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Agenda Item No. 8

 

The Vale of Glamorgan Council

 

Scrutiny Committee (Corporate Resources): 9th December 2014

 

Report of the Managing Director

 

Initial Revenue Budget Proposals 2015/16

 

Purpose of the Report

1.         To advice Scrutiny Committee of the amended budget for 2014/15 and of the commencement of consultation on the initial revenue budget proposals for 2015/16.   

Recommendations

It is recommended that:

 

1.         The amended revenue budget for 2014/15 as set out in Appendix 1 be noted.

2.         Any recommendations on the initial revenue budget proposals for 2015/16 be referred from this Committee to Cabinet for consideration.

3.         It be noted that £3.5m is transferred from specific reserves to the School Investment Strategy Reserve to fund future development in schools.

4.         It be noted that an additional revenue contribution of £2.1m be used to fund capital schemes in 2014/15, as detailed in the Initial Capital Programme Proposals 2015/16 report.

Reasons for the Recommendations

1.         To incorporate changes to the 2014/15 budget.

2.         To enable Cabinet to consider the comments of Scrutiny Committee.

3.         To set aside funding for the Schools Investment Programme.

4.         To use revenue funding to carry out additional capital schemes.

Background

2.         The Council’s budget is determined largely by the Revenue Support Grant (RSG) settlement set by the Welsh Government (WG). The provisional RSG settlement was received from WG on the 8th October 2014.  The final settlement is likely to be received in December 2014.

3.         The Council is required under statute to fix the level of council tax for 2015/16 by 11th March 2015 and in order to do so, will have to agree a balanced revenue budget by the same date. To be in a position to meet the statutory deadlines and the requirements for consultation set out in the Council’s Constitution, much of the work on quantifying the resource requirements of individual services needs to be carried out before the final RSG settlement is notified to the Council.

 

Revised Budget 2014/15

 

4.         Appendix 1 to this report sets out the Amended Budget for 2014/15, together with the necessary adjustments to be made to the original budget. 

5.         These adjustments have no overall effect on the net budget of the Council and are as follows:-

Asset Rents, International Accounting Standard (IAS) 19, Transfers and Recharges - These are accounting adjustments largely outside the control of services. They reflect charges for the use of capital assets, changes to inter-service recharges and transfers and pensions adjustments to comply with accounting standards.  Also included are transfers of functions and responsibilities between Directorates as detailed below :-

Education

- £336k from Children and Young People in respect of the transfer of responsibility for the Children and Young People's Partnership.

- £19k to Children and Young People as an additional contribution towards the jointly funded Residential Placements budget for looked after children.

- £36k to Property in respect of school planning and buildings officers.

Environment and Visible Services

 - £52k from Public Protection in respect of Emergency Planning.

General Fund Housing

 - £341k from Corporate and Customer Services in respect of Community Safety.

Planning and Transportation

- £20k from Corporate and Customer Services in respect of the Authority's  Publications & Media Officer.

Leisure

- £24k from Corporate and Customer Services in respect of the Arts Development section.

6.         The following table compares the amended original budget with the projected outturn for 2014/15.

 

       2014/15

2014/15

Variance

 

Amended

Original

Projected

 (+)Favourable

Directorate/Service

   Budget

Outturn

 (-) Adverse

 

          £’000

£’000

     £’000

Learning and Skills

        

 

 

Education and Schools

93,691

93,691

                           0

Libraries

2,550

2,550

                           0

Adult Community Learning 

247

247

                           0

Youth Service

1,069

1,069

                           0

Catering

1,775

1,775

                           0

 

 

 

                          

Social Services

 

 

 

Children and Young People

14,240

13,940

                     +300

Adult Services

36,512

37,312

                     -800

Business Management and Innovation

301

301

                           0

Youth Offending Service

653

653

                           0

 

 

 

 

Visible Services and Housing

 

 

 

Environment and Visible Services                  

18,183

18,183

                           0

Parks and Grounds Maintenance

3,564

3,564

                           0

Building Services

0

0

                           0

General Fund Housing

1,438

         1,438

                           0

 

 

 

 

Development

 

 

 

