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Agenda Item No. 8(i)

 

 

THE VALE OF GLAMORGAN COUNCIL

 

SCRUTINY COMMITTEE (CORPORATE RESOURCES): 9TH DECEMBER, 2014

 

REFERENCE FROM SCRUTINY COMMITTEE (SOCIAL CARE AND HEALTH): 1ST DECEMBER, 2014

 

 

'           INITIAL REVENUE BUDGET PROPOSALS 2015/16 (DSS) -

 

The Council was required under statute to fix the level of Council Tax for 2015/16 by 11th March, 2015 and in order to do so, would 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 needed to be carried out before the final Revenue Support Grant (RSG) settled was notified to the Council.

 

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

 

Provisional Settlement 2015/16

 

The WG on 8th October, 2014 had advised the Council that its provisional Standard Spending Assessment (SSA) for 2015/16 was £212.270 m.  The SSA represented Welsh Government’s view of the relative resources needed to provide a standard level of service in each local authority in Wales and its primary use was to allocate RSG to these authorities.

 

The Council had been advised that from the WG’s RSG an amount of £155.982m would be received along with a share of the Non-Domestic Rates (NDR) of £36.525m.  Together, these figures would constitute the Council’s provisional Aggregate External Finance (AEF) of £182.507m.  WG reported that this represented a cash reduction of 3.4% (£5.4m) for 2015/16.

 

However, after taking into account an additional burden for 21st Century Schools Initiative, this actually represented a cash reduction of 3.5%.  This was a small reduction that the 4.5% which projected in the Medium Term Financial Plan and this had been taken into account as part of the initial budget proposals for 2015/16. 

 

The Committee noted that following transfers into the RSG settlement for 2015/16 were as follows:

  • Integrated Family Support Service - £280,000
  • Autistic Spectrum Disorder - £40,000.

In addition a transfer of £10,000 for the settlement of the National Adoption Service was also highlighted.

 

Revised Budget 2014/15

 

For the purpose of this Committee, Appendix 1 to the report set out the amended budget for 2014/15.  Included were necessary adjustments to be made to the original budget. 

 

These budget adjustments had no overall effect on the net budget of the Council and were as follows:

 

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

  • £336,000 from Children and Young People to Education, in respect of the transfer of responsibility for the Children and Young People’s Partnership
  • £19,000 to Children and Young People from Education, as an additional contribution towards the jointly funded Residential Placements budget for Looked After Children.

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

 

 

2014/15

2014/15

Variance

 

Amended

Original

Projected

(+)Favourable

Service

Budget

Outturn

(-) Adverse

 

£’000

£’000

£’000

 

 

 

                          

Children and Young People

14,240

13,940

                     +300

Adult Services

36,512

37,312

                     -800

Business Management and Innovation

301

301

                           0

 

 

 

 

Total

51,053

51,553

-500

 

The projected outturn for the Social Services Directorate was an overspend of £500,000 when compared to the amended original budget. 

 

Children and Young People Services - This service was currently anticipated to outturn £300,000 under budget at year end.  The major issue affecting this service was the need to manage continued pressure on the Children’s Placement budget.  At present, however, the budget for the jointly funded Residential Placements for Looked After Children was projected to outturn within target.  There were potential underspends elsewhere in Children’s Services relating to key budgets of £52,000, £54,000 relating to administrative staff, £50,000 on legal expenses, £60,000 due to additional adoption income and £84,000 on alternative means of provision and accommodation costs required for the current cohort of children.

 

Adult Services - This service was currently anticipated to outturn £800,000 over budget at year end.  The major issues were the continuing pressure on Community Care packages, the Division’s most volatile budget and the one most dependent upon levels of service demand which were not entirely within the Council’s direct control.  At present, the projected year end position was an overspend of £1m as a result of increased demand for services, particularly from frail older clients.  This service would strive to manage demand, not only to avoid a further increase in the overspend but also to reduce the overspend.  The annual deferred income budget for 2014/15 had been set at £725,000 and as at 31st October, 2014 income received to date was on target.  The year-end projection was still set at a £100,000 under recovery as house sales slowed over the winter months.  This position was included as part of the projected overspend within the Community Care Packages budget.  There were potential underspends elsewhere in Adult Services of around £200,000 which could be used to off-set this position.  These areas were £114,000 on staffing, £19,000 on transport, £38,000 on premises and £29,000 on supplies and services. 

