Agenda Item No. 8(ii)
THE VALE OF GLAMORGAN COUNCIL
SCRUTINY COMMITTEE (CORPORATE RESOURCES): 9TH DECEMBER 2014
REFERENCE FROM SCRUTINY COMMITTEE (ECONOMY AND ENVIRONMENT): 2ND DECEMBER 2014
' INITIAL REVENUE BUDGET PROPOSALS 2015/16 (DDS AND DVSH) –
The initial budget proposals for 2015/16 were submitted to the Committee for consultation together with the amended original budget for 2014/15 for services within the Committee’s remit.
In presenting the report, the Accountant advised that Appendix 1 to the report set out the amended budget for 2014/15 which included the necessary adjustments to be made to the original budget. In referring specifically to the services areas within the Directorates the report further detailed the projected outturn for the following:
Highways and Engineers – the service area was projected to have a balanced budget at year end with the employees’ budget anticipated to underspend by £261k due to a number of vacant posts currently within the service. This would however, be offset by the anticipated spend on subcontractors of £180k due to the number of vacant posts. The Highways Department were also projecting an estimated overspend on potholes at a current estimate of £327k. For street lighting an overspend of £100k was projected as the required savings had not yet been made, the details of which had been presented to Cabinet on 20th October 2014 under the street lighting energy reduction strategy.
In relation to vehicle costs, these were projected to be over budget by £84k which was attributed mainly to increased costs of the new Winter Maintenance fleet. An overspend of £27k for the section was also attributed to cesspit emptying costs for which there was no budget. The Director of Visible Services and Housing was to present a report to a future Cabinet meeting on this issue. The Highways Department also had increased disposal costs of £65k for waste produced at the Pant-y-Lladron site, but this had been offset by an addition £45k income from Bridgend and Cardiff Councils who used the site. As a result of a sharp increase in insurance costs, due to the previous claims history for the Highways Department, this had resulted in the service being charged a larger proportion of the overall Council insurance cost, with the figure totaling £120k. The anticipated required savings from car parking income had also not been received, with the shortfall being £378k and again, the Director advised he would be reporting to a future Cabinet on the issue.
However, Committee was advised that it was anticipated that other income received by the Highways Section would be £165k higher than budgeted due to increased car parking enforcement income and also an increase in the amount of highways work schemes undertaken by the department.
To assist with the budget pressures outlined above, Cabinet had already approved a one off budget transfer of £350k from Policy to Highways and it was also anticipated that a central recharge budget for energy of £460k would not be utilised in the current financial year, and would therefore be used to assist the pressures.
With regard to waste management, the section was projecting a balanced budget with employee costs projected to be over budget by £86k. A proportion of this was attributed to the staffing of lifeguards on beaches for which there was no budget e.g. Fontygary.
Vehicle costs were projected to be over budget by £130k, however, vehicle telemetry meetings had commenced within each department with a view to reducing the number of vehicles. The department had also seen an increase in treatment costs for co-mingled waste of approximately £80k and a spend of £36k was projected on procurement costs for Prosiect Gwyrdd again for which there was no budget. Although the department had budgeted to spend £50k on the Joint Organics Procurement with Cardiff Council, this could be met from £50k of grant funding.
Committee was further informed that to offset the overspends Waste Management should be able to make significant savings of around £500k in the current financial year from the interim contract for waste disposal with Viridor, with it being reported that the Council had joined the contract on 28th October 2014 and was now taking waste to the new site.
For the Grounds Maintenance section employee costs were projected to be £150k under budget due to vacant posts which had been offset by additional works undertaken by subcontractors to around £125k over budget. It was anticipated that the section would achieve a break even position at the year end. It was also estimated that there would be a £30k saving on waste disposal by switching to a different contractor. There were however additional costs for insurance of £35k and high repair costs at Jenner Park which were projected to be £20k over budget. With regard to the Building Maintenance and Building Cleaning and Security Services sections these were expected to outturn on target.
In referring to the Planning and Transportation Department, the year end projected spend showed a nil variance against the revised budget and it was anticipated that there would be an underspend of £175k at the year end, mainly as a result of an increase in planning income.
For Leisure Services including Countryside, the report outlined that the Countryside function had undergone a restructure and revised budgets reflected the assumption that the new structure would be in place by Christmas. It was anticipated that there was likely to be an underspend of £130k at the year end with it being proposed that the funding was used for capital regeneration projects within the Vale. The Economic Development service was currently projected to outturn within target.
In referring to the budget strategy process, Members were informed that the Strategy for 2015/16 had been approved by Cabinet on 30th June 2014, with services being requested to supply initial revenue budgets based on the costs of providing the current levels of service and approved policy decisions and including the existing savings target. This meant that the cost of price increases and any allowable pay awards should be included as advised by the Managing Director.