Public Protection

2,489

2,489

                           0

Private Housing

11,091

11,091

                           0

Planning and Transportation

5,158

         5,158

                           0

Leisure

3,526

         3,526

                           0

Economic Development

833

833

0

 

 

 

 

Managing Director

 

 

 

Resources

(21)

           (21)

                           0

Corporate and Customer Services

49

49

                           0

General Policy

19,483

18,668

                     +815

Total

216,831

216,516

+315

Met from General Reserve

(2,500)

(2,500)

0

Grand Total

214,331

214,016

 

 

                     +315

Learning and Skills

7.         The projected out turn for the Learning and Skills Directorate is a balanced budget when compared to the amended original budget.  The paragraphs below highlight any variances within each service.

8.         Central Education - The Central Education budget is anticipated to underspend by £181k due to a favourable variance within Strategy and Resources.  It is requested that any underspend identified at year end is directed into the Schools Rationalisation Reserve to use towards the costs of the 21st Century Schools Investment and Reorganisation Programme.

9.         Repayments on the schools Early Retirement and Voluntary Redundancy Scheme will result in £145k being transferred into the Schools Early Retirement/Voluntary Redundancy Invest To Save reserve.

10.      School Improvement and Inclusion - This service will outturn on target.  The budget has been decreased by £664k to fund the secondary Learning Support Assistant (LSA) provision for pupils with statements and additional learning needs in secondary schools.  Provision was made within the budget to fund £596k for secondary LSAs, the shortfall of £68k is being funded through a staffing underspend on Educational Psychologists of £58k and an underspend on the Secondary Behaviour budget of £10k.

11.      The Hospital and Home Tuition budget is anticipated to overspend by £20k, which will be met through an underspend on the Safeguarding and Wellbeing team.  The revised budget has made a one off transfer of £95k from Recoupment income to fund LSAs for primary pupils with statements.

12.      Strategy and Resources -  The Strategy and Resources budget will underspend by £181k due to the favourable variance on mainstream school transport of £150k, staffing underspends on Education Finance and ICT of £38k, an underspend on independent nursery placements of £21k, offset by a predicted overspend on SEN transport of £28k.

13.      Schools - The delegated budget relating to schools is expected to balance as any variance is carried forward through school reserves.  The schools delegated budget has increased by £664k due to the LSA transfer for secondary pupils with Statements and Additional Learning Needs. 

14.      Libraries- The Libraries service is anticipating an underspend on salaries of £80k due to vacant posts not being filled pending the libraries review.  It is requested that the underspend be used to fund possible pressures following the libraries review.

15.      Adult Community Learning - The Adult and Community Learning (ACL) budget has increased by £42k as a result of the transfer of the ACL ICT admin support budget from Central Education.  The service will outturn at revised budget after transferring £63k from reserves to assist with funding reductions from Welsh Government and Cardiff and Vale College, the delay in implementing the restructure of the service and redundancy costs relating to the new structure.

16.      There is currently an adverse variance on Adult Community Learning Cost Recovery of £28k however, it is very early in the academic year and there are many more courses planned for the new year. Further action is being taken to maximise income generation and it is envisaged that the budget will balance by the end of the financial year, with any shortfall being funded from the Adult Community Learning reserve.

17.      Youth Service - The Youth Service is projected to outturn at the revised budget after transferring an estimated £128k from reserves.  £79k will be used to assist with the implementation of the Youth Engagement & Progression Framework in schools and £49k will cover the estimated dilapidation costs in relation to Area 41. Any increase in the dilapidation costs will be funded from the Youth Service reserve.

18.      Catering - The Catering budget is anticipated to outturn on target.

Social Services

19.      The projected out turn for the Social Services Directorate is an overspend of £500k when compared to the amended original budget.  The paragraphs below highlight any variances within each service.

20.      Children and Young People's Services - The service is currently anticipated to outturn £300k under budget at year end.  The major issue affecting this service is the need to manage continued pressure on the children’s placements budget.  Currently, however, the budget for the jointly funded Residential Placements for Looked After Children is projected to outturn within budget.  There are potential underspends elsewhere in Children's Services relating to team budgets of £52k, £54k relating to administrative staff, £50k on legal expenses, £60k due to additional adoption income and £84k on alternative means of provision and accommodation costs required for the current cohort of children. 