 

Budget Strategy

 

On 30th June, 2014 Cabinet had approved the budget strategy and as in previous years required all Directorates to make the following provisions:

  • Supplementary estimates would only increase the base budget if Council had given specific approval to this effect.  Increases met by virement within a year would not be treated as committed growth.
  • Directors should find the cost of increments and staff changes from their base budgets unless the relevant specific approval had been given for additional funding.
  • The effect of replacing grants from outside bodies that had discontinued would not be treated as committed growth.  In addition, before any project or initiative that was 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 would continue and these included the effect of interest rates and financing costs of the Capital Programme, increases in taxes, increase in levies and precepts charged by outside bodies and changes to housing benefits net expenditure.
  • Services would be expected to achieve savings already approved by Cabinet as part of the 2014/15 final budget proposals and Directors had been asked to consider bringing forward the implementation of these savings ahead of the scheduled date and also to consider areas for further savings.
  • It was envisaged that the cost of service development would need to be met from within the respective Directorates. 

Having regard to the above, it had therefore been proposed in respect of the 2015/16 budget strategy, for Directors to be instructed to prepare initial revenue budgets for 2015/16, in accordance with a timetable agreed by the Managing Director.  Preparation should be made 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.
  • Budgets to be broken down subjectively and objectively in as much detail as deemed appropriate.
  • 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.
  • Directors would continue to draw up Service Plans that set out the aims and objectives for the service and any possible future developments and efficiencies.
  • It was to be expected that the revenue costs of service development would need to be met from within the respective services. 

Medium Term Financial Plan 2015/16

 

The Medium Term Financial Plan (MTFP) 2014/15 to 2017/18 was approved by Cabinet on 11th August, 2014.  The MTFP was produced using the assumption of a reduction in funding of 4.5% in 2015/16 and a further 4% reduction in 2016/17 and a 2% reduction in 2017/18.  Savings totalling £18.2m were identified for the period with a shortfall in funding across the three years of £14.2m. 

 

2015/16 Initial Budget Proposals

 

Shown at Appendix 2 was an updated full list of cost pressures for the Scrutiny Committee (Social Care and Health) meeting.

 

When approving the budget strategy for 2015/16, Directors had been asked to review savings already approved, with a view of implementing them ahead of the target date and to consider areas for further savings.  Details of the proposed areas for savings were attached at Appendix 3 to the report.  The savings did not include the cost of any potential redundancies. 

 

A summary of the overall base budget for 2015/16 was attached at Appendix 4 to the report.  This had been arrived at by adjusting the 2014/15 budget for items such as inflation and unavoidable growth, but did not include identified cost pressures for savings.  These were shown as a note to the table and were further detailed in Appendix 2 and 3 to the report respectively.

 

Total cost pressures associated with this Committee totalled £1.898m and included £1.14m for the discontinuation of the Intermediate Care Fund Grant. 

 

Once the base budgets for 2015/16 had been established, it would 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 the current level of £36.690m, total available funding would be £209.197m.  When compared to the base budget of £216.958m, this would result in a funding deficit for 2015/16 of £7.761m. 

 

If all identified cost pressures were funded, this would increase the shortfall to £13.438m and if all proposed savings were achieved the shortfall would be reduced to £4.581m. 

 

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)

 

The projections of the budgets shortfall included an assumed pay award of 1% for 2015/16.  The implications of the proposed pay award had not yet been assessed and would be included within the final budget proposals report. 

 

There would 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 had already commenced its programme of re-shaping and transforming services, as approved by Cabinet on 11th August, 2014. 

 

The General Fund Reserves as at 30th March, 2015 was projected to stand at £11.46m.  The 2015/16 base budget included the use of £2.5m from the General Fund Reserve and there would be a further use of £1.5m in 2016/17.  The Section 151 Officer has stipulated that the minimum balance on the General Fund Reserve should be no less than £7m. 

 

As part of the usual budget process, an examination of the level of reserves was undertaken to ascertain the adequacy and strategy for use.  A view of their level and purpose had been undertaken and the requirements for each of the specific services had been considered in light of the Council’s priorities and it had been necessary to move funding from lower priority areas to higher priority areas.  As a result, it had been proposed that some specific reserves be unearmarked and transferred to the Schools Investment Strategy Reserve to allow for the continued investment in school buildings and their developments.  Set out at Appendix 5 to the report was actual reserves as at 30th March, 2014 along with the estimated reserve balance for each year up to 31st March, 2018.  The use of all reserves would be reviewed further by the Budget Working Group as part of the final budget setting process.