The Medium Term Financial Plan (MTFP) had been approved by Cabinet on 11th August 2014, and the 2014/15 Final Revenue Budget Proposals had set savings targets between 2015/16 and 20106/17 of £13.5m (excluding schools). This was based on the anticipated reduction in funding from Welsh Government (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 three years of £14.2m. The Plan also 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.
The Council’s provisional settlement for 2015/16 had been announced by WG on 8th October 2014 with the provisional Standard Spending Assessment (SSA) being £212.270m. Council would also receive from WG a Revenue Support Grant of £115.982m and a share of the Non Domestic Rates of £36.525m.
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 also included a list of cost pressures which had expectations of services managing down part or all of the pressures and a copy of the updated full list of cost pressures was attached at Appendix 2 to the report.
When approving the Budget Strategy for 2015/16, Directors had been asked to review savings already approved with a view to implementing them ahead of the target date and to consider areas for further savings. The overall base budget for 2015/16 for the Scrutiny Committee was attached at Appendix 4 to the report, which included transfers of functions and responsibilities between Directorates as detailed below being the full years costs:
Environment and Visible Services
- £124k from Public Protection in respect of Emergency Planning.
Planning and Transportation
- £36k from Corporate and Customer Services in respect of the Authority's
Publications and Media Officer
- £52k from Corporate and Customer Services in respect of the Arts Development section.
Once the base budget for 2015/16 has 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 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 was mainly attributable to a reduction in funding from WG, an increase in pay and price inflation and the requirement to fund committed growth
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..This shortfall was already based on the requirement to achieve a high level of savings in 2015/16. The projections also included an assumed pay award of 1% for 2015/16. The implications of the proposed pay award although not yet having been assessed would be included in the Final Budget Proposals report.
Further work would also be undertaken by the Budget Working Group (BWG) in order to achieve a balanced budget for the final budget proposals for 2015/16. This would 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 would also consider the results of the budget engagement process in determining priorities for future savings and service delivery. The report further outlined that 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 a programme of reshaping and transforming services which had been approved by Cabinet on 11th August 2014.
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 with any recommendations to be forwarded to the Scrutiny Committee (Corporate Resources) as lead Scrutiny Committee. The Cabinet’s final budget proposals were to be made no later than 23rd February 2015. It was noted that the BWG would consider any comments made by the Scrutiny Committees together with the results of any consultation. The final proposals to Cabinet would include a review of the financial strategies required to achieve a balanced budget which was sustainable for future years. The final budget proposals were to be considered by the Full Council at a meeting to be held on 4th March 2015. Based on the assumption that all cost pressures would be funded in full, the estimated funding shortfall for 2015/16 was reported to be £4.581m with Committee being advised that although WG had not provided any specific detail regarding the level of funding post 2015/16, it was anticipated that there would be further funding reductions in funding for Local Government going forward. To this end the report outlined that it was important that Directors achieved approved savings and looked to mitigate further cost pressures through alternative means of service delivery and collaborative ventures.
In referring to paragraph 10 of the report and increased disposal costs of £65k for waste produced at the Pant-y-Lladron site a Member asked whether the Council was actually recycling all it could from the sites. In response the Accountant advised that the issue here was in relation to the fact that the Environment Agency had changed the classification of the waste being produced and, as a result, disposal costs had increased.
The amended budget figures were then queried with reference being made to the fact that the figures in paragraphs 8 to 23 did not appear to balance, the Accountant advised that he would recheck the figures but could reassure Members that the Department was projecting to outturn a balanced budget. Members’ also raised concerns in relation to the number of vacant posts within the Highways and Engineering section and whether that was putting undue pressure on staff. They considered that the loss of professional members of staff would have a severe impact on remaining staff. They queried whether this was a deliberate tactic by officers in order to make savings.. The Director stated that there were issues within the division, for example they had only recently appointed an Operational Manager, key posts were receiving honorariums and it was financial prudence measures that were being undertaken. He was also holding discussions with other Local Authorities as to how they could work together to provide services. He did however, advise that the situation was not sustainable and that he was personally keeping his eye on staff stress levels. In referring to the recent decision of the Cabinet to inform Welsh Government of an expression of interest to merge with Bridgend Council he had also taken the opportunity to meet with his counterpart in Bridgend to discuss a number of issues of possible collaboration.
A Member, in welcoming the Council working with Viridor in relation to waste recycling and procurement, requested that the Committee also receives a report to a future meeting on the Joint Organics Procurement project with Cardiff Council.