21.      Adult Services - The service is currently anticipated to outturn £800k over budget at year end.  The major issue is the continuing pressure on Community Care Packages, the Division's most volatile budget and the one most dependent upon levels of service demand which are not entirely within the Council's direct control.  At present, the projected year end position is an overspend of £1m as a result of increased demand for services, particularly for frail older clients.  The service will strive to manage demand, not only to avoid a further increase in the overspend, but also to reduce the overspend.  Actions still need to be taken to review all processes and to address this shortfall.   The annual deferred income budget for 2014/15 has been set at £725k and at 31st October 2014 income received to date was on target.  The year end projection is still set at a £100k underrecovery as house sales slow over the winter months.  This position is included as part of the projected overspend on the Community Care packages budget.  There are potential underspends elsewhere in Adults Services of around £200k which could be used to offset this position.  These areas are £114k on staffing, £19k on transport, £38k on premises and £29k on supplies and services.  With the levels of savings required for 2015/16, budgets are being re-examined during 2014/15 with a view to their possible realignment being earlier than planned. 

Visible Services & Housing

22.      The projected out turn for the Visible Services and Housing Directorate is a balanced budget when compared to the amended original budget.  The paragraphs below highlight any variances within each service.

23.      Highways & Engineers – It is projected that the Highways & Engineers section will have a balanced budget at year end. It is projected that the employee’s budget will be £261k underspent due to numerous vacant posts currently within the service. However due to the number of vacant posts, the anticipated spend on subcontractors is over budget by £180k.

24.      As previously reported, Highways have an estimated overspend on potholes, which is currently estimated to be £327k. There is also a projected overspend on street lighting energy costs of £100k, as required savings have not yet been made, however, a report was taken to Cabinet on the 20th October on the Street Lighting Energy Reduction Strategy. 

25.      Vehicle costs are projected to be £84k over budget which is mainly due to the increased cost of the newer Winter Maintenance fleet. There is also an overspend of £27k due to the Highways section paying cesspit emptying costs for which there is no budget.  A report will be brought to a future Cabinet by the Director of Visible Services and Housing on this issue.  Highways also have increased disposal costs of £65k for waste produced at the Pant-y-Lladron site, however, this is offset by an additional £45k income from Bridgend and Cardiff Councils who also use this site.

26.      The service also has to meet additional insurance costs of £120k. There has been a sharp increase in these costs due to the previous claims history for Highways, resulting in the service being charged a larger proportion of the overall Council insurance cost.

27.      As previously reported, Highways has not made required savings from car parking income, with the shortfall being £378k. Again a report will be brought to Cabinet on this matter in the near future by the Director of Visible Services and Housing.

28.      It is anticipated that other income received by the Highways section will be £165k higher than budgeted. This is due to increased Car Parking Enforcement income and also an increase in the amount of Highways works schemes undertaken for other departments.

29.      To assist with the budget pressures listed above, Cabinet previously approved a one off budget transfer of £350k from Policy to Highways.  It is also anticipated that a central recharge budget for energy of £460k will not be utilised this financial year so will also assist these pressures.

30.      Waste Management - It is projected that the Waste Management section will have a balanced budget at year end. Employee costs are projected to be over budget by £86k. A proportion of this is due to the staffing of Lifeguards on beaches for which there is no budget e.g.Rhoose Point.

31.      Vehicle costs are projected to be £130k over budget, however, vehicle telemetry meetings have now started with each department with the view to reducing the number of vehicles, therefore, this overspend may reduce.

32.      Also as previously reported, there is an increase in treatment costs for co-mingled waste of approximately £80k over the current budget. The department has also projected a spend of £36k on procurement costs for Prosiect Gwyrdd for which there is no budget. The department has also budgeted a spend of £50k on the Joint Organics Procurement with Cardiff Council, however, this can be met from £50k grant funding.

