves reviewed at least twice yearly. Certain funds, such as the Insurance Fund, are maintained to minimise the council’s exposure to risk whilst minimising the costs of maintaining external insurance premiums.

 

19.       The importance of reserves should not, therefore, be underestimated and given the Council’s overall funding position will be a key consideration for the BWG when setting the future financial strategy.  The latest projections on reserves are detailed at Appendix C and summarised below:

 

Reserve Category

Estimated Balance 31st March 2013

£000

Housing Revenue Account

13,049

General Fund

  8,598

Earmarked Reserves

30,584

Schools Balances

  2,438

 

Cost Pressures

20.       At the time of the provisional settlement, the shortfall in the 2013/14 budget was estimated at £8.426M (assuming all cost pressures were met). Future resource requirements were also assessed having regard to the likely future revenue settlements and cost pressure information provided at that time by services to 2016/17. These are shown below:

 

Matching Predicted Resources to Expenditure

2014/15

£000

2015/16

£000

2016/17

£000

Total

£000

Real Term decrease in resources

   702

1,934

1,963

  4,599

Cost Pressures

6,173

4,644

4,272

15,089

Existing Corporate Savings Targets

(2,133)

       0

       0

(2,133)

Shortfall

4,742

6,578

6,235

17,555

 

21.       The initial projections showed a cumulative shortfall of some £25.981M by 2016/17 including the shortfall on 2013/14. In view of the difficulty in predicting future levels of inflation and cost pressures, the above table needed to be treated with a degree of caution and the eventual position may be better or worse than stated.

 

22.       Changes in future settlements from WG have to be carefully considered. The projection assumes the level of increase in 2014/15 in AEF would be in line with the forward indication received from WG. However, for 2015/16 and 2016/17 no future indications had been received and so it has been assumed that there would be no increase. For each 1% difference in this assumption the impact on a year's shortfall would be £1.6M. So, for example, if the Council's AEF was 1% lower than predicted in both 2015/16 and 2016/17 the cumulative shortfall would increase by £3.2M.

 

23.       In addition, as can be seen from the Table above, the biggest financial impact for the Council comes in the form of cost pressures. Details of these cost pressures were provided as part of the Initial Revenue Budget Proposals for 2013/14. The BWG is currently reviewing the level of cost pressures and whilst this work is not yet finalised, the total is likely to decrease.

 

Proposed Savings Targets

24.       Whatever action is taken to mitigate cost pressures, there will, nevertheless, still be a requirement to find significant savings over the next four years and beyond (although not necessarily at the levels indicated). In order to assist in dealing with the original prediction as to the funding gap, each Director was asked to identify savings at least equivalent to their pro rata share of the shortfall based on their controllable expenditure. It was extremely unlikely that this would be the eventual outcome of the Budget Review but it should help officers focus and provide members with options. Schools had been excluded from the target as a result of the existing Welsh Government Minimum Funding Commitment for Schools and will be looked at during the Review. The target sums were set out in the table below, and were in addition to existing targets (including £2.544M  for Social Services as part of their Budget Plan) as follows:

 

Directorate

Original Target

Additional Target

 

2013/14£000

2014/15£000

2015/16 £000

2013/14£000

2014/15£000

2015/16£000

2016/17 £000

Total £000

Learning and Skills

244

257

0

1,141

642

890

844

4,018

Social Services

1,847

1,342

0

3,571

2,010

2,788

2,643

14,201

Social Services Budget Plan

303

817

1,424

0

0

0

0

2,544

Visible Services and Housing

595

266

0

1,166

656

912

863

4,458

Development

148

87

0

662

373

517

490

2,277

Resources

0

128

0

1,328

747

1,036

983

4,222

Corporate and Customer Services

38

53

0

269

151

209

198

918

Corporate Services

          0

           0

                0

        289

        163

        226

    214

      892

Total

3,175

 2,950

  1,424

 8,426

  4,742

  6,578

6,235

33,530

 

25.       The resulting proposed areas for savings as identified by Directors to date are attached at Appendix D and total £29.3m. These are not in any order of priority. As such they will not meet the target as originally set. However, it is acknowledged that this target is extremely challenging both in terms of its financial magnitude, service implications and timescales for implementation and the individual savings are subject to on-going appraisal by the BWG as part of the Review.

 

26.       It should be emphasised that none of these proposed savings have been ratified for implementation by either Cabinet or the BWG and the BWG will be examining these propositions further whilst also considering alternative options prior to formulating its final recommendations as part of the 2013/14 Final Revenue Budget Proposals including the financial strategy to 2017.

Issues for Consideration

27.       When undertaking the Budget Review, given the extreme financial constraints currently facing the Council, it is of fundamental importance that the best use is made of its resources in order to meet its aspirations and priorities for the future. However, as with the Capital Programme there will still remain a number of issues, both burgeoning and extant, to which further consideration must be given: These include:

·         The prospect of additional cost pressures arising between now and 2016/17 which are as yet unknown;

·         Increased future demand for services (particularly in the light of Welfare Reform changes);

·         Increased expectations of the Welsh and UK Government for local authority services;

·         The restrictions which the reduced funding will have on future service development;

·         The longer term impact of the economic recession (and the Government’s response to it) over and above existing forecasts;

·         Difficulties for services to continue to meet savings targets;

·         The availability of additional sources of external funding compatible with Council objectives;

·         The continued absorption of unfunded costs pressures within reducing service budgets;

·         Options for alternative forms of service delivery including the development of collaborative projects as a means of achieving savings while maintaining acceptable service standards.

·         The impact on future staffing levels across services.

Resource Implications (Financial and Employment)

28.       Reduced resources will restrict the ability of services to meet corporate targets and objectives. In setting future targets for financial savings, regard will have to be made to services seeking alternative forms of service delivery including collaboration with other public sector bodies and the third sector.

 

29.       Resulting reductions in staffing levels, once known will require prior consultation with the Trades Unions, as will the Government Department for Business Innovation and Skills in accordance with the Council’s own local procedures and statutory requirements.

Sustainability and Climate Change Implications

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

Legal Implications (to Include Human Rights Implications)

31.       The Council is required under statute to fix its council tax for 2012/13 by 11th March 2013 and will need to have agreed a balanced budget in order to do so.

Crime and Disorder Implications

32.       The obligations of the Council with regard to Section 17 need to be fully considered in the budget decision making process.

Equal Opportunities Implications (to include Welsh Language issues)

33.       Additional finance improves the Council’s opportunities for assisting disadvantaged members of society.

Corporate/Service Objectives

34.       Contributes to the corporate priority of Corporate Resources by the provision of sound financial management

Policy Framework and Budget

35.       The results of the Budget Review will inform the Final Revenue Budget proposals 2013/14 to 2017/18 which will require the approval of Council.

Consultation (including Ward Member Consultation)

36.       The Corporate Management Team has been consulted on the proposals.

Background Papers

Correspondence received from the Welsh Government

Contact Officer

Alan Jenkins Tel. No. 01446 709254

Officers Consulted

The following Officers have been consulted on the contents of this report:-

Corporate Management Team

Responsible Officer:

Sian Davies, Managing Director

 

 

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