 

The Committee was being asked to review the level of cost pressures with a view to suggesting ways in which these could be managed downwards and / or mitigated.  The Budget Working Group would consider the comments made by the Scrutiny Committee, together with results of the consultation.  The final proposals of the Cabinet would include a review of the financial strategies required to achieve a balanced budget and the report indicated that Cabinet’s final budget proposals would be considered by Council at a meeting to be held on 4th March, 2015. 

 

A Committee Member sought clarification whether there would be a balanced budget for the financial year 2014/15.  In response Members were advised that there was currently an anticipated overspend of £500k and that measures had been taken to address the issue.

 

In discussing the cost pressures highlighted at Appendix 2 to the report, the Committee was advised that the £150k cost pressure identified for Children and Young People in relation to additional costs for children with increasingly complex needs was a reasonable and realistic projection. 

 

In respect of cost pressures for Adult Services, the amount of £207k relating to the increase in demographic growth in older people and older people mental health services had been based on a 2% increase in demand, based upon WG population analysis.  The Committee had been previously made aware of the changes in legislation for the Deprivation of Liberty Safeguards and was fully informed of the cost pressure of £250k. 

 

In noting the discontinuation of the Intermediate Care Fund (ICF) grant amount to £1.114m, the Director of Social Services advised Committee that the ICF grant was only realistically available in time for the second quarter. In essence, the service had only three to four months in which to make meaningful changes in terms of restructuring.  In the medium-term, it is essential that some of these new projects and services displace spending on more traditional programmes.  He further advised that the ICF had been used to achieve many positive outcomes and that there were signs that the changes implemented were having a major impact. 

 

Members were asked to note that the £77k cost pressure identified against the Support People grant reduction had been the result of a 7% cut in WG funding. 

 

A Committee Member commented that there were two types of cost pressures, the first related to increasing demand and the second as a result of fallout from changes to WG grant funds.  He queried whether, in relation to the ICF grant, there was anything that could be done to review the decision to remove grant funding.  In reply the Director of Social Services stated that, at present, there still was not a final decision made but the Local Authority should be informed by the WG on 10th December 2014.  Representations by all Local Authorities in Wales had been made to the WG and evidence provided to demonstrate the effectiveness of the services provided through the grant funding.  He advised that they were not in a position to challenge the WG’s decision any further.  He also advised that the Regional Collaboration Fund (RCF) was likely to be reduced significantly, another major source of funding for remodelling adult social care services. 

 

In answer to a query as to whether the savings targets were achievable, the Director of Social Services commented that the service had a budget programme ongoing for at least the past six years.  It was fair to say that the ability to meet savings targets was becoming more difficult.  He alluded to the demand tsunami' in Children’s and Adult Services and commented that savings were very challenging, but the service was committed to meeting its targets.  

 

In reference to the Looked After Children placed out of county, Members were advised that the target reduction for bringing Looked After Children back to this area was being achieved.  The Director of Social Services advised that there had been a commitment to savings in this area and that the service model had been redesigned through the greater use of community placements, the creation of a new residential unit and greater use of family support services. 

 

A Committee Member queried as to how the service would maintain its quality and standards.  In response the Director of Social Services advised that it was likely that the Council would see increased concerns about the quality of care; this is a national picture and not necessarily due to the level of savings expected within the Vale of Glamorgan.  He alluded to the impact of the WG’s £55 cap on care costs and the increase in demand that this has placed on the service.  It would be a considerable challenge to maintain standards in the future and he commented that, in some Local Authorities, increased demand in areas such as Looked After Children had adversely affected the quality of care management processes and reduced the level of service resilience. 

 

Having considered the report and in regard to the financial pressures facing the Council, the Committee subsequently

 

RECOMMENDED -

 

(1)       T H A T the amended budget for 2014/15 as set out in Appendix 1 be noted.

 

(2)       T H A T the initial revenue budget proposals for 2015/16 be noted.

 

(3)       T H A T Scrutiny Committee (Corporate Resources) be advised that Social Services is facing significant cost pressures and increased demand for services from all areas of its work.

 

(4)       T H A T Scrutiny Committee (Corporate Resources) be advised that it was the unanimous view of the Scrutiny Committee (Social Care and Health) that the cost pressures detailed at Appendix 2 be fully funded.

 

Reasons for recommendations

 

(1)       To advise Committee of amendments to the 2014/15 budget.

 

(2)       In order that the Scrutiny Committee are advised of the initial revenue budget proposals.

 

(3)       In order to highlight the specific cost pressures and future demands facing the service.

 

(4)       In order that the Scrutiny Committee (Corporate Resources) be informed of the view of this Scrutiny Committee as part of the budget setting process.'

 

 

 

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