33.      To offset the overspends above, Waste Management should be able to make significant savings of around £500k this financial year from the interim contract for waste disposal with Viridor. The Council joined the contract on the 28th October 2014 and is now taking waste to the new site. This has been offset slightly by an increase in costs for our Household Waste Recycling Centre due to all residual waste that passes through the site now being sorted to take out recycling, prior to being sent to landfill, in an attempt to increase recycling in order to meet Welsh Government targets. The additional cost over the available budget is around £168k.

34.      Grounds Maintenance – It is anticipated that the Grounds Maintenance section will achieve a breakeven position at year end. Employee costs are projected to be £150k under budget due to vacant posts within the service. However, this has been offset by additional works undertaken by subcontractors, which amounts to around £125k over budget.

35.      It is also estimated that there will be a £30k saving on waste disposal by switching to a different contractor. There are, however, additional costs for insurance of £35k and high repair costs at Jenner Park which are projected to be £20k over budget.

36.      Building Services – The Building Maintenance and Building Cleaning & Security Services are expected to out turn on target.

37.      General Fund Housing - The General Fund Housing budget is likely to outturn at £390k underspent based on current trends.  As previously reported, the variance is due to savings being made on the use of temporary accommodation for the homeless. Due to the uncertain pressures for the remaining part of the financial year on the homeless budget it is felt appropriate at this time to show a balanced budget.

Development Services

38.      The projected out turn for the Development Services Directorate is a balanced budget when compared to the amended original budget.  The paragraphs below highlight any variances within each service.

39.      Public Protection– The projected outturn for Public Protection (including Coroners and Emergency Planning) shows a nil variance against the revised budget.  

40.      Private Housing - The year end projected outturn is a favourable variance of £400k and is attributable to an underspend on Council Tax payments. The projected underspend of £400k (based on current take-up) represents 0.8% of the gross budget. The take-up for the rest of the year cannot be predicted with certainty and it is considered appropriate at this time to show a balanced budget.

41.      Planning and Transportation – The year-end projected spend on Planning and Transportation shows a nil variance against the revised budget. It is anticipated that there will be an underspend of £175k at year-end, mainly as a result of an increase in planning income. It is proposed to use this funding for capital regeneration projects within the Vale.

42.      Leisure, including Countryside – The projected outturn for Leisure and Countryside shows a nil variance against the revised budget. The Countryside function has undergone a restructure within the year and revised budgets reflect the assumption that the new structure is in place by Christmas. It is anticipated that there will be an underspend of £130k at year-end and it is proposed to use this funding for capital regeneration projects within the Vale.

43.      Economic Development – This service is currently projected to outturn within target.

Managing Director

44.      The projected out turn for the Managing Director is a balanced budget when compared to the amended original budget.  The paragraphs below highlight any variances within each service

45.      Resources - Finance & ICT is anticipated to outturn within budget although there is a possibility of a shortfall on Council Tax court income. The service will manage any shortfall from within existing resources.

46.      Corporate Customer Services - This service is expected to outturn within target at year end.

General Policy

47.      The projected outturn is a favourable variance of £815k.  This has arisen from a reduction in capital charges of £715k and an increase in external interest receivable of £100k.

48.      It is also projected that there will be an anticipated Council Tax surplus of £2.1m in 2014/15. It is proposed that this surplus is used to fund additional capital projects covering the Council's priorities of highways, regeneration and schools.  Details of the schemes are contained in the Initial Capital Programme Proposals 2015/16 report, elsewhere on this agenda.

Budget Strategy

 

49.      Cabinet approved the Budget Strategy on the 30th June 2014 min no. C2363.

50.      The Budget Strategy for 2015/16 outlines that in order to establish a baseline, services should prepare initial revenue budgets based on the cost of providing the current level of service and approved policy decisions and including the existing savings target. This means the cost of price increases and any allowable pay awards should be included as advised by the Managing Director.

51.      Increases to budgets approved during the course of a financial year can restrict the freedom the Council has to allocate its resources to priorities during the following budget cycle when it is aware of all the competing demands. Consequently:

- Supplementary estimates will only increase the base budget if Council has given specific approval to this effect. Increases met by virement within a year will not be treated as committed growth.

- Directors should find the cost of increments and staff changes from their base budget unless the relevant specific approval has been given for additional funding.