In referring to the General Fund Reserve and the cost of maintenance for roads and potholes, and the estimated overspend of £327k, Members were concerned at the current level of budget and that the position would only deteriorate with the reduction in capital works undertaken on resurfacing from 2015/16 due to the cessation of LGBI funding. The Director advised that regular inspections of surfaces had been undertaken and, as a result, it had been recognised as a revenue budget cost pressure with £300k additional budget being requested. He reiterated his concern that the pothole issue was a major problem for the Authority and was likely to worsen in line with the current national trend. The number of third party claims to the Council had also increased as a consequence which was a major issue for the Authority. The Accountant confirmed that the majority of the increase was in relation to third party claims as a result of potholes. This meant that the Highways section was picking up a larger share of the overall insurance cost for the Council. The Director advised that the country’s current claim culture was contributing to the pressures.
Members also raised concerns in relation to savings detailed in the report that had not yet been made with the effect that this would again increase the cost pressures for the Directorate. In view of the budget overspend and the resulting road repairs required, reference was made to the Council’s asset management plan and the fact that the Council had in previous years received Local Government Borrowing Initiative (LGBI) of £2.5m per annum funding from WG which was no longer available. It was requested that a copy of the asset management plan be brought to the Scrutiny Committee in the near future for consideration.
In referring to Appendix 3 to the report and the savings noted for public conveniences of £100k, Members referred to the Reshaping Services Agenda where it was suggested that Town and Community Councils may wish to take on the service and that an additional £100k was being provided for refurbishment of two heavily used public conveniences in 2014/15. The Director advised Members that the £100k would be spent on King’s Square and the public conveniences by the Western Shelter in Barry Island. The Director also advised that he would be suggesting that the Council consider Town and Community Councils taking over the provision but, before they could do that, they would need to be handed over in a fit state. He reassured Members that shutting public conveniences was not his aim and would be a last resort with some Members suggesting that the facilities should be charged for. Again, in referring to Appendix 3 and the proposed savings to review the provision of recycling boxes, food carriers and food bags and to the lifeguard service, Members requested clarification on the suggestions. The Director and the Cabinet Member stated that most Local Authorities were looking at the issue of recycling with a view to levying charges for current recycling receptacles as well as charging for green waste collection services. It was important that the Council considered all opportunities to raise income and advised that a report was to be presented to the Cabinet shortly which the Director advised he would propose be also referred to the Scrutiny Committee for its consideration.
With regard to the lifeguard service, the RNLI had provided the service for a number of years but the Council had recently asked if the service could be provided for less money.
A Member, in advising that whilst preparing for the meeting, had considered that more detail should have been included in relation to the savings proposed. The Director advised that the Budget Working Group would be considering each of the proposals in conjunction with full background information. A proposal he said had also been made to bring forward the Prosiect Gwrydd savings to 2015/16 to assist with the cost pressures and savings which may take longer to implement. Members suggested that further detail on each of the issues was required in order for them to fully consider the impact of the proposals. They also raised concerns with the fact that some savings had not been realised and queried whether the savings were realistic.
In referring to a review of the level of street cleaning, the Director hoped this would realise savings of £250k in the forthcoming year and informed Committee that a further report on the issue was to be part of a future report.
The Cabinet Member assured Members that he had considered all of the savings and he would have preferred to have brought the street lighting strategy in sooner rather than later but, as a result of health and safety concerns, this had taken longer than anticipated to be introduced.
In referring to the £472k reported for 2015/16 for energy costs, the Accountant advised that this budget had been set aside for some time in anticipation of future energy increases but was no longer required.
Members queried whether the savings projected under the transport review were too optimistic. The Accountant stated they were being progressed and that nearly every service area would require a commitment to transport savings. He further stated that the inclusion of the vehicle telemetry system would allow for up to date reports to be made available to assist the process and vehicles had already been earmarked for disposal due to low utilisation.
Members raised concerns in relation to the suggestions of charging for bulky item collections and the possible increases of fly tipping as a result. The Director stated that this was indeed a consideration but he could assure Members that there were only three Councils in the whole of Wales who did not levy a charge. He would, however, consider some types of concessions but advised that the Vale itself did not have a huge fly tipping issue as other Local Authorities had. The Cabinet Member re-emphasised the comments of the Director and again informed Members that if the savings contained within the report were not made, then the department would have to look elsewhere for savings which could be in more difficult areas.
Having fully considered the report, it was subsequently
(1) T H A T the comments as outlined above be referred to the Scrutiny Committee (Corporate Resources) with the request that they also be forwarded to Cabinet and that further detail on the impact of the suggested savings be provided to the Scrutiny Committee Economy and Environment when available.
(2) T H A T the amended budget for 2014/15 as set out in Appendix 1 to the report be noted.
Reasons for recommendations
(1) To draw Committees and Cabinets attention to the comments of Members and in order for Members to be able to fully assess and consider the impact of the savings for Council services.
(2) To inform Committee of the amendments to the 2014/15 budget.'