- The effect of replacing grant from outside bodies that has discontinued will not be treated as committed growth. In addition, before any project or initiative that is to be met either wholly or partly by way of grant may proceed, the exit strategy must be approved.

- Certain items of unavoidable committed growth will continue and these include the effect of interest changes and the financing cost of the capital programme, increases in taxes, increases in levies and precepts charged by outside bodies and changes to housing benefits net expenditure.

- Services will be expected to achieve savings already approved by Cabinet as part of the 2014/15 final budget proposals and Directors are asked to consider bringing forward the implementation of these savings ahead of the scheduled date and also to consider areas for further savings.

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

52.      Having regard to the above, it was therefore proposed in respect of the 2015/16 Budget Strategy, that Directors be instructed to prepare initial revenue budgets for 2015/16, in accordance with a timetable agreed by the Managing Director. Preparation should be on the following basis:

- Capital charges, central accommodation costs and central support costs to be estimated centrally.

- Services to prepare baseline budgets on current service levels as set out in the 2014/15 final revenue budget report including detailed Cost Centre Analyses.

- Budgets to be broken down subjectively and objectively in as much detail as deemed appropriate by the Managing Director.

- Budget reports to include revised estimates for 2014/15.

- Full account to be taken of the revenue costs, other than debt charges, of new capital schemes coming into use.

- Minimum savings targets to be met initially as detailed in the 2014/15 Final Revenue Budget report. Any savings made directly by services over and above individual service targets to count towards future saving targets.

- Directors will continue to draw up Service Plans that set out the aims and objectives for the service and any possible future developments and efficiencies.

 - As stated previously, it is expected that the revenue costs of service development will need to be met from within the respective services (in particular, from the savings made). As such, no revenue bids are initially to be made. However, services may still be asked to identify and prioritise any burgeoning revenue cost pressures for consideration.

 

Medium Term Financial Plan 2015/16

 

53.      The Medium Term Financial Plan (MTFP) 2014/15 to 2017/18 was approved by Cabinet on the 11th August 2014, min no. C2432.

54.      The 2014/15 Final Revenue Budget Proposals set savings targets between 2015/16 and 2016/17 of £13.5m (excluding schools).  This was based on the anticipated reduction in funding from WG of 1.64% in 2015/16 and a further 1% in 2016/17. 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 these 3 years of £14.2m.

55.      The Plan factored in a managed level of cost pressures, a notional increase in council tax of 2% each year, price inflation of 2% and annual pay awards of 1% each year from 2015/16.

56.      It assumed that the Minimum Funding Commitment (MFC) for schools, equivalent to 1% above the WG’s block grant settlement would continue.

Budget Consultation with Stakeholders

57.      To ensure that the budget set for 2015/16 continues to address the priorities of Vale residents and the Council’s service users, the budget setting process will incorporate in-depth, targeted engagement with a range of key stakeholders. 

58.      The engagement with residents and service users was facilitated by Council officers and conducted in line with the corporate standards set out in the Vale of Glamorgan Council Public Engagement Framework.  The results of this consultation are attached at Appendix 6.

59.      Further consultation with town and community councils, the voluntary sector and our Local Service Board partners will take place, in order to inform the final budget proposals.

Provisional Settlement 2015/16

 

60.      The Council's provisional settlement was announced by WG on 8th October 2014.

61.      WG has advised the Council that its provisional SSA (Standard Spending Assessment) for 2015/16 is £212.270m.  SSA represents WG's view of the relative resources needed to provide a standard level of service in each local authority in Wales and its primary use is to allocate RSG to these authorities.

62.      The Council will receive from WG Revenue Support Grant of £115.982m and a share of the Non- Domestic Rates (NDR) of £36.525m.  Together these figures constitute the Council’s provisional Aggregate External Finance (AEF) of £152.507m. WG reports that this represents a cash reduction of 3.4% (£5.4m) for 2015/16. However, when taking into account an additional burden for the Local Government Borrowing Initiative for 21st Century Schools, this actually represents a cash reduction of 3.5%. This is a smaller reduction than the 4.5% projected in the MTFP and has been taken into account as part of the initial budget proposals for 2015/16.

63.      The Council will also receive a sum referred to as the Successor Outcome Agreement Grant for 2015/16. No amount has been advised for 2015/16 but for 2014/15 it was in the sum of £1.236m. This amount has been included in the estimates. The grant is unhypothecated (i.e. not specific for particular services).  The Council is not guaranteed to receive the full amount of the grant as it depends on the extent to which the Council meets its obligations under the agreement.

64.      There were transfers into the RSG settlement for 2015/16 as follows:

- Local Government Borrowing Initiative (LGBI) for 21st Century Schools - £54k

- Integrated Family Support Service - £280k

- Autistic Spectrum Disorder - £40k

 

65.      In addition transfers out of the settlement were as follows :

- Student Finance Wales - £97k

- Feed Safety Controls - £18k

- National Adoption Service - £10k

2015/16 Initial Budget Proposals

 

66.      As a result of the anticipated reduction in future years settlements, the MTFP identified additional savings to those originally approved for 2015/16 as part of the 2014/15 budget setting process.  It has also been necessary to revisit the cost pressures facing services in order to build up a complete and up to date picture of the financial position of the Council.  The MTFP included a list of cost pressures, which had expectations of services managing down part or all of the pressures, however an updated full list of cost pressures is shown in Appendix 2.  These are not shown in any order of priority.

67.      When approving the Budget Strategy for 2015/16, Directors were asked to review savings already approved, with a view to implementing them ahead of the target date and to consider areas for further savings.  This message was reinforced by Cabinet when approving the MTFP.  Details of the proposed areas for savings for 2015/16 to 2017/18 are attached at Appendix 3.  The savings do not include the cost of any potential redundancies.

68.      A summary of the overall base budget for 2015/16 is attached at Appendix 4. This has been arrived at by adjusting the 2014/15 budget for items such as inflation and unavoidable growth, but does not include identified cost pressures or savings.  These are shown as a note to the table and are further detailed in Appendix 2 and 3 respectively.   Adjustments shown include the following:

69.      Asset Rents, International Accounting Standard (IAS) 19 - Relate to accounting items outside the control of services. They reflect charges to services for the use of capital assets and adjustments in respect of pensions to comply with accounting standards.

70.      Recharges/Transfers - Relates to changes in inter-service and inter Directorate recharges.  Included are transfers of functions and responsibilities between Directorates as detailed below:

Education

- £336k from Children and Young People in respect of the transfer of responsibility for the Children and Young People's Partnership.

- £19k to Children and Young People as an additional contribution towards the jointly funded Residential Placements budget for looked after children.

- £86k to Property in respect of school planning and buildings officers.

Environment and Visible Services

- £124k from Public Protection in respect of Emergency Planning.

General Fund Housing

 - £341k from Corporate and Customer Services in respect of Community Safety.

Planning and Transportation

- £36k from Corporate and Customer Services in respect of the Authority's  Publications & Media Officer

Leisure

- £52k from Corporate and Customer Services in respect of the Arts Development section

71.      Budget Adjustment - There is a net total of £410k and relates to £433k for the reversal of one off funding previously provided to services, £101k relates to the reduction in the Fire Authority Levy less the £124k reduction in the use of the Social Services Fund in 2015/16.

72.      Inflation - The total figure for inflation of £2.276m relates to general price increases (£1.721m) and a 1% allowance for pay awards (£555k). These figures do not include schools inflation which amounts to £2.010m for pay and £269k for prices.

73.      Committed Growth - This totals £761k and £263k reflects the Minimum Funding Commitment for schools, £69k relates to the cost of borrowing for the LGBI 21st Century Schools initiative and £180k has been allocated for capital charges. It also includes the net transfers into the RSG of £249k as previously detailed.

74.      Once the base budget for 2015/16 has been established, it must then be compared to the funding available to identify the extent of any shortfall.  With a provisional AEF of £152.507m and Council Tax at a current level of £56.690m, total available funding would be £209.197m.  When compared to a base budget of £216.958m, this would result in a funding deficit for 2015/16 of £7.761m.  This deficit is mainly attributable to a reduction in funding from WG, an increase in pay and price inflation and the requirement to fund committed growth.

75.      If all identified cost pressures were funded, this would increase the shortfall to £13.438m.  If all proposed savings were achieved, the shortfall would be reduced to £4.581m as shown in the table below.

Projected Budget Shortfall 2015/16

 

 

£000

Funding Available

 

Provisional AEF

152,507

Council Tax

56,690

Provisional Funding Available

209,197

 

 

Base Budget

216,958

 

 

Provisional Shortfall Against Base Budget

7,761

 

 

Assume all Cost Pressures Funded

5,677

 

 

Provisional Shortfall with Cost Pressures funded

13,438

 

 

Assume all Savings Achieved

(8,857)

 

 

Provisional Projected Shortfall for 2015/16

(4,581)

 

76.      This shortfall is already based on the requirement to achieve a high level of savings in 2015/16.  Despite the continuation of the MFC for schools, there is still uncertainty about the level of a number of WG grants and the impact of 11 grants relating to Education amalgamating into a single Education Improvement Grant for schools.

77.      The above projections include an assumed pay award of 1% for 2015/16.  The implications of the proposed pay award have not yet been assessed and will be included in the Final Budget Proposals report.

78.      Further work will be undertaken by the Budget Working Group (BWG) in order to achieve a balanced budget for the final budget proposals for 2015/16.  This will include a review of the use of reserves, a possible increase in council tax, a review of all cost pressures, possible savings and the current financial strategies.  The BWG will also consider the results of the budget engagement process in determining priorities for future savings and service delivery.

79.      There will be difficulties in maintaining the quality and quantity of services in the future without exploring opportunities for collaboration and alternative forms of service delivery.  The Council has already commenced a programme of reshaping and transforming services, as approved by on Cabinet on 11th August 2014.

Next Steps

 

80.      The next stage is for the estimates to be submitted to Scrutiny Committees for consultation.  Committees are asked to review the level of cost pressures with a view to suggesting ways in which these could be managed downwards and/or mitigated.  Corporate Resources Scrutiny Committee is the lead Scrutiny Committee and will consider both the Initial Revenue Budget Proposals and any recommendations that other Scrutiny Committees have made. The responses of Scrutiny Committee must be made no later than the 16th December 2014.

81.      The BWG has held a series of meetings in November 2014 with the relevant Cabinet Members and officers to consider the budget proposals. They will submit their recommendations so that the Cabinet may make its final budget proposal no later than the 23rd February 2015.  Before making its recommendation, the BWG will consider the comments made by Scrutiny, together with the results of consultation.  The final proposals to Cabinet will include a review of the financial strategies required to achieve a balanced budget, which is sustainable in future years.

82.      Cabinet’s final budget proposals will be considered by Council at a meeting to be held on 4th March 2015.

83.      The timetable for the 2015/16 Budget Process is shown below.

Timetable for 2015/16 Budget Process

To be completed no later than

Cabinet considers the initial budget proposals

 

17th November 2014

Lead Scrutiny Committee responds to consultation and makes comments on budget proposals

16th December 2014

Cabinet make its final proposals on the budget

 

23rd February 2015

Meeting of Council to consider budget and council tax resolution

 

4th March 2015

 

Resource Implications (Financial and Employment)

84.      Based on the assumption that all cost pressures will be funded in full, the estimated funding shortfall for 2015/16 will be £4.581m.

85.      WG has not provided any specific details regarding the level of funding post 2015/16, however, it is anticipated that there will be further reductions in funding for Local Government going forward.  It is therefore important that Directors achieve approved savings and look to mitigate further cost pressures through alternative means of service delivery and collaborative ventures.

86.      Reserves are a way of setting aside funds from budgets in order to provide security against future levels of expenditure and to manage the burden across financial years.  Funds no longer required may be transferred to the General Fund surplus and then set aside for other purposes or used to reduce council tax.

87.      The Council has always taken a prudent approach with regard to specific reserves and uses them to mitigate known risks (financial and service) and contingent items, e.g. Insurance Fund.  Other reserves have been established to fund Council priorities, e.g. Visible Services and in particular the Capital Programme, e.g. School Investment Strategy Reserve, Project Fund, Building Fund. This is important as the Council has limited capacity to realise sufficient sums from the sale of assets for capital investment. Sums have also been set aside to assist in budget management, e.g. Early Retirement Fund. The Housing Revenue Account Reserve is ring-fenced to Housing and the majority will be used to fund improvements to the Council’s housing stock.

88.      The General Fund Reserve as at 31st March 2015 is projected to stand at £11.46m.  As detailed in the latest MTPF and as approved by Council on 29th September 2014, the 2015/16 base budget includes the use of £2.5m from the General Fund Reserve and there will be a further use of £1.5m in 2016/17.  The Section 151 Officer currently believes that the minimum balance on the General Fund Reserve should be no less than £7m.  This is considered sufficient to cover unforeseen expenditure whilst, in the short term, maintaining a working balance. Unforeseen expenditure can be substantial and several instances can occur in a year. Whilst there is no set requirement for the minimum level for the General Reserve, some commentators use 5% of the net budget as a guide. For the Vale this is about £10.7m. However, in view of the prudent approach the Council takes with regard to specific reserves, £7m is considered a reasonable minimum.

89.      The Council presently benefits from a reasonable level of reserves, however, they are not inexhaustible and have taken years of careful financial management to develop to their current level.  As part of the usual Budget process, an examination of the level of reserves is undertaken to ascertain their adequacy and strategy for use.  A view to their level (i.e. whether the amount held in the fund is sufficient to requirements) and purpose (i.e. whether the need to hold the fund is still relevant) has been taken.  The requirement for each specific reserve has also been considered in light of the Council's priorities and it has been deemed necessary to move funding from lower priority areas to higher priority areas.  As a result, it is proposed that £3.5m of specific reserves are unearmarked and transferred to the Schools Investment Strategy Reserve to allow for the continued investment in school buildings and their development.  

90.      Appendix 5 sets out the Authority’s actual reserves as at 31st March 2014 and shows the estimated reserves balance for each year up to 31st March 2018.  The Council is forecasting the use of general and specific reserves totalling £37.7m from 2014/15 onwards, which represents 54% of the balance as at 31st March 2014.  These levels of reserves are still deemed to be adequate as known risks are largely covered and the General Fund Reserve does not fall below £7m.

91.      The Council is planning to use a considerable amount of its specific reserves over the coming years, however, as reserves are a non-recurring means of funding, they can only be used as part of a specific financial strategy.  The use of all reserves will be reviewed further, by the BWG, as part of the final budget setting process.

92.      Not all the identified savings relate to staffing, however, the impact on staffing levels could be a potential reduction of up to 150 Full Time Equivalents (FTE).   Further staff reductions of over 350 FTEs may be required to achieve the savings yet to be identified.  The trade unions will be consulted on the details of any possible redundancies once known.  This figure does not include the staffing implications relating to budget pressures within schools, as details need to be considered by individual governing bodies.

Sustainability and Climate Change Implications

93.      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)

94.      The Council is required under statute to fix its council tax by 11th March 2015 and in order to do so will have to agree a balanced revenue budget by the same date.

Crime and Disorder Implications

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

Equal Opportunities Implications (to include Welsh Language issues)

96.      These initial budget proposals have due regard to the requirements of the Council’s Strategic Equality Plan including the Equalities Act 2010 and Public Sector Equality Duty for Wales. The subsequent development of individual strategies for achieving savings will require the completion of Equality Impact Assessments. This involves systematically assessing the likely (or actual) effects of policies on people in respect of disability, gender, sexuality (including gender identity), age, Welsh language, and racial equality.

Corporate/Service Objectives

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

Policy Framework and Budget

98.      This report is following the procedure laid down in the Constitution for the making of the budget and so does not need to be referred to Council. However, the final 2015/16 budget will require the approval of full Council.

Consultation (including Ward Member Consultation)

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

100.   The report includes at Appendix 6 the results of the consultation on service priorities with local residents and service users.

Background Papers

Medium Term Financial Plan 2014/15 to 2017/18

Budget Strategy 2015/16

 

Contact Officer

Carolyn Michael, Operational Manager - Accountancy

 

Officers Consulted

The Corporate Management Team has been consulted on this report

 

Responsible Officer:

Alan Jenkins, Section S151 Officer, 01446 709202

